tv Squawk on the Street CNBC February 13, 2018 9:00am-11:00am EST
he's talking about >> what a clued in millennial. he bought a therom >> you must have been shocked. >> he seems more clued in. i told him he should be a guest on the show. >> or maybe an an kchor >> make sure you join us tomorrow, "squawk on the street" is next. ♪ >> good morning and welcome to "squawk on the street," i am david faber and jim cramer, we are live at the stock market exchange carl quintanilla is live in pyeongchang. we are looking like we are opening a negative territory, of
course, after a nice move yesterday, up moving along this market if you are happy about it european market, you asked and we answered. spain and italy which we like to look at it as well one of the foreign markets the only good over night was the opening. >> i am not kidding. >> the olympics were good. >> 10-yr note yield is the focus, 2.84. more than we were yesterday. >> tomorrow is the key question. look at oil though you know stories today, we'll be the largest producer, bigger than saudi and russia. >> it is true. >> 10 million barrels a day and there is no place to put the stuff. there is not >> i know. >> the government relyinquishreg it is hard to have a lot of
inflation and oil is considered one off. that's ridiculous. it is important of the whole foods chain of every aspect. what people have been saying is expensive. >> i appreciate that now, i need to get to our road map. wild ride market if you take what the futures are telling us in the early going here under armour sales the shares are doing something they have rarely done, moving up >> i think he's back >> i think kevin shein is back pepsico, we'll have the cfo, hughes johnson, joining us later. the nasdaq is back in positive territory for the year yesterday we saw the 10-yr note
yield surpassed 2.9% that was a four-year high. we were right at the same level than yesterday lets call it, jim, volatility is here to stay >> yes >> get use to it >> tomorrow's cbi if interest rates go up, you will see a lot that's a race. if interest rate goes down, you have a fantastic rally we are in a tick by tick moment where the algorithm are saying that you should sell it if we go to three and you should buy it if we go to 2.6 or 2.7 that's the world that we are in. we are not used to big supplies. we wiped out everything since the september rally. it is important that people realize that we are absolutely attempting the repeal all the gains that have happened since tax reform that's what i am watching for. all the gains.
if that would be wrong to repeal all the gains, we'll repeal some of them. i think there are too many stocks like mcdonald's where they wiped out everything that happened since september >> when do we get to a point where -- is now the time to say okay those names where i know where the multiples have come into a certain extent and earnings are not impacted now is the time to buy them. >> i think pepsico is a true testament to it. it gave you a big boost and buy back they give you a four-case. the stock goes down. it is a sign of where we should be at the same time, it may be a buy if it goes down. if interest rate goes down, you can can buy it at 1.08 most people don't remember that. the people that allegedly m
manipulated -- >> i know, i cannot do this in the '70s anymore >> you asked a great question and the answer i have to give you is i don't know myself so i cannot tell no, david, this is it i believe we'll look back and say this is a great opportunity to buy but we'll have to wait. i think people will say you know what, he just says to buy it and we went down a thousand point. >> right i just described the ken fisc r fischer's theory a lot of people are not rigor s rigorous >> a lack of rigger. >> under armour is a great example. inventories are lean they got nike woke up. >> we can go back and look the stocks have been a house of pain use one of your favorite words
>> it can give up some but i do think that i am looking at some stocks that they got too cheap lets tell people what's happening here, under armour is up the company is posted better than expected and strong global sales seem to offset the decline. under armour announcing the 2018 restructuring plan seeing more opportunities to optimize its operations, you already discussing it. you said at the top of the show, you seemed to think that things are now good >> entirely from our friend. addicted to the concept of inventories. once inventory goes down which is mentioned in the release, you get more full price, i have been waiting for inventory to be not a problem. it looks like it is no t a problem. of course, we still have to worry about nike and adidas, mark parker is a competitive
guy. i absolutely love the guy he makes things miserable. under armour has to talk about personalization, it is really important. really important that was the way that nike struck out >> kevin, playing back and focus continue to be -- >> this is the old kevin plank that we remember he's a competitor and who wants to win at all costs. i think he's back and he delegated too much and i am a buyer of plank that's what you are buying you are buying the old plank and it is terrific >> i am fnot talking about the yoga plank i am talking about kevin plank >> i got it. >> can you do a yoga plank >> i did two-minute today. i am bigger than ever. >> core? >> all right, lets go to carl in pyeongchang, can we do that in he's at the winter olympics and under armour there is a story we
know, carl >> it is a story, guys under armour products are worn by 375 athletes representing 16 countries here at the games. the biggest presence that under armour has had at the olympics you remember the controversy back in sochi where the air dynamics have slowed down and speed skaters. the u.s. hopefuls did not come up short today in the 500-meter short track. it is not the suits, guys. the u.s. women have not medaled in the olympics skating all the way back to 2002 this morning, chloe kim, wins gold, the youngest olympic champion ever on snow at 17 years old. the journal calls her the most dominant female halfpipe in the
world. >> what a business career she already assembled. we'll be talking to her about social media and spon sponsorships and a first generation >> she already master social media and using twitter effectively and getting endorsement deals. >> ben and jerry's all coming to her over night as she tweeted about food you can imagine how much they would love to create a custom flavor for chloe kim yes, social media with all its apparels still provide an avenue for companies to approach the athletes rather than the other way around >> personalization >> yes >> carl, thank you we'll be joining you shortly in
pyeongchang. >> in that brief moment. we'll talk to hughes johnson about that from pepsico. >> speaking of companies, we should mention -- >> that's oreos. >> mondelez is stepping down he's got a lot to do on the other board. >> procter & gamble. >> do not draw any conclusions other than a replacement of the director as a result of mr. peltz says if he's on that board, he'll cut back. >> he's going to spend a lot of time in cincinnati proctor is going, that's a shrinkage of multiples nothing has really changed in terms of the number of proctors
other than going up because of the weaker dollar. >> what's an appropriate multiple for p&g >> i think facebook. facebook is trading at 19 times. >> proctor is kind of a lot of polls. >> i think gillette is under which is what i use. the blades are very sharp. >> i have been using it for years. >> i cut myself the first time, holly cow, not like it is relevant at all. proctor, they have a 3.39 yeel, that does not matter if treasury goes to 3. >> it is over valued >> are you kidding me? >> david, what do you think? don't answer that. >> that's not what comes to mind >> never, ever idiots, you are not two words
that are near each eaother. >> when we return of pepsico posting a better result. we'll talk with the company's cfo and vice chairman, hughes johnson and take another look of the futures. me are a little lower at the ti for "squawk on the street" live at the post 9, after this. e tre, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential. two,that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math.
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pepsico out with earnings meeting at the top and bottom line the company is upping its dividend substantially more than they have before and doing a much bigger buy back for more, hugh johnston, we see him all the time welcome back to "squawk on the street." >> thanks, jim, good morning it is great to be with you all >> thank you, one of the things that people are going to say, wait a second, carbonators is n not as strong as we thought and losing shares to coca-cola frito-lay is on fire and what we are looking at
frito-lay is doing so well >> that's exactly right. if you look at our pepsico portfolio right now, four or five sectors are performing very well and frito-lay is hitting on all cylinders at this point. the execution is working and even with customers right now, customers absolutely feel great about a north america businesses one of the things we have not talked much is cantor retail survey, customers rated us o f the highest rank, we were positioned at number one the other performance is terrific right now we got our challenges and we are addressing them. >> well, can you tell me each single quarter i read about the new products, we had the blades,
we understand there is a new mountain dew product, at what point does your innovation pipeline begins to become relevant to earnings >> it is funny you say that, i think it is relevant right now if you look at pre2000s and '12. we were putting up 5% or 6% of sales. that number have been 8% now we have been averaging about 3.4% revenue growth of a .5 of that has been coming from innovation if you think of pepsico compares to most food and beverage company, we have been exceeding boo i a point and a half i i argue it is driven by the innovation investments that we are making and building capability to handle innovations successfully
i expect going into 2018, we'll have a perfect year of innovation because of mountain dew and bubbly, we have a full pipeline and i think it is going to blow well for the year. >> i agree interestingly, we are talking about prices, pepsico got the same one of the questions before i turn it over to david, there is a sense that maybe the next number, the forecast is not as good i think it is important for you to try to explain to people that it is organic growth that has always been the key and that you actually raise your figure for 2018 >> yes, that's exactly right if look past over the past several years, we got 8% for each of the year and we deliver some where between 9% or 10% this year we are guiding to 9% so it is a point higher than what we previously guiding to. why are we doing that? we got confidence in the
innovation pipeline and productivity plans and frankly we got confidence in getting all of our businesses performing at a higher level we feel good from the guidance of that perspective. in addition to that, the fact that we raise the dividend by 15%, we tell investors that we are feeling confident by our cash generation potential as well >> hugh, i would love to get your take on something that your ceo says on a call of a recent deal in the marketplace involving keurig purchasing dr. pepper she says i am sure there are some towerering strategic logic but we are still searching for it you see between the red and blue system, she went onto say lets wait and see over the next few weeks and months to see what kind of strategy they articulate right now we struggle to see the logic somehow alluded us, pretty
strong words, can you sort of add to that as to why she would say that or why you guys are looking at the stance at that deal >> i would not say we are looking at it. we have respect for those guys, the jab guys are smart guys and certainly dps has been a long time partner of us i think the point is the deal has not closed yet we are waiting to see their actions in the marketplace as to what it is they intend to do one of the things that's been commented on by media and some degree by analysts, this is a big distribution play. as she noted, 80% of their distribution of dr. pepper right now is pepsi or cokes. it is not clear to me what the distribution play is i think our best bet is do what we always have take our competitor seriously
and be watchful and looking to see what they do rather than looking to see what they say >> hugh, of the tax benefits, a lot of corporations are giving us some sense here of their expectations but not completely. what is pepsico saying to their shareholders >> tax rate will be down in the low 20s, that's what we have got through this year. in addition, to that we did take the dividend up 15%. that was reflective of the fact that we can move cash freely around share purchases is $2 billion this year, we announced authorization for a $15 billion buy back program we are trained to sort out not just what happens in the u.s. but moving cash around the globe, i expect the end of this year, you will hear more from us in terms of what we intend to do with the capital >> it takes that long to get the sense of the landscape before you can get your plans fully in
place? >> yes, i think because there is still a whole lot of writing that has to go out of tax reform as you know. the 500-page is not an end to the process. i think we have got to understand that more fully as we decide what it is we are going to do. >> got it. hugh, well appreciate you joining us >> vice chairman at pepsi. >> good story, if the futures go down, it goes down and if the futures go up, it goes up. >> get ready for your mad dash coming up. another look of the futures here we got about eight minutes before we talk about trading more "squawk on the street" straight ahead
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that's the power of and. all right, here we go, two-minutes before opening bell. "mad dash time," where do you want to take us? >> i think you should buy the cboe i have never seen them anything other than that with the manipulation charges which is about individuals that may have tried to manipulate cboe i want to make this point, why because people can say jim, you are cavalier about saying that they issue a denial quickly. it is not about the cboe they're doing very well and they should
it is about the regulatory over sight. >> do you think the pressure on vix related products will pressure them? >> i think their stock is down so much that it reflects that. it is about the regulars they did not do anything wrong and they are really good guys. it is about regulatory over sights and margins they are trading there is nothing wrong with trading. it is whether the government should bless the part. it is the u.s. government that's really at stake. it is not the cboe, they are doing a good job offering products i want to protect the individuals. i want to make it clear that i would buy the cboe and they are not at fault they did not do anything i wish they did not need to actually issue a kndenial it is the government that needs to speak up. it is not cboe global markets, they are good guys out there i want to make that point. it is a good stock to buy.
>> right there at the podium is dici properties and over at nasdaq, talenom. >> okay. >> you can see the realtime exchange, it is going to be more red and green on that given the way futures look before we open. >> what's the key today? >> caterpillar you got europe up 31%, not acceleration, latin america, 49%. north america, flat 20 plus 23 why this matters last time these numbers came out, caterpillar zoomed to its
high in january '16. watch the stocks because these are good numbers will it go back to the highs or n >> i want a wall street journal story from last night. >> oh, i am so glad you did that i am going to bring it up. i have no reporting at all to offer on this as i pointed out many times, sometimes it seems that the bars come down for what constitutes in what -- companies talk all the time. here is what the journalists had to say walgreens of a potential deal and there is no offer on the table and they say the deal may not materialize. all the analysts are telling us what we are thinking you can see amerisource bergen is up. >> do we know where walgreens is
purchasing >> you got a lot of analysts out, of course, saying it could drive as much as 55 cents to walgree walgreens' adjusty biggest risk is retaining customer base. they distribute a lot of stuff the to a lot of pharmacies and suddenly owns by walgreens, that may fall off >> they own 26% of it also as we should point out walgreens owns roughly 26% of equity there >> and the stock being, they like the walgreens' deal walgree walgreens' stock have been under pressure my reporting came up something something. >> tell me, what do you got? >> remember we had the corso
corsortium announcement. >> yes >> i am close to people who are involved >> okay. >> that's the cut-out party. >> the middleman so to speak >> jeff bezos believes that he can lower the price of healthcare and becoming more dominant, jp morgan feels that way. this is the principle expense. i think walgreens may not be as smart as they are in buying these. i think these companies are going to be squeezed by that venture. they are squeezed by others who have to compete. david, you are going up against bezos. i would say that it is a great time for ameri source bergen to sell
if i were cardinal or ameri source bergen, i would sell if i saw that amazon gets traction they believe and i don't know and i am sure these companies would argue. take a copay amazon believes that copay is a huge win fall for these companies. amaz amazon believes that it can be wiped out. >> amazon attack margins in every single business. >> yes >> the journal reporting as wel this morning that it is turning their medical supply business to a major supply u.s. hospitals or pushing to do so >> that's another margin that's something that the market is digesting today there is a great deal of margin there and amazon is going to attack it and believes there is an opportunity to capitalize so supplying to hospitals seem to be yet another area. as we pointed out, they got a number of licenses and states
from medical devices and not pharmaceutical and at least not yet. >> there were people that disputed that and st. louis posted an article and it got n >> we got more news from our friend broadcom. of course, yesterday, hock tan, the company's ceo sat down with jim and me somebody was krcorrecting my grammar yesterday, jim and i >> so sat down with i or me and the answer is me and that's how you know that. >> i got it right. i am so happy. i was an english major but it was a long time ago. back to broadcom, they changed their slate to now going after six directors. six would still be a majority of that board that's really all they want at broadcom they want this to be a referendum on their $82 share to
acquire qualcomm they want to give opportunity to equ qualcomm's shareholders to take that they say it is continuity for the board and will give people more peace of mind because you have five directors of qualcomm yesterday, we spoke to hock tan and he made the point as well about a majority or a walk away. >> at least a majority of our slate do not get in after march the 6th then i get we'll get a message that this deal is not going to happen. we'll walk >> you will walk >> we'll walk if we don't have a board that'll work a deal. >> will you see the directors or not? >> of course, my one message is, i won't work unless we get
majority of the vote >> in front of iss >> yes >> you have to take that into account here in terms of how holders may have gotten them or perhaps if they get any back channels from iss, hey, there is no way you are going with 11 that we are going to fully support. >> so what's the significance of this >> a majority is a majority, maybe it will give more comfort to shareholders. the idea has been whether you are going to give up the entire board and potentially face with the deal that you sign up for that you cannot get done because of antitrust because of what happens. in this case, you can make an argument that well, there are five directors and they'll still be on the board from previous qualcomm i don't know, jim, what do you think? >> i think people are generally respected of the qualcomm board and i think there are large shareholders who don't want to throw the bums out hock tan did say something and the perception i got from the interview that we talked about
was a lot of people said, okay, do you want to go with the winner or the loser? >> a lot of people understood that qualcomm has a reputation of being a winner and qualcomm is very much a winner. i get that jaime dimon in an exclusive to me, david. we believe there is ampled liquidity, -- i got this exclusive, not you >> that's a great little advertisement you did for jaime dimon and jp morgan. >> i felt when i had the exclusive interview that i had to say i got it and not you. >> you did, baby >> how thaabout that advertisemt >> they said they can do $100 billion deal of jbm
>> i think if i read this -- we are just the mouthpiece for corporate america. >> we are tools. >> every so often we go off a little >> they also felt that t that -- remember it wwhen they it was a bag of big potatoes that's how i feel about this >> what has to be done >> just let me get into lennon in my ear who says when the richers, when it istheir fault jp morgan is moving up on that >> bob pisani, he's going to take us away from this >> back to the markets >> hello david and jim
s asia is on the upside. 4-1. they improved a little bit take a look at sector, kind of the inverse yesterday. downside leader, we see 10-yr is down here and not much better. what a ride we had in the last few days 2:00 on friday until the middle of the day yesterday, the dow moved 1200 points which is kind of hard to believe that's actually what happened, the debate we started over the weekend, are we at a tradeable low and of course, it switched to are we going too far or too fast t the average shares down 14%. the correction is only six days old and it is too early. the sentiment is way too bull
issue eve bullish overall. the argument is too far and too fast here and a lot of weeks long in the markets still. a lot of people came out thought there will be retested lows in the next couple of weeks we'll keep an eye on that. the vix is trying to finding find a range, we don't know where it is going to go out. certainly is higher than 10 and if it calms down, we'll be lower in the mid-20s speaking of the vix, jim referenced some issues this morning. there was anonymous letter representing anonymous whistle blower claiming there was a flaw in the vix the basic allegation is that firms can move the vix up and down by posting quotes in the s
& p. cboe, they have a mow totive of increasing revenues. cboe should have implemented some circuit breakers to help initiate this. cboe issued a statement to us saying we take our regulatory responsibles ailities and the oversight of our markets seriously. this letter replete with inaccurate statements, misconceptions -- this is a complicated issue and it involves how the vix gets priced off the options for the s&p 500 but there is various ways you can interpret how. take a look at our cboe, they got 25% of revenues of various
vix products their earnings came out as well. we'll get more on that later many the day as we get more information. dow jones industrial average is downright now. thank you, bob pisani. i want to get back on the deal of xerox, remember the deal that's combined with fuji, xerox. it is well seeking a nullify of the joint venture between the two. the complaint brought by deason that the fuji/xerox allows fuji to control xerox intellectual property and manufacturing
rights in the 36 billion asia-pacific market. they say it was signed up in '01 and it is only recently when they started asking questions of the board that they found out about it in relations as well as this deal that was consummated between fuji and xerox an accounting scandal at the fuji/xerox joint scandal it gave xerox the right to terminate the venture agreement but it did not do so had the director terminated the venture agreements, they would be able to engage in a share
value and controlled premiums. that's the heart of this the deal that was signed up not long ago and fuji will control 50.1% of xerox by folding in at 75% ownership of their jv. th that was when xerox is under some real pressure in 2001 and gave up a billion dollars of what had been 50% of stake and jv jim, carl icahn yesterday and along with deason, these claims are important potentially because if you do get a judge to agree with you and by the way we need to listen to the defense of xerox. if you do get a judge to agree
with you, it opens up a slate o responsibility basically, we tried to sell this company, there were no other buyers and fuji was the best that we could come up with and we believe obviously for many reasons, it adds values given the deal that they already announced. >> i don't understand. if they tried to solve but the crown jewels are already contracted >> their point is, you signed up a deal that you gave fuji veto right. nobody is going to come into buy the entire company because fuji has the right to maintain jv >> you would not want to be in it fuji is the only one that had the right. they say that was not made apparent and in fact, it was hidden from shareholders and should have been and therefore, they claimed that it is
fraudulent >> well, it is hard to disagree with -- well, i don't know >> these are laws and complaints coming out >> if everyone had known that would be different. that's when av comes in and everyone knew that j&j had it. >> well, look, i am not involved but that's great reporting, i did not know that. >> we'll continue to focus on that now, lets check in with rick santelli at the cme group in chicago. >> good morning david, today is no t a big range day in treasuries it is a little bit kind of the opposite of what we have been looking at today we have a 2-yr note yield. for the most part it has been steepening trade looking at two days of 10s
we continue to make these stabs and higher yields in today's closing basis and we seem to fall back a little bit creating a value range in the lows to mid-80s. the chart has not taken back, you can see it has not taken out of its march 2017 high yield as the 10-yr did much earlier in the process. barclays, these are all security and not the efts why would it be kwif laequivale the etfs selling off it does not jump out to anything huge year to date and a 1-yr, the reason i bring this up is to underscore when you are in a security relationship and you are measuring it, it is a different picture especially
during the time of etf it is in the fixed income market, it is in the dollar. it is down of a half percent now, that's not like huge technical analysis equation there. it is simple but it is a simple thing that traders do and just looking at how it failed, the word is now, you want to pay attention to that especially now we are under 90. >> jim, david, back to you >> thank you, rick, rick santelli >> still to come stephen roach, he's going to offer his perspective on the global economy we'll be right take a deeeep breath in... and... exhale... aflac!
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what some of these companies, but no, ftc sue for allege he had conspiracy ftc filed a complaint against henry shine and paterson companies basically saying they are not giving enough breaks to customers. david, remember when amazon wanted to be in this business. >> yes. >> well, because the margins are so great i think this is the opening for amazon i happen to like ken shine very much, but look at that stock on that. >> it also got hurt on that day when we learned amazon might be focused on business. >> look, i feel amazon, jp morgan, that is real when you name a ceo, you'll want to sell all of these anybody makes a lot of money in health care business is going to be under pressure. >> mixed doubles curling tonight on mad money. >> holy cow.
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♪ it's a beautiful day >> good tuesday morning. welcome back to "squawk on the street." i'm here with michelle let's look at the markets. we are down on all the major averages oil also has been off a decent amount as well and ten year note you'll hang out there about 2.84 let's get to the road map starts with the stocks lower first time in three days. choppy trading continuing on
wall street. >> plus under armor surging, we'll bring you analysis. >> and general reports on possible deal in the works get you up to speed on wall greens and berg on taking place first shares up significantly this morning first of all, getting some breaking comments from federal reserve powell steve has those for us steve. >> thanks. jerome powell in a ceremonial swearing in ceremony making unexpected comments. and looks like these are second public comments and first on what's been going on in markets. he says we will remain alert to any developing risk to financial stability. that could generally or specifically points out the federal is normalizing interest rates and the balance sheet and continuation of prior policy and then comments on the global economy which he says is recovering strongly fort first time in a decade on regulation, well, on policy
he says fed policy extending economic recovery. he says it is in comparable bly stronger and safer and federal will preserve gains while ensure efficiency dpa david this is the second time he's had a chance to speak we didn't know he was speaking federal said they would be transparent. >> steve, can i ask you a question. >> sure. >> doesn't appear to be, can they push around interest rates in any way >> i don't think so. february 28th is the day we'll make the first remark when he testifies before congress. so these seem to be pretty much a continuation i think if there is any important message here is that so far fed policy as we understood it before the recent stock market volatility sounds
like it remains the same. >> thank you. >> we are of course watching the major averages following those comments from fed chairman powell also joining us from boston is put man investments global asset allocation jason thanks to you both anything over the last couple of weeks change given that you've been a number of times bullish view you have for worldwide equities. >> we still have that view and seeing the u.s. doing very well and earnings growth coming in strong i think what has changed is there is a little more questioning of the goldie locks scenario over the last two years, meaning growth that's accelerating but does not generate inflation and tightening central banks so more questioning of that. we don't think we are quite there yet wherein inflammation is a problem or rates are aggressively high. but what has changed much more focus and questioning about that
inflation ang zblle. >> jason, same question to you, given concerns about inflation >> no, i would agree with gabriella. our view has been inflation is not going to a problem this year if you look at the components of cpi for example, just as many of them are in out right disinflation as are inflation. so obviously the philips curve and everyone's reaction to the wage number has been around wage inflation spiral noog this generalized price inflation. and how that mechanism works is pretty shaky so i think this kind of hyper reaction around one number which is a very volatile series in the first place, is just seems to be misplaced given the evidence to the contrary of inflation not being a problem. nan fact even disinflation likely just being as large of a problem if anything. >> so gabriella, can i deduce
from what you said, doesn't move higher what we can be paying for stocks. >> that's fairly career. we think it could be move higher. >> where >> over 3% given better growth better inflation and less accommodation from central banks. but you havepretty heavy and chores holding the ten year down, a lot of demand from private investors, not much higher than 3% not to the point where it truly becomes a concern for things. >> put up a great data point last year, two weeks ago the market was 18 times forward earnings two weeks of selling now it's 16.8 times forward earnings. what are you willing to pay for earnings >> we are willing to pay higher than average multiple still. 16.8 is still above 2k5 average 16 times chls we think with rates very, very low, and 3%
rate on the ten tour is still very low, with an economy and earnings still accelerating, we are willing to pay above average multiples. when we think about sectors and markets we like beyond u.s. fs much more attractive than it was two weeks ago. >> jason, you said earlier not concerned about inflation, certainly. i wonder though, there are those who believe pulling for ta lot of demand, tax reform, cap x is going to be very strong this year, no the to mention generating deficits we vnts seen in quite some time even dollar wise or percentage of gdp. doesn't that concern you at all there is the possibility for overheating? >> yeah, i mean certainly you don't exfoekt have fiscal stimulus as late in the sick ce cycle as we are. and possibility that -- i think the political debate around deficits and the infrastructure spending package are kind of hyper focused around the freedom
caucus shoe of excess spending and i think you need to separate that investment spending can increase productivity and keep a lid on inflation. so i think there is a possibility for some of these things done right on infrastructure side to extend the cycle. we don't obviously get too carried away as gabriella said long rates will act as governor how they can rise through most of 2017 they were increasing at a rate that seemed pretty sustainable given what earnings were doing, kind of low to mid teens p and then they hit a new gear in december, compounding at rate over those weeks of 80 or 90% and oonualed so that clearly wasn't sustainable. but the reality is general comments that it's been x number of weeks since correction and the cycle is y months long
those are silly statistics when you look at the breathe of the global economy and look at some of these fears of overheating, this is not anywhere near it was in previous high cycles, so we don't see the potential for overheating in the near future in the way they suggest a week ago. >> cpi number tomorrow a lot of people focused on that. >> yes, for sure i think we'll be much more hyper sensitive to the inflation numbers, cpi, there are a lot of them this week ultimately our view is, look, the story of last year of disinflation of disappointment with inflation, that's past. but we are still only to the point wherein inflammation is normalizing to 2%. right. we are not -- and we expect confirmation from the numbers. we are not at the point we should be concerned about inflation, aggressive central banks. and i think we'll get that confirmation this week.
>> tlanhanks to you both. >> let's go over to carl in winter olympics pyeongchang south korea. hey, carl. >> good morning. talking about kim, break out starve these games winning gold in the women's half pike snow board. but want to get some of the other events park city utah ted ligty looking to be the first male skier to win two times. unexpected bronze in torino in 2006 but he comes in fifth. but the wind delayed alpine skiing for two days. we do expect to see shiffrin tomorrow having been rescheduled a couple of times. she has one six of her last sechb slalom starts. we did news in the luge, em my sweeney fishtailed infamous turn number nine. she crashed into the top wall with both of her feet. run four was suspendsed for a
few moments. ambulance brought her down to the finish house but it does appear she will be okay. you know, the u.s. has a good chance to win 100th gold medal at these games already got 99 so far. a large number of those from speed skating. 99th one did come from chloe kim and we talked to her a few moments ago about her race, about social media, and what's pektsed to be a wave of new endorsements. >> i'm actually working with nabisco,or owe chips a ho and ritz that's been pretty fun. >> coming up 11:00 squawk ally our first interview with half pipe artist in the world, chloe kim making her olympic debut and now a gold medalist. guys, become to you. >> carl, it's funny when you say speed skating, high dens, and
beth were highest for a while. >> we talked to bony blair, what a different experience it is now, david, being an olympic athlete, especially a young versus back then no distractions, practically no email, and these young athletes have a lot more to handle. >> you know, four years ago, carl, remember in sochi, under armor wau armor because of the speed skaters. they had the new uniforms. not winning as many medals so tried to blame underarm armor we don't hear that in time around. >> yeah, they brought in specialists and retooled the uniform, you'll see inner white to help the arrow dynamics we talked to official today from
speed skating even though they have struggled a bit, it's not the suits. so under armor having good news on that front and revenue front today. >> carl, thank you carl quintanilla of pyeongchang, covering the olympics. >> we were told americans weren't winning is because we were focused on football which said it sucked. >> your kidding? >> yeah, we did the interview. i recall the interview, yeah. >> by the way, when we come back, controversy about under armor, i think it was the speed skater. >> yeah, this morning you can see up dramatically, fueled by international growth maybe they are selling some to the dutch. we'll dig through the numbers. l continue to be down on al the major averages don't go away.
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shaking that up. american feels did fall 4. international grew 47% and international has been growing in 40% range for several years just making up a quarter of their over all sales. now representing more than 40% of total sales apparel and footwear those were among the categories that had stronger than expected results for fourth quarter she does say that the high inventory up 26% is troublesome. expenses those were elevated as well gross margin fell, but not as bad as feared. now the earnings call like usual has a tone of coach pumping up players. ceo said in 2017 we were a loud company with quiet plan. in 2018 our plan is to be quiet company with broad brand as under goes transformation athletic wear maker new mission statement, quote, under armor makes you better
training and running are the areas with the largest market opportunity. those will be key focus in this year the company also going to cutback its assortment with 30 to 40% fewer items by the fall of 2019 than what we saw in 2017 so that's a pretty big call back on inventory michelle. >> yeah, important data point. thank you, courtney. courtney mentioned in her analysis the following analyst is susan anderson, good to have you here. >> thanks for having me. >> want to add what courtney said what's your assessment of the shares today what are your thoughts today >> yeah, i think a lot of short covering they did have in line quarter with better revenue and i think the prospects of improving business back to double digit growth but we continue to think that things will not improve and they
will not be able to return to double digit growth. as courtney mentioned inventory up 20% there is still going to be a while of clearing through the inventory that will hurt the first half of the year, and the 14 to 19 cents consensus was 21 cents. that could still have to come down if they don't improve. >> why aren't going to improve in the back half >> if the north american market continues to be troublesome. also international, if you look at the growth there, a lot of it is being driven by new stores, store growth was up 57% on revenue growth so a lot of new stores driving that revenue growth there. but yet also appears that negative base on the dynamics there. >> direct to consumer gets to be a bigger and bigger piece of their business, it seems, every quarter. margins are better there, right snt is there at some point they could right size what they've got in terms of inventory and
supply relative to demand that you see as weak out there? >> yeah, i this i that's what they are trying to do. so reeling in expenses which it's going to take a couple of years. they have business for high teens, low 20% growth for several years. that's clearly not the case now. so it's going to take awhile to real in those expenses but even if they can get back to call it 7% operating margin, the stock right now where it's at is more than over pricing it in. >> what happened here? is it at leisure just rolled over you mention they had planned to have 20 plus percent sales growth for more than they got, for more years than they actually got how did it fall apart? >> yeah, so we saw almost a decade of higher than average growth for athletic appearal ex and i think under armour benefited from that. they had growth spurts during those years, now that's come down at leisure still working if you
have different products like that, but for those that are really selling to athletes or selling product really to go work out in, that's not more lifestyle. i think it's coming back down to the normal base and being used for athletic wear. so i think it's going it be tough for them to grow in that double digit range going forward. >> speed team for example, does that help at all in terms of sales, do you think? >> a little bit maybe. the under armour brand is well-known globally. so i think while the advertisement within the olympics probably helped the brand, it's just not as big a boost as it could have been. >> got it. susan, thanks for calling in. >> thank you. >> when we come back, walgreen's reportedly in early talks about an acquisition of drug
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a bright spot in the correction mike here looking at this. >> consumer discretion after the pull back out performing the market and also out performing the consumer staples group so people look to the market for economy. this is somewhat encouraging it says the consumer is in pretty good shape. wage growth and interest rates going up discretionary stock tend to do well in that world and basically take some comfort in this leadership area. there you see is the performance spread between discretion narry and staples.
pretty dramatic. year-to-date the discretionary up 3.6%. i wanted to look at the equal weighted versions of these in other words, not weighted but the market caps. because amazon still holds out performance not quite as dramatic if you look at the equal weight versus staples. so telling you staples is having trouble with higher interest rates. doesn't necessarily mean this continues. bull for those people, like i said, who wanted to see to make sure this connection was not giving us a scary message about the u.s. economy, this would seem to bertha out. >> in terms of the stock performance, do we know one sector has higher yield than the other? >> absolutely. yes, i think staples not only have higher dividend years, but kind of slow slower growth owned for dividends. look, i didn't want to own the
stock, but this is the yield kind of the motivation is the investors differ. >> thank you, mike we have some possible news to follow this year walgreen's reportedly in stocks with drug distributor berg enabout a deal or approach made according to the wall street journal. let's go to bertha. >> they had some preliminary talks. wall green approaching berg enabout a deal it would be right out of ceo stephen playbook coming off the companies bid to buy rite-aid. on the earnings call last month, executives said they look to do a deal before making acquisition, and that's the case here wall greens has 26% stake in berg in. the deal would involve buying the rest of the stake doesn't
already own. no discussion of a price according to wall street journal, but the market valuation at the close yesterday was nearly about $20 billion about there now. analysts say this is not a must do deal for wall greens. but the pharmacy could ring out cost savings by bringing supply business in-house. and that would be that although they think a deal wouldn't be transformative but one more step towards stepping up longer term goals. >> someone open to different types of transactions given his career path, would you have to assume they probably have more things they would like to do. >> so it might be just the beginning. now, interestingly, this morning the drug suppliers were all higher along with berger which has lost some ground burks at this hour it has been the drug stores which are rising, walgreen's in fact was lower, now it's high.
between the threat of amazon getting into the pharmacy and or supply chain business, these drug wholesalers and medical suppliers are likely to face more margin pressure would could ultimately mean better pricing for drug stores, david, regardless whether this deal comes to full fruition. >> yes, and again we'll see. seems tenuous, but worth watching bertha, thank you. >> when we come back, we'll have a look at the state of global markets. the economy, and a lot more. former treasury assistant charles dallara is with us then we'll go back to carl, he's at the winter olympics in south korea, give us update on what's happening there. "squawk on the street" back after this
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good morning everyone i'm sue herera here's your news at the hour there are concerns the coalition put together to destroy isis is losing sight of prime objective. >> global coalition has made outstanding progress, but the fight is not over. isis is so-called caliphate in the iraq and syria has crumbled, but isis remains a very determined enemy, and is not yet defeated. >> emergency workers continue to search for the remains of the 71 victims from the crash of a russian airliner human error may be to blame.
investigators say the pilot's failure to activate heating for some pressure measuring equipment resulted in flawed speed data north korea media reporting kim jong-un says north and south korea should try to make progress and dialogue between the two governments. met with high level delegation that returned home from the winter games. you're up to date. that's the news update this hour michelle caruso-cabrera i'll send it back to you. >> thanks, sue stocks are loweller. do you off about 104 points. considering what we felt recently, doesn't seem like a lot these days joins us no you with a look at what happens with lower stock prices could it potential reduce gdp. steve? >> thanks, michelle. were you spending more because your stock portfolio is way up or maybe you did something reckless, boat you always wanted if you did any of that, wealth
effect, buy moran save less when stock and real estate values rise estimate is people spend between 3 and 5 cents of every dollar of windfall from their portfolios that may not sound like a lot but stocks were way up goldman sachs thinks it may have added half a point to gdp over the past year. and now with the market down and outlook for stocks half a point could go away. so go to neutral not negative on wealth effect. since 2009 household up $45 trillion with a t and more than $3.5 trillion knocked off. here is where they prompted americans to save less that's the red line that goes down when the black line was way up that's three times that's happened going back to 1995. you can see there on right-hand
part of the screen savings rate has plunged while the stock market gone up better wage gains. tax cuts more jobs could ease the negative effects but americans can think twice about the fancy vacation or loaded carat least until the stock market stabilizes. michelle. >> steve, that was a great data point. what about on the way down do we know anything about the wealth effect if we see a sharp decline in storks? >> i think the literature suggests it takes a little time for the wealth effect to get going to the upside. but may end on the downside. because most of the research suggests most people are loss an averse, and they are okay spending house money, all of a sudden it's not house money, they may cut off sharply at that point. >> got t thank you, steve. >> pleasure. >> goldman sachs also weighed in on this question, saying the recent stock volatility, stock
market modest risk on the global economy. here with us is vice chairman charles dalarra. good to have you here. i don't think i've seen you since athens. >> pleasure to see you. >> you travel around the world you have international clients how worried are they with the stock volatility and recent rise in interest rates? >> michelle, i do travel a lot i was in the middle east last week and concerns are growing. two issues rates are going to raise so fast this is going to undermine confidence as steve says you've had this positive wealth effect but the negative when you come bienl that with a lack of consumer confidence could be quite serious. and then you have of course the fact that behind that, there is this strong stimulus coming that could push interest rates even
higher ten year rates have moved 7 obey cyst points over the last 12 months and the concerns i'm hearing internationally are growing about the pace of these interest rate rises and the volatility in the markets over the last two weeks, of course. >> any concern about deficits at all? that plays into this, this idea that in ha economy that's already fairly strong, we seem to be adding stimulus to a certain extent, whether or not it's needed, not to mention we'll generate deficits percentage of gdp higher than we have seen at some point? >> i am, david at this point of the cycle, it's not clear to me about this and that's roughly, maybe a little more, roughly the combined effect of the tax cuts and the spending increases approved last week if you combine that and then there is a quarter% every year rolling through the nondiscretionary spending, so you have a strong stimulus coming at a stage when the economy is quite strong.
unemployment is nearly full. and i think the timing of this really is not working ouchlt i was a strong supporter of the tax reform but did we really have to take corporate rates down to 21%? or could we have stopped that two thirds of the way down or 25 to mitigate the effect on short term revenues, medium term revenues >> or not such a massive increase in spending at the same time with potentially more coming with in infrastructure bill, if that ever happens so internationally, when interest rates in the united states go up, it tends to draw money from all over the world and country that is are in weak positions get often suffered dramatically are you worried about any overseas crisis? we talked for so long about the fragile five, because they have borrowed in dollars and maybe their currency won't be able to pay it back. any hot spots in the world we should be worried about? >> well, fortunately as know the
european recovery is well under way, looks quite solid surrounding political uncertainties. emerging markets are reasonably solid position with japan and 6% turning around one country that does concern me is turkey. seems to be poorly positioned but politically and financially right now to with stand a lot of volatility in global capital flows. i think, again, we have to look at the pace. and the extent of interest rate increases here the fed has established its course and they have been pretty clear, three to four interest rate increases this year. i would be very surprised if chair p chairman powell changes that i think we'll probably get four interest rate increases. ha is a little less clear to me is whether or not the game plan for decreasing balance sheet has to stay on quite the same course. >> what do you mean when you say that >> clearly no longer in the
market fortressryes, yet another potential demand source eliminated. >> exactly, david. they are taking probably over the next few quarters, they'll be taking roughly $20 billion a month out of the demand fortressryes n for treasuries. >> amounts increasing according to the fed announced plan of increasing cap over quarter. so looking at combined effect on the treasury and agency market of 45 billion of loss demand and also central banks so i think we are faszing a fundamental classic economic demand supply and balance in u.s. treasuries. and i think that this has to be considered carefully you know, the fed has said all along they'll move steadily, cautiously, and i think they've done an excellent job. whether they waited a bit too
long to begin this is another question but right now i think they are on a steady course but did they really anticipate when they announced the scale of this that the supply of treasuries would double this year i'm not sure they did. >> right, they did flot expect that. >> thinking there is going to be higher rates to come, perhaps a lot higher. >> i think so. it's hard for me to see that we get through this year without rates mofk, breaking the 3, ten year rates breaking 3.5 point and moving pretty close to 4 point. >> that's ha lot more pessimistic than our previous guest. thanks for being here. >> it's a pleasure to be with you. >> let's go to carl in south korea olympics. >> good morning. you have to talk about samsung
they are called chebeles, they are powerful, but lately not without controversy. >> when you first walk through olympic park, you see a giant s samsung activation store for many it's a pride of the olympic games, because samsung has been olympic sponsor since korea hosted first games in seoul in 1988. also known here as fable, family run, all official olympic partners, and all growth engines that put south korea on the global map as the fifth largest exporter in the world. the 45 or so tables make up about 70% of gdp which has gone from $200 billion back in 1988 to $1.4 trillion in 2016. >> no surprise for many years
these firms had immense influence over economics and politics but that's shifting in korea's new administration growing scandals, bribery climbs, involving samsung vice chairman and now deposed president park put a wedge between the blue house, korea version of the white house, and some see the current moon administration is changing tune, which won't have corporate activity but bring more transparency. whether they can balance the reforms remains a key question since korea's long standing pro business sentiment that many argue has helped korea's economy go from good to great. >> guys, take a look at the medal count this morning norway with 11 canada surgd with 10 germany with 9 and united states with six so trying to keep one eye on the athletics and the other eye on business and we'll continue to do this through end of this week and next. >> all right, carl, we'll be
watching for that. it was very interesting to watch what you were discussing with samsung, particularly those virtual reality. are those chairs moving as people wear those glasses? >> yes l we a we are going to take you for a ride at samsung experience here at the park, where the phones with actual physical movement. like an amusement park they are trying to work out some of these issues about dizziness and gnaw snauseous but they areg incredible leaps i went for a spin you are in a harness like you are on the surface of the moon but that's in the days to come. >> i can't wait to see did you get nauseous >> yes,i did. >> just making me nauseous just thinking about t i remember some of those vr rides. >> what do you do? >> i don't know.
well carl will tell us all about it very soon. >> that's right. >> hang in there, carl don't get sick. >> see you guys. >> thanks, carl quintanilla in pina colada. as we go to break, take a look at shares of blue apron, i vngtd mentioned that in a long time. certainly when the stock is up you can see it hasn't happened very often meal service company did beat on the top and bottom line. of course those numbers came down decline in what it spent to actually market service. and here's a look at stocks at this hour. yeah, climbing our way back. nasdaq almost back to flat "squawk on the street" is back right after this cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities.
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>> now let's get to rick santelli with the santelli exchange. >> hi, i'd like to welcome jerome i look at the board and see ccp coming up. post the jobs report, even with the dropping hours on the work week that seemed to be the catalyst of a market change what can we expect, in your opinion, from the inflation front and effects on rates >> yeah, we still forecast up for tomorrow increase of .25 increase on the cpi number but most importantly have to reflect this is wage impression rs slowly increasing. from that, investors need to be thinking about recalibration of yield curves, recalibration of rates moving high, and again, response of the fed to all that data so for tomorrow it's an important piece of data, but it could be continuation of what we
have seen improving trends. >> do you see any rate of change speeding up? do you see the rate of change speeding up on the delta, so to speak, of wages or generalized inflation in the economy >> the hope and goal and what we see is wage pressures are slowly moving higher as we have moved from the economy. >> slowly? >> slowly moving higher. and response is fed will continue to highlight the fact we'll continue to move in methodical fashion over the cyclical rise and tighten zbins that data. investors a little bit of indigestion as you see them calibrate. so tomorrow's print is important, but it's one data print. but the trend remains intact, still have a growing economy, that ultimately slack is reduced and we'll have to absorb and react to higher nominal yields going forward. >> if the federal reserve and all other central banks had balance sheets the same size they did precredit crisis, would this process play out any different in terms of raising
rates in trying to in essence slow down the economy given some of the they call it stimulus, i think tax reform is more policy, but either way >> ultimately we have to think about the supply and demand mechanic of what's going on. new supply come noog the treasury market but have new sus going to be the buyer on the demand side. >> you're going to have foreign central banks, foreign counter parties, foreign dealers looking to buy less of u.s. treasury supply you have corporations who are prone to tax reform, looking to buy less than the credit corporate sector over the past three to five years. the demand function is the key component to understanding the shape of the yield curve going forward. it's a living, breathing organism we have going on. >> it's a living breathing organism in a bit of a box due to the ownership of many of the organisms. >> what is not in a box is the front end central rates. >> so if you look at -- before the budget and before the $320 billion with regard to the two year deal they arrived at, we're looking at roughly a trillion dollars for 2018 and i believe close to $600 billion of that, a
little over half is t bills. yesterday six month bill garnered you 1.77. so a little over 1.75% wouldn't that be a good plashgt f good market for investors to wait and see what happens with the volatility >> yes, when you think about rates moving higher, the most attractive point of the yield curve is that where it can recalibrate to higher. i highlighted before, floating note rates recalibrating >> you bring up a good point we have a lot more floating issuance on the corporate and even on the government side. is that going to diminish or act as a shock absorber that we didn't have in by gone era there is more supply that investors can shield themselves and look to absorb higher yields into their portfolio which become more attractive
>> we're going to go lightning round. okay march meeting coming up, quarter point tightening he? >> yes. >> what would surprise you, four rate increases or two? >> two we have a growing economy. >> wait. so you think four is possible? >> it's possible we also have a reaction function with jerome powell looking into maintain the monetary policy normalization path that we have. investors should be poised to take advantage of that monetary policy normalization which means higher rates over the cyclical horizon. >> you did very well i think you're going to win a vacation for four. jerome, thank you very much for being my guest david faber, back to you >> okay. thank you mr. santelli let's send it over to jon fortt, get a look at what is coming up on "squawk alley." jon? >> coming up, stephen roach, former chairman of morgue an stanley asia is going to join us back in december he said the market's in for a reckonning in 2018 we'll see if he still thinks so coming out of play on squawkaly.
the best performing sector is being led by shares of under armuor you also got the likes of amazon, foot locker and wynn resorts also among the leaders today. certainly a sector to watch, david. back to you. >> okay. thank you very much, dom chu with apple's annual shareholder meeting set to start in hours from now, at&t will be the first company offering a buy one get one free deal for the iphone 10. customer wloz buy two of the phones on at&t's next installment plan will get the second device for free the plan splits payments over 24 or 30 months of course, the equipment installment plans are the way things go these days that's not a bad deal though >> considering the price, a lot of people have to pay in installments when you talk about a price point of more than $1,000 to get a second one for free is good. >> not bad >> i wonder if we'll see the other brands do that, have to meet that. >> see if that comes into play >> she said wishingly. >> we come back.
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