tv Squawk on the Street CNBC March 16, 2018 9:00am-11:00am EDT
also see green arrows. these are modest and advances with the exception of italy. oil markets this morning, wti crude up by 13 cents, 61.32. that does it for us today. >> make sure you join us on monday, "squawk on the street" begins right now ♪ good friday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer who's back with us. welcome back >> thank you >> s&p trying to pose its first game of the week expect heavy volumes today on options of expirations and rebalancing. europe is mostly green
10-yr is 2.83. our road map begins with the faith of qualcomm. days after the president blocked qualcomm bid plus, once considered a possible candidate to become the ceo, a top nike executive is now out after reports of inappropriate workplace behavior at the company. >> ten years after the bear stearns bail out first up, semiconductor stock is in the news. jim's interview last night qualcomm rising on the premarket of this idea of a buy out which you got news on. >> let's deal with this once and quickly and never discuss it again. >> put a stake in it >> yes let's do that. there was a written communication from paul jacobs until last week or so was the chairman of qualcomm, the
founding family of the company in that written communication, he indicated interests in trying to take the company private. okay let's step back from that and think about it in a moment he may have approached soft bank and i heard there is nothing going on there let's step back and take a broad look of this we know that qualcomm says no to 82 from bod coroadcom. what was the price that would have won the day there and lets say if there is not a cfius review, where would you ended up 85 or 86 $130 billion, step back and think about that number for a minute, jacobs, does not have any real money -- he's a rich man. his ownership -- >> jeff bezos maybe? >> what do you need an equity there? what are equity checks these
days you have to write 20% or 25% at least. you are going to raise over $100 billion in debt soft bank foreign company, cfius just said no but soft bank is going to do it they subjected themselves to the toughest cfius -- they agreed to all the things cfius asked for which was very tough and, remember that first letter from treasury where they said we don't want to see qualcomm going down the road of potentially a private equity style buyer well, this would be that conceivably, it is virtually impossible it is the reason why, jim, and you know how many people i have spoken to in reporting qualcomm/broadcom. more than one said the following to me and i am going to quote
it they think jacobs has snapped and the pressure got to him. >> that was the term used to me by a number of people. mr. jacobs have not been able to reach and not acting rationally. >> wait a second he's not snapped that place is dynamite they have more tequilas. >> the board itself is not going to set up a special committee. they'll take it seriously. >> how did this happen >> well, he does really want -- >> the stock was 3 bucks when the story ran. >> jim, it is true that on tuesday sent a written communication saying i want to do this. he talked about the possibilities of it previously the question now is, you know, i
think some people wondering if he's going to stay on the board. >> he snapped? >> a number of people said that to me. >> that's ill-advised. >> this is a highly pressed situation for months particularly when it looked as so hock tan and broadcom by the way be successful. i have seen those potential vote totals they were going to potentially get as many as six index funds were not all in. it is a lot of pressure and it is not going to happen let's move on. >> thank you was it nice when news were reported by different news outlets that they may have testimo tampered it. but, the stock went up three
bucks and a lot of people lost a lot of money someone wrote a story -- >> and they did say and to be fair for them that it is highly unlikely >> the story is true. that's a news worthy story -- i don't give them -- >> let's tie into the other bits of news. we mentioned broadcom's results and jim interviewed krzanich last night >> we are heads down on making those successful and right and they are great engines for the future >> growth engines although
nowhere near the size of what this could have been >> this is one of those as opposed to other organizations reported yesterday with qualcomm we are not going to do it. now, would he like to do it? he does want to dominate 5-g here is the way i look at this thing, if you want to dominate 5-g, you would like to own broadcom before, the idea that it came into your head and trying to figure it out, it is not in itself, david, since you taught me this, this is about to happen >> but, they did they did have some banks, looking into the possibility of that >> he did not deny it. >> but, right. it does not mean to your point that it is going to happen >> they looked at it many years ago. i got it in my notes >> they were going to buy when nick was running that company, they're going to make a bid. i am talking about in the '90s
they're going to make a bid and they passed on it. >> they look at everybody. >> your take away is nothing more than that at this point in terms of their interests >> i think they are so involved in autonomous driving that this is a company that you regard as the autonomous driving semiconductor company that has a fabulous data center stimulus. and he did not want to go there. yeah, that's double digits he does not want to hear it. intel inside the car >> yeah. >> give me a check for that. intel inside the car >> you are always looking for those cat phrases. when it comes to autonomous, it takes me back to qualcomm. jacobs thinking of the nxp deal is not going to happen and you talked naiveegatively about it i got people seem to indicate
that they're going to receive the approval as needed of antitrust. >> if that's the case why does everyone sell every single text sk constantly when they hear china in the white house >> cfius note where they took it from a strong buy of a sale. >> i am not kidding. >> their target of micron to 100 today >> well, that's the second guy the first guy did 100. >> we'll talk about that $100. >> they are. >> when we come back, it is the tenth anniversary of the bear stearns bail out we'll talk to gary parr and barney frank looking back at the crisis and ahead on this push to roll back dodd frank as we said, s&p is shooting for its first gain of the week with a lot of going on including options and rebalancing. back in a minute
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memo memorialization. today is the 10-yr anniversary of bear stearns being forced in the arms of jp morgan. they did get up a lot, 10 bucks a share. we did get a chance to speak to allen schwartz in which investors and perhaps more importantly counter parties were starting to become very concerned. take a listen. >> it is been a hard week for shares of bear stearns, bear maintains it is balance sheet and capital positions all strong the stock rallied yesterday still down 17% over the last five trading sessions. joining me first on cnbc is allan schwartz, mr. schwartz,
thank you so much for being here this morning >> good morning. >> let me start off with this broad idea that's been in the market now and pressuring your stock namely the counter party risk is something that a number of firms on wall street no longer want to take in terms of dealing with bear stearns, is that true? >> no, it is not true. we are, there is been a lot of volatility in the market and a lot of disruptions in the market and that's causing some pressure a administratively, we are working hard and getting it down were in a constant dialogue with all major dealers and counter parties on the streets we are not made aware of anybody that's not taking our credit as a counter party. >> when i am told that last night they tried to close out a mortgage credit protection, mortgage position with goldman sachs that they bought a year
ago. bear was the low bid and i am told that the golden would not accept the counter of bear stearns, you are not saying it is not the case. >> i am not aware from a specific trade to another and of third party, we have direct dealings with all of these institutions and we have active markets going with each one and our counter party risk is not a problem. >> guys, $220 billion, $11 billion in equity, some people -- well, come on. this was on a road of confidence we kept on talking those weeks confidence in wall street can go away in a heartbeat and that's the end of it. >> i remember infamously or famously, i got a call the next day, listen, is my money in bear stearns and am i okay?
and anyone who had done the work at goldman if you have insurance or money, your cash is okay. the fact is somehow it came out recommending bear stearns. no, you got to take your money out right now because it is not safe for bear stearns. the question was was there a way to be able to stem it and these are famous instances if you talk about it, are you dead should you come on well, it did not matter. we could have talked about washington mutual and i got about a dozen firms to talk about right now. >> people thought okay, they stemmed the crisis and dealt with bear stearns and shareholders were hurt, originally it was two bucks and moved on there was those that thought okay, we dealt of what was an incredibly high-levelled institutions >> contained is the word in terms of lessons now, you got
household and government debt, ultra low rates around the world and you have cohahn on "squawk" seeing people cannot wake up with security risk >> the idea that you can journal the money out of an account is very true with bit coin and not true with banks. he can basically get the bad guys from north korea or russia, they're waiting to see your bitcoin account and journal it away it is so easy to say that everbank can go under. if it happens, you put it on youtube. come on, it does not do any good are the banks better off than they were or the balance sheet they are we only have certain metrics that you can use and you can use equity and carbsh on hands.
what metrics are we supposed to use? diamond per share? what are we supposed to do >> there is a level of transparency right now and better than it was then then things were incredibly opaque. the banks did not fully understand it was not just bear you go on and on right. you get to a leverage ratio that was far above what you would ever expected and again, all based on people paying back their mortgages. >> here is the way you could end their discussion and tell all these guys, if you put a lot of people in jail, okay you can say look, we put a lot of people in jail and it is not going to happen again because jail is bad. going to jail is bad the narrative would change we put the top five board members of x, y, z, bank in jail and that would be true
that would say yes, it is safer now. we did not do that >> no, e wiwe did not >> massive frauds of what they did. >> none of them. >> very tan. >> i come back and i say the only way to do it is what the people of republic of china does they say we are tough on crimes and i think they're tough on crimes they take them on disclosed locations. our banks are taken over by the chinese government and chairman wu disappeared a long time ago >> did you agree that main reason why something bad happened then is nobody would go to jail. they robbed us where are they >> they are with us still. >> they're rancho valencia, the
greatest resorts owned by paul jacobs 18 tennis courts i have that room, that was the room that i was in i was with my daughte daughter -- whatever >> it is unbelievable it is the bear stearns l' legacy >> we'll take a break and we'll count down to the opening bell industri industrials did cross. futures are pretty steady here more "squawk on the street" after a break.
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all right, we got a "mad dash." >> i have to tell you david, there is a person that people you talk about and they speak at about him. he's the ceo of adobe, narayen, this is a hundred billion dollars company. 50% net income grew year after year this is the hottest txdot. it is commerce cloud >> and the subscription model is the key. i listen on "mad money" when you talked about this. it was here and you saw the cross over when it went from being on premise by the way, their products
are -- i don't know, my daughter mix things with the adobe, it looks like what we would pay hundreds of thousands of dollars. >> $110 billion market value some where in there. >> it is not done. if you do commerce on the clouds, i don't want to say anyone as a monopoly, i have to tell you, david, they are the only one that people really trust creating activities on the web and a lot of people thought it is -- >> got all the key things and own their own distribution channel and data and customers and you go on and on and all those key things that people like to market as a sign of a company in the current age that'll be successful. >> that's why people love them shantanu basically checked all boxes. he checked them off before they were boxes he's a delightful man and the stuff you can do is talk to your computer and it has you in cartoon forms.
these are things that you would have thought maybe in 200s or 100s that we could do. i had them draw a picture of me. artificial intelligence, i look good man you look younger than the bear stear stearns. >> you look good as a cartoon character. >> nobody went the jail. >> no, nobody. >> some investment banker went to jail. >> some of those guys have beautiful homes in the hamptons. >> we got a lot of things to get eng lls morning including an opinbe i'm april kennedy and i'm an arborist
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say carl, we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.
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production acro the cross current this week and now this >> rick did an excellent analysis of how long we have been at this particular lefrvel. here we are, 2.8 and it is still the same and all these numbers ever do is cancel each others out. it should be a fabulous time for investing. you go to bed and mcmaster is out and you wake up is mcmaster is in. there is a notion of each day that wow, how do i relate that you fire one guy, okay, it is a bad guy. you fire two guys, maybe we should be worry and you fire four, the house is clear oh, the narrative switched i find it jarring to me. i don't know how to relate it to stocks i just find it jarring >> same with the mueller's subpoena yesterday and russian
sanctions yesterday? >> yeah. >> dc have a big pipe of information and investors seemed to have no clues out to process. >> we'll help it and they'll come on and he's very good and look -- i have been in involved of moments of crisis when you talk to lawy larry, he's as forr senior commentator press in general, i like his view of how the economy has been doing i would like to hear a little bit more of the narrative. that used to be a big narrative. remember the economy >> of course we remember. there is the opening bell. the south china morning post celebrating its launch of english language as a new brand, and zscazscaler is celebrating
theirs >> i guess that has to happen ahead of when they report. they report next week and trevor, i don't know the gentlemen, when the conference call, i always think he was a star he's been the key root of the jordan brand which is something that makes money michael jordan is better known in china it is amazing how well the jordans sell in china. this man was in carjaharge of te digital experience i regard him as the expert in social media and nike is doing that personalization and a champion for performance and athletic performance shoes for a while, people thought they lost that edge, this is a big loss this guy is fabulous, anybody that listens to the nike
conference call always hangs on this man this is a big loss for nike. >> reports of the employee memo referencing an internal investigation into behavior, they did not say whose behaviors. we'll watch that retail is a busy day, tiffany beats by 3%. >> i thought they would say the manhattan store was dois was do better remember we had a strong dollar, we heard people who are not coming to manhattan there. >> also, there is that period of time where there is a no go zone remember of the key 57th street location given to trump tower. >> that did not inhibit traffic. i did expect more. i think the game name is fabulous they were selling it down, six or seven hours that was wrong retailers, we have seen retailers if people turn on
retailers like they did on dollar tree, it is really frightening. now we got champions down here i just -- when they hate a retailer, they hate it down to the bottom it is really this one. >> more than tac >> now, they think maybe broadcom is going to buy it. >> regulatory risks continue to elevate for so many potential deals out there, guys. yesterday it was reports and closer look on antitrust regulators you forget how long and they all take forever >> yeah, they do >> that raise some questions and concerns as to what it will need to do to get through the finish line i don't have any great insights there, it is on the reporting. but it does raise this other question of given how long it
takes for this deal and even if they are finally able to close they seem to have the shareholder votes early and you sit there waiting for a year or more as a shareholder having to give your blessing that's why nxp was so interesting. shareholders retain the rights to dictate what they wanted to happen and they're able to get the higher price when you are aetna, for example, and you signed off the deal as they did earlier this week, who knows what's going to happen at aetna or cbs time warner signed off on that deal and shareholders voted it a long, long time ago. what if they did not vote on it so soon. sometimes the intervening time period can be positive for the acquired company the business does a little better or there is a revaluation of their industry some way it is interesting to know how
how long everything takes to get done and whether or not the shareholder books should be moved back >> cigna deal, how long is that going to go up >> people do hate that deal? >> yes >> they hate it. cigna was promising to get big they may hate it but it is not going to cross >> not close for a long time don't know for the vote for cigna or express >> amazon and whole foods happened pretty quickly. >> no leaking around that deal it got done quick. >> still disrupting everybody. kroger, that kroger corner was not great but that has not taken into account of what they want to do with whole foods >> they were done about the current one. jim, we were pinned to the 2075
number flows to the u.s. funds last week >> it is weird because there is a lot of etfs money, technology is 26% of the s&p. there is money flowing in of technology the view is so exciting. it is autonomous car you go out there in san francisco, that comes up within 30 seconds it is no longer talking about elon musk. just the idea of -- is it going to be 2023 or 2021 now, it is going to be 18 months you are going to start seeing. driving around in jerusalem right now. >> this leads on a lot of elements of tech
>> 15 million. i think if we were to do our show from israel, i think we'll be doing karaoke, "squawk on the street,". >> what about tesla? and how it is key now and production of 500 cars and how they're going to need to raise more money if they don't get there pretty soon. >> well, they lost two of their senior people in treasury function there >> for personal reasons, david >> personal reasons, right >> are you worried at all? >> personal reasons. you are the one that says a brilliant man snapped in the a-block. >> i did not say that. >> i was quoting people close to the board. >> so paul jacobs snapped?
>> i don't know, that was like the best -- one of the great stories you broke and i am not going to let it die. >> i didn't break anything >> they think paul jacobs has kind of, you know, he's decompensated, what's the word i don't know w >> mr. roberts >> the strawberry incident, he snapped. >> he snapped. >> just like sources close to paul jacobs. >> can we talk about walmart for a second >> sure, why not >> walmart is putting more pressure on vendors to help finance price cuts and expand labels to give more leverage
these price cuts continue to fuel walmart's share gains the packet food company cannot afford, walmart is bad for kfc >> kfc is the stuff that walmart is infamous for. >> wow >> so much pressure in that business coming from all sides >> when you talk to clorox which is the best. it is moving into health and wellness that is your ticket to double digit growth when you go to the kraft, it disnot realdi does not cut it. kraft time >> i am aware of their product portfolio.
it depends how you define health and wellness >> the cholesterols are the greatest thing that you can have >> the science can go the other way on it. >> high cholesterols >> i heard from gottlieb this morning on "squawk." >> you think opioeioid is discouraged, it is still >> 8 million looiives their charter is to work on the health benefit of the country. >> totally true. >> so for the time being, we are again close to 2750. dow is up 50 bertha coombs. good morning remember a lot of people who did not see me outside the door. today we are oen watch for the
close. we have quadruple -- the s&p 500 is normally up 70% of the time during that week is up about 1%. this week we are giving back half of what we had rebounded in last week's strong 3.5% rally. the number of data points now showing a record, $43 billion equity and 32 billions in u.s. stock funds. the nasdaq really rose that moment momentum, not the best performer for the week we got utilities and real estate with those dividends as they paid off as the best performance sector real estate, we had the housing numbers start this morning, they're pressuring the home bui builders overall and ten years
after the fall of bear stearns, there are still new challenges and head wings as mortgages continue to move higher. it is going to be a tough spring selling season for buyers and not much inventory out there and higher mortgages and with that said, regional banks have gained on the week on that senate bill to roll back dodd frank's revision would see where it moves in terms of the house and notwithstanding regulations of small regional banks that out performed dealers. the big banks when you look at it in the long deal. rough week for retails, you mentioned tiffany and ulta, not to the new hikes that we have seen and disappointment there and the over hang of toys r' us right now, liquidating its stores that's a lot of real estate. we'll see if anyone would take
up the brick and mortar stores nasdaq, they priced at $16, that was above the range. they raised about $192 million that's going to give them a valuation of close to $2 billion morgan stanley is the lead rider on that. we'll see how much demand and whether they can match up those trades e etf, has out performed a big cap tech this year right on pace with the russian hacking of utilities and the u.s. in europe and the headlines this morning keeping system secure is the major challenge. >> bertha, thank you for that. >> let's get to the bottom of this rick santelli, a lot of news today coming off from the navarro's interview and the 2-yr
is raising eye brows again >> definitely, let's look at that you should know in today we did the pop over the 229 level on a closing bases, the last time we closed it was around september of '08 we'll be comping at -- you can do the math on that. now let's consider on the week we are up on the 2-yr note yield, let's move down the curb a little bit to 10-yr. on the day it is down five and it is a real curve flatten week. let's go on 220 and 218 on 10-yr. it is 16 this would be, should we close in the 280s. the 16th trading day of the row and you can see it is clearly on this chart for 222
10 minus bund. so under 200 basis points. let's open that chart up now and you can see that current levels at 226 we are zooming september of 2016 is important because you see that one spike there. it is 235 basis points that level which were in striking distance of, why does that relationship being going all the way back to 1989 if you look at one week of bund. today is the first day of all week bund yields are trading into the previous day ranging to the upside and still under 16 basis points the dollar index have been grounded up so much that you can put it on the grill and put it on a bun it is ground up. today it popped. we have been talking about technicals traders use
look at today's chart of dollar index. the minute it popped above 90, it did get some legs you want to pay attention indefiniin which side of 90s it closesat. >> still to come this morning, bob greifeld, on the collapse of bear stearns and s&p 500 is up at 11. we'll be back after a short break. where can investors seek predictable income in an uncertain world? pgim sees alpha in real assets. like agriculture to feed the world. and energy to fuel its growth. real estate such as e-commerce warehouses. and private debt to finance transportation and infrastructure. building blocks of strategies
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have no incentives to rock that boat >> navarro on yesterday. as aaron rogers said yesterday, relax. you go european commission publishing a list of u.s. goods that could be subject to tariff retaliation. >> look, this is -- you set this in motion. this is what's going to happen the president is following up on what he ran on, which was, look, we're not going to let these companies be pushed around anymore by china peter navarro -- i have known him for years. he was at har varvard when i wa there. one thing that is certain is peter has been consistent. bring peter in under this article that i'm trying to get my arms around, there is without a doubt a definitive sense that president trump believes that all these people are paper
tigers that we just haven't fought. when we fight, they will capitulate, which is why i keep focusing on to bring you back to this nxpi deal where are the chinese? why aren't they doing something? >> why would they choose that to be their marker? we're not even talking about retaliating against what it's not the broadcom deal being turned down. it had to do with concern about china. it's not like when we say no way with sea nook. >> you want to send a signal i felt the president treated it as -- >> terrible, terrible, really bad message if they were to turn it down. for reasons not having to do with the actual underlying antitrust regulatory apparatus and worries about that. >> maybe they don't -- how about if they do this? we're going to study this for the next year. how about they do that someone says, you are -- how
about if they say that >> it would have a chilling affect on a large contingent -- not just even in china but just sort -- then you get into this tit for tat. >> they are tit for tat. >> come back on a tariff as opposed to something to do with a merger >> all i cantell you is that the president feels very strongly that we have been pushed around and he actually is not going to be deterred by any of this. not one bit. i think larry knew that when he signed on. he knew it >> interesting china has the least amount of u.s. treasury since last summer. we will pay attention to that. >> some people feel that's the only reason why we haven't taken them on. you buy our treasuries versus -- you get a better deal. >> let's move on dow is up 75 well, it's earnings season
once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.
when i spoke to a huge buyer at hp of flash, he said micron is strong from d ram side. flash would be weaker, he wouldn't say that. flash prices are still elevated. western digital could easily trade to 130 as the price target was. it's a really strong story >> big show tonight. >> i got greg hayes coming by. got lew cirne. greg will talk probably ask him about a breakup. >> what a week you have had. utx, intel, pay pal, twitter who didn't you have? >> i didn't have apple i didn't have google i didn't have facebook i have thrown a lot of chairs. >> big three you didn't get the big three. >> and the cuddler news. >> i broke that story.
i'm the only person that breaks a story and there's an article about how he's not allowed to break the story. it's not fair. >> you were out there breaking the story. >> 17 million americans can break a story but not cramer fine fine >> you did it. most importantly, you got it right. >> that's really all that matters. >> thank you see you tonight. good to have you back. when we come back, barney frank. senators vote to roll back some dodd-frank reform. talk to gary parr who negotiated the sale of bear dow is up 79 orward. we're the number one dairy and apple producers in the eastern united states supported by innovative packaging that extends the shelf life of foods and infrastructure upgrades that help us share our produce with the world. all across new york state, we're building the new new york. to grow your business with us in new york state, visit esd.ny.gov
good friday morning. welcome back to "squawk on the street." going to start with fresh data let's get to rick santelli >> my job is really fun when you get extremes really weak or strong data i'm an old market guy. market volatility tells you more information. our preliminary read on university of michigan sentiment is one of those times.
102.0. granted, that's preliminary and it can change. the reason i'm so excited, the current tie was 100.7 from october of last year that was the highest level going all the way back to january of 2008 that read was 103.8. we're going back to jan of '08 usurping the 100.7 solid read. 122.8 on current conditions, expectations 88.6. let's get into the inflation here is another one that the market is going to maybe get excited about. the one-year inflation outlook, 2.9. that's a jump from 2.7 and the five to ten inflation outlook stayed the same at 2.5 we have jolts. you could tell if it's strong. does it have a 6 million handle? check. it does. 6.312 million job openings
even though we had a really negative revision from 5.8 to 5.66 million last read, it accentuates how it popped back over the 6 million handle, which is really rare carl, these two data points are strong we want to see if we see selling in treasury pushing up yields. we're getting a little curve steepening today reversing some of what's occurred this week back to you. >> a lot of good information thank you so much. our road map this morning begins with stock s shrugging off some of the white house noise hatzius is with us >> a shake vup at nike ten years later, the anniversary of the bear/stern negotiation. >> despite signs of turmoil at the white house and political uncertainty in washington, stocks are higher across the
board today. dow is up 69 here with insight, a reference of the michigan number we got, squares with nfib. the jobs number, ip today pretty good retail sales sort of the only fly into the recent ointment. >> we have seen a divergence between the gdp and things that feed into the gdp which have been pretty soft most other things, higher frequency indicators, payroll, claim, survey, today's numbers that all say perhaps once again we're getting one of these weak first quarters that looks suspicious on statistical grounds. on average, more than 1.5 percentage points weaker than the average of the other three quarters over the last ten years. we do think that part of that is continued seasonal adjustment distortion i think the economy is really quite strong >> stronger than --
>> stronger than the first quarter gdp number might suggest. we're tracking that at 1.8% at the moment i think the true growth rate is quite a bit higher. >> you went to 1.8 jp morgan went to 2. atlanta went from 5.4 to 1.9 with a do you thi >> our estimate is 1.8%. we reset after every release obviously, there's -- we don't have risks on one side or the other. we move immediately. >> does it get offset in q2? do we have to wait longer? >> i think so. i think q2, maybe 3, will see stronger numbers ultimately, i think the pace is closer to 3% than to the low 2 i think you will make up for this at least to a significant degree >> as investors grapple with the idea of a trade war, how does that factor in to your view of economic growth and whether or
not it's a wild card >> it's certainly a wild card. i think the concern about trade war and tariffs is mainly about what it might foreshadow if you look at -- obviously, you can have more negative scenarios where there's a lot more retaliation and escalation but if you focus on what's already been announced or what's likely to be announced with regard to china and you look at the macro affects of that, it's not enough to derail our basic outlook for the economy, the effects are really quite small in terms of the impact on inflation and on growth. we're certainly very focused on it but it's not something that led us to make any changes to our baseline >> do you get a lot of questions on trade these days from clients and are you going back to try to look at some period that perhaps might be analogous to try to understand what may happen >> for sure. it's been probably the number one question over the last few weeks.
we have looked at it in quite a bit of detail. the sort of numbers we find though are that the impact on inflation is below a tenth of a percentage point the impact on growth is below a tenth of a percentage point. we're still really talking about these numbers in terms of basis points, not in terms of even tenths of a percentage point again, focusing on the things that have been announced or could be announced, if it escalates, that's going to change, but it would have to escalate a lot to make a big change, to make a big difference in the macro numbers from microeconomic perspective, tariffs and trade restrictions introduce distortion most economists believe that we certainly believe that. from a macro perspective, we will see what happens. >> how much does the fed have to address that issue in this month's meeting? >> i don't think it's going to be addressed explicitly in the statement or in the opening
remarks that chairman powell will make. it probably will come up my expectation would be that the fed's view is like wise. this is a potentially concerning development if there is a significant escalation but at this point, not enough to change their outlook i think the outlook is going to be fairly positive. >> has there been good work on how inflationary trade wars are? >> i think a lot of people have tried to do work on it we tried to do work on it. we just don't come up with numbers that are all that big unless we feed in assumptions that are far, far bigger than what's been announced so far >> what is far, far bigger >> i mean, we would have to wrap it up in order of magnitude in terms of the overall impact on the average rate on u.s. imports. our estimate is that the average tariff rate on u.s. imports, if
you take the steel and aluminum tariffs pecifically, equates t something like 0.2 or 0.3% then once you go to the level of consumer price inflation or pce inflation, that's mostly services so the numbers go basically down by one order of magnitude. it's fairly small. >> on retail sales, is it just about goods producing economies under performing overall economies? we talk about people valuing services and experience over things is it that simple? >> i wouldn't put too much weight on the weakness in the last couple of retail sales reports. that follows some very strong ones towards the end of the year also i think the overall taxes have not yet been -- >> delayed in returns? >> delays in the tax refunds
the reduction in the withholding schedules is not kicking in until february, march. i would want to give it a month or two my expectation would be that the next couple of retail sales reports are going to be significantly stronger than what we have seen in the past couple months >> interesting we didn't get to cap utilization, another interesting number save it for next time. >> thank you a shakeup at the top of nike it is conducting reviews of its hr practices >> good morning. there's still much unknown what we know is that nike's succession plan is no longer what it was yesterday. its work culture is suffering can we say a bit of a black eye today? it's unclear how and if the two are related. according to a memo that the ceo sent to employees, the president trevor edwards decided to resign and will retire in august.
he has been viewed at parker's successor and is the executive that attends big public company events his resignation and retirement comes after parker reveals in the same memo that instances of inappropriate workplace behavior have been reported that do not reflect our core values of inclusivity, respect and empowerment. nike is doing a review of hr systems, restructuring management into what parker calls a different alignment, that will allow for closer management we asked nike for more details and clarify what's cloudy. so far, they have not explicitly linked edwards to the inappropriate workplace behavior the company instead calling out mark parker's statement thanking edwards for his significant contributions to the company after 25 years shares of nike little change this morning down a half a percent. parker asserts he remains committed to nike, saying he
will remain chairman and ceo beyond 2020. he has been ceo since 2006 the third in the company's history. starting his career in 1979 at nike back over to you >> interestingly, one of the few dow components in the red today. point well taken thanks when we come back, today marks ten years since the bear/sterns buyout >> the fed making moves it has not made since the great depression likely to be historic morning. >> what a historic morning it was. gary parr will join us later, we will talk to bob greifeld big show ahead dow is up 54 ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business,
and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. let's start there. the firm, 85-year history, well, sells out for $230 million >> it's the ten-year anniversary of the bear sterns bailout joining us gary parr who advised bear stearns on that sale.
he was instrumental in the restructuring of lehman brothers and fannie mae if i remember, aig, too, at least along the way. >> a few other things. >> you were in a lot of these. let's go back ten years ago. take me to the room. it's been a brutal week. >> yes >> confidence is gone. you know kind of what's about to happen >> there was a panic there was a run on the bank. there was a lack of financing and funding. time was running out when we came to the final weekend was jp morgan saying that the price they would pay was $2 a share i will never forget that phone call coming in i was the one that took the call stepping out of the boardroom and saying, i think we have a bad connection can you say that again do you really mean it? it was $2.
bear stearns had two choices to make $2 or bankruptcy it ended up being raised to $10, fortunately. in the end, those were the two decisions. i do believe still sitting today ten years later, the right decision was made. in a sense, lehman brothers validated that. >> it would seem six months later when we were entering the depths aboard the beginnings of the serious crisis, it was confirmed. how bad were things at bear? lessons learned here i was talking about $220 billion of at risk assets versus $11 billion in equity. it's not hard to understand how confidence might go away quickly. >> yeah. i was going to say, all the characteristics we have seen in crisis in the pasts. too much leverage, illiquid
assets and it wasn't only bear stearns. it was where fear was placed that weekend in reality, every other major investment bank had illiquid assets against short-term funding. not that they were bad assets, but they couldn't liquidate in a hurry. we knew there was a broader issue everyone had it happened bear stearns was first. >> it was something about the asset mix that made them first. >> it was. they had more mortgages. therefore, people assumed more risk in the -- we remember the mortgage problem that being the asset class people were focused on yes, they had a higher proportion that brought the bright light first. >> as we sit here on the ten-year anniversary, there were movements to roll back a lot of the areforms that had been enacted. does it make you nervous do you think that those risk factors don't exist in the system anymore and banks are so
well capitalized, the run on the bank situation that bear faced, it can't happen? >> i never say the "it can't happen." as long as you have short-term funding against other assets, it could. i would say today, the regulatory changes being discussed i view as being targeted to the small banks and not of consequence where the real systemic issues are i would worry about if that were beginning to happen. it's interesting i don't think today we have the risk of what we had ten years ago. i could sit and say there are other things i might worry about if i wanted to worry it's not the same thing. usually things don't replay. you fix last iyear's battle or what next. >> would you say the fix to the degree it's been fixed in terms of risk strategy has come from within banks or was it something about legislation? if so, what was the most potent part of legislation? >> i would say it was probably a combination.
banks didn't want to relive this again, of course and legislation. the regovery good legislation w increased capital and increased liquidity. that's the core of addressing the issue. a lot of that was legislative and the banks wanted to do it as well it was a combination that was the core issue. >> gary, six months after bear the government made a decision to let lehman go bankrupt. how much of what happened at bear then informed that probably not great decision incredibly consequential decision to let lehman go. >> there were -- there was a primary issue we were concerned about in bear. that was that the technology, the systems weren't sophisticated enough or fast enough to deal with all of the counter party risk if there was a bankruptcy in fact, the markets would not open in japan on the monday morning and so on around the world. it was this fear of the technology
what the government focused on rightly was let'sget all the tapes from all the investment banks, let's figure out how we would do netting, how we would do counter party risk and fix the technology system so if we face this again, we're ready on a technology front there was a number of other things done, too that was the big one in the end, when lehman went under, it really wasn't a technology issue that became the issue. it was a money market fund issue. >> systemic risk >> exactly it was something unanticipated i would say at bear we had one particular thing in our minds. at lehman, most people thought that was addressed it probably was. there was another risk that had not been properly anticipated. >> you mentioned some of the other things that might cause you to worry if you wanted to worry. let's say we wanted to worry what are some of those things? >> the primary thing i worry about is cyber cyber security, cyber risk again, panics that are systemic arise from fear.
fear of i'm going to lose my money. what do i do everyone has the same reaction i could i suppose paint a scenario, imagine one or more institutions were attacked in a cyber manner whatever it did, whether taking somebody's deposits or just disrumedi disrupting accounts. if there was multiple attacks and people said who is next and what does it mean for me, i don't want exposure to financial institutions -- >> imagine the run on the banks. >> it would -- so i would sit today and say i believe that's the one. that's what you worry about systemically is where you don't know who is next you don't even know how to analyze who is next. out of fear, therefore, you pull your money that's the one that does concern me. >> that explains why banks are spending so much of their available cash on tech. >> i would like to -- i know the government spends a lot of time on it. in the end, if that were to occur in that scenario, i think there's only one entity that could address it to stabilize
the system that would be the government i don't think it would be individual institutions. >> gary, back to the actual negotiati negotiations what was the $2 based on how did you get them to $10? clearly, treasury was involved in those conversations as well >> you recall, the stock closed somewhere around $30 the prior friday night we had reasons to think maybe the price that would be offered would be higher than $2. when it was $2, how they arrived at $2, you would have to ask them i don't know the answer. i can only say we were disappointed we didn't like it. then we had to deal with reality. moving it to $10 had to do with technical aspects of the contract it was put together quickly. it allowed us to get shareholder approval and get this done, $10 will work better to bring this all together so we were able to raise it to $10. >> fivefold increase >> wish it were more
>> we can laugh now. >> it is ten years later let's not relive it. >> you still look great. >> nice of you to say that. >> david, i saw your video you haven't changed a bit. >> actually, there's the one who hasn't changed the master gary, thank you. always a pleasure to see you >> nice to be here again coming up, more on the strengthth of t of the market. bob greifeld will join us. his take on if a crisis could and will happen again. a check on stocks. right now, the dow really gains across the board here, s&p up by 11
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before they're out of the house. spend your life living. find an advisor at northwesternmutual.com. mike santelli is looking at why housing stocks are under pressure despite strong data. >> they have been under pressure for a while. this morning's housing start number was another soft one mostly because of apartment building was -- came up short of estimates. in general, the etfs that track the housing sector, that would be home building and home improvement retail areas, have been significantly off their highs. 12% to 15% off their highs if
you look at the two main ones. that's the xhp, s&p and itb, u.s. home construction etf, both of them roughly get the -- capture the same parts of the economy. a handful of things are going on they were up tremendously last year up 75% to 80%. people anticipated a big rebound in the housing market. it's somewhat happened you see -- i think it's miscast as building etf. lowe's and home depot have struggled. it's a mismatch between wage growth looking good, jobs looking good, home builder sentiment good, home construction employment are up it's funny, the stocks are not capturing the story here there's been some concern about higher interest rates, mortgage rates up, too. the market is kind of i think taking a little bit of pain up front for what it seems like a
clog in the industry, not being able to deliver enough new units. >> wage pressure for skilled -- carpenters, electricians and lumber has been an issue for the last year. >> margin squeeze. not being able to deliver the volume the market demands when you also have really not enough homes in existing homes on the market all the macro factors say this should be a booming area the stocks are not showing it. modest action today. they're not selling off on the bad housing starts number. that could mean perhaps they're trying to find a base. >> depot back to 180 is interesting to watch thanks, mike let's get over to sue. >> good morning. here is what's happening at this hour we begin with miami-dade police saying the death toll is now up to six in the collapse of a pedestrian bridge at florida international university ten people have been hospitalized the bridge had been put into a stress test and its cables were being tightened when it
collapsed. the operation has turned from rescue to recovery >> they are saying at least, because there is the possibility -- the sad possibility that under the concrete there may be additional vehicles as i mentioned before, the structure is very fragile. it could be very dangerous to rescue personnel that are still there. hillary clinton was treated at a hospital in western india after suffering a minor injury at her hotel she wore a scarf over her right arm and hand as she toured monuments on thursday. she reportedly sprained her wrist. the samsung galaxy s 9 and sp plus arrive in stores today $720 to $840 that's a couple hundred dollars less than the iphone x samsung is offering a trade-in promotion of up to $350 with most carriers out there. you are up to date that's the news update this
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we are an hour into the trading session. watching the markets closely on this friday. some rebalancing going on. expect heavy volume. hard to read into what investors are thinking dow is up 100. s&p up almost 13 for more on lessons learns from the financial crisis, joining us is robert greifeld. currently, co-finder of north island it's great to see you again. >> great to be back. >> what has changed? technology certainly has changed a lot in the past ten years. how has that made things different in terms of preventing the next crisis? >> i think there's a whole different regulatory infrastructure in place. i would just start by thinking back ten years ago i realize how naive i was and i think others i remember the date that bear stearns got bailed out by the government and jp morgan
we thoughtat that time the crisis was contained what we didn't realize is that other parties, other parties that had been valid counter parties, now in the eyes of others had been reduced in terms of their viability everybody spent the next number of months figuring out who was going to be the next bear stearns and assumed everybody would be the end state of that devolved to the point where the only valid counter party was the u.s. government clearly, we learned through bear stearns that the world is so interconnected and an issue in one will spread like a contagion across the financial system. >> what was it like ten years ago when you were head of the nasdaq to go through those days where trading volumes were skyrocketing, stocks were being taken to the woodshed? >> it was interesting. at points terrifying
what we saw in the equity markets was transactional volume that we had only tested in the lab. so we would typically have three times the capacity on hand and normally in a busy day you increase volume by 20, 30, 40, 50%. now we had systems that were red lined because laboratory testing conditions were now existing in real life. i'm proud to say the equity markets held up very well. we did not like the results of the price movement but the fact is the markets performed very well and functioned that was, i think, in contrast to the over-the-counter market we came through that without any systems issues with the integrity of the market in place. >> now, bob, we continue to see new cycle highs in all kinds of metrics. today it's university of michigan above 100 a long way from where we were in the early days of the crisis how would you characterize the way we are set up for growth, the way the cycle can be elongated? what needs to happen now
>> i think under the current administration, we have to give them credit for deregulatory environment we have. that will help accelerate growth the tax plan i think is going to be a wonderful tonic for growth in this country. my particular concern is these two pro growth initiatives are somewhat counter balanced by an immigration policy which is backward looking if we look forward, we see that we have currently full employment and as these growth policies come into place, we're going to need people. we're going to need additional people to fuel the growth that now the economy can realize. when you are in full employment, you don't -- you have to look for immigration policy that encourages people to come into this country i think if we look forward for immigration, it's really the reversal of where we have been in the past. we're going to need more people if we're going to grow at 3% there has to be more qualified
people coming into the country on a consistent basis. i see this imbalance which will impact and certainly somewhat negatively affect our ability to grow in the years to come. >> bob, back to lessons and current concerns we had gary parr join us not too long ago we asked him what is his main threat or concern that he sees to the financial system. he said cyber. you are a guy who spent a lot of time on systems, a lot of time investing in them, obviously a lot of technology companies went public on the nasdaq do you agree with that >> i do. i want to step back from the lessons learns from ten years ago and back to my example where we thought bear stearns was going to be contained. we have to make sure that we have a failure of one it's not seen as the failure of the many. i think we have a great resolution authority in place today. it has not been tested in real life the only way the financial system gets into trouble like it
did ten years ago is we think this will be a flu that affects everybody. with respect to cyber, we will live in the cyber threat environment until the next wave of technology comes forward. i think we are three to five years away from that there are ways where you are going to see systems designed where they cannot be hacked the way systems are today. certainly for the next three to five years, i agree with gary's assessment i think the vendors that are available today compared to ten years ago are light years ahead. clearly, the threat increases on a regular basis. it's something we have to deal with >> when you are talking about systems that cannot be hacked, are you talking about the block chain? >> well, i think block chain could be one example of that i'm saying pervasively through the network environment, you have to build from the ground up to ensure your systems are secure block chain certainly had that in mind. understand the computer
designers ten years ago, when we were living in the advent of the bond newman architecture, they did not think of security. the next generation equipment will be built first and foremost with security. in the past, we have thought about the speed of the processor, the speed of the io, how can we get the computer to work faster. now we're going to make sure that first and foremost, the first design objective is that this thing is secure we are going to enter that generation i think we will see a different world. >> the notion that we are able to box in hackers, some might think is overly optimistic >> well, i think if you stand here today you would agree with that assessment. i'm saying is we get to the next generation and have the talented design engineers build it from the ground up. this will have some impact on performance. so what we can do now from a design perspective is not -- was not possible years ago because the overhead on the systems, the inherent overhead is so great.
now when we have an excessive amount of memory capability, we can look at it as having unlimited resources to get and dedicate to security we didn't have the focus ten years ago nor did we have the technology look at the chip technology that's developing, memory technology, you have these resources. you can dedicate them to be a secure environment >> bob, we're going to leave it there. great speaking with you. >> okay. thank you. >> thanks, bob as we continue to mark the tenth anniversary of the bear stearns buyout, we look at the best and worst banking deals of the crisis >> let's start with the jp morgan acquisitions. first up, bear stearns for $1.2 billion. washington mutual six months later. bear boosted their investment ability. washington mutual boosted chase particularly in geographic areas
like florida and california. for 3.1 billion, they appear good deals it led to 70% of jp morgan's $40 billion litigation costs in the following years. thus, in 2015, jamie diamond said, we would not do something like bear stearns again. i don't think our board would let me take the phone call let's move on to bank of america. $50 billion on merril lynch. that did boost their investment banking and wealth management capability it has taken a decade to integrate and truly begin to deliver. switching to country wide, it was meant to boost mortgage market share but failed to do that countrywide had 17% share of mortgage origination back then bank of america today just 3%. it cost them many tens of billions in credit and legal costs above the $4 billion price tag. wells fargo for wachovia, huge
expansion for the retail part of the bank a good deal. the best deal wasmorgan stanley's $2.7 billion for the initial 51% of smith barny, adding scale and retail exposure guys, there is a theme here. the later the deal, the better prices have fallen further more importantly, deals were executed less hastily. more due diligence and lower litigation costs down the line bank of america and jp morgan paying the most largely due to the big deals during the crisis. >> i can remember the countrywide deal, there were so many who wondered immediately why in the world they would ever do that deal frankly, it's something of a mystery to some why charles lewis at the time -- i think he was the ceo -- chose to do that deal. >> absolutely. the mortgage market share, which was initially the idea behind it -- let's get more into mortgage origination
simply didn't work it really ruined bank of america's reputation as being a good kind of consolidator, a deal maker, bolting on those types of companies it set them back a significant amount of time some people estimate that cost them -- when you consider not just the litigation costs, but the credit costs, close to $100 billion. tens of billions more than the $4 billion price tag it's something that set them back a long way. >> a cool list haste makes waste. >> one that i haven't mentioned that could be the best of all, it's not strictly a bank deal, and it came leater, was black rock also, it got them i shares, into the index linked funds which is a theme that was very important. on that note, barkley probably questions its purchase of some of the lehman assets if it hadn't done that it
wouldn't have had to set barkley global investors another one of the successful deals along with wells fargo, wachovia and morgan stanley smith barney. >> how hard to see around corners when people's hair is on fire great stuff. thank you. >> pleasure. when we come back, rick santelli made news yesterday >> i think we can obviously do it in a way that can be good for the american people and good for global trading system. we come in peace here. the thing everybody on wall street needs to understand is just relax if you look at the negotiating posture of this country, all these countries that are running huge trade surpluses with us have no incentive to rock that boat >> when we come back, rick will join us with one of president trump's informal economic advisers we took legendary...
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let's head out to chicago. get the santelli exchange this morning. >> thank you i would like to welcome dr. judy shelton. she is in paris, city of lights. the time delay, we will try to work through it. thank you for joining us today very quickly, even before you get to answer, you heard peter navarro there. do you agree that this isn't necessarily going to end in tears regarding trying to level a battlefield on a very touchy
issue involving trade? >> it is a touchy issue. there's a certain risk to this strategy but i think it is necessary. that was a terrific conversation that you had yesterday with peter navarro. i thought he made a very compelling case that it was time to shake up the status quo and those of us who believe in free trade are now recognizing, along with this administration, that the problem is everybody is not playing by the same rules. so i think it's very important to get the attention of the world and to say, you know, we can't just keep going on like this we can't keep talking about a rules based global economy and trading system when it turns out that some countries, notably china, don't abide by the idea of reciprocal access to markets. they steal intellectual property to me, the big thing that was
brought out early on by president trump was currency manipulation i'm personally hoping this will bring us around to also thinking about that issue because it also undermines the concept of free trade. many talked about how trade deficits aren't so bad we buy certain things. in exchange for that the united states puts out i owe yous and many of these countries that have big surpluses send over the capital. my problem is -- and peter brought this up, is that there is a dark side to this >> the dark side is that many undervalue the currency which
al allows them to make it harder for us to sell exports and exacerbates trade deficits >> it encapsuleates his view what do you think about that relationship well, first off what is legitimate, you don't have to problem we are experiencing where a whole manufacturing segment of our economy is being hallowed out by the fact that if china is not allowing those dollars that are chasing their exports to go into their own similar then the way free markets are supposed to work on currencies, the way friedman would have predicted app you would have seen a rise against
the dollar it is to get an exported advantage they also have reason to manipulate the other way i think the big thing they are bringing to unfair trade practices is everybody should be plays by the same rules. >> we are out of time here i love that answer especially considering how you're a big dollar fan but you like a stable relationship with other currencies we will get to that next time
and dig even deeper. thapg you for your thoughts. back to you. >> okay. thank you. >> time to get a look at what's coming up. >> these results needs no air brushing look at adobe systems up 2% and 3% today m a all time highs we have that here to find out how he will keep it going. that's on squawk coming up right. so who sent you? new guy. what new guy? watson. my analysis of sensor and maintenance data indicates elevator 3 will malfunction in 2 days. there you go. you still need a pass. there you go.
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