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tv   Squawk Alley  CNBC  March 27, 2019 11:00am-12:00pm EDT

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>> good wednesday morning. welcome to "squawk alley." i'm jon fortt with me at post nine, morgan brennan and david faber. carl has the morning off we start with the nasdaq on pace for its best start to a year since 2012 this as a flood of tech unicorns seek to go public this year. lyft set to make its debut just on friday. and despite giant losses, more than any other u.s. start-up in the last 12 months leading into its ipo. so as venture investors cash out, should public investors get in with us here at post nine, legendary tech investor, founder of graycof, alan patricof. great to have you. >> thanks for having me. >> so it's like $9 million on losses on more than $2 billion in revenue in the last year. on one hand, you have lyft coming you also have pinterest coming, which has narrowing losses kind of a different, i would argue, discipline to its approach how should the public market
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investor parse through this and make sense of it >> listen, let's look at it. let's face facts for the last ten years, we haven't had an ipo market. we've had a lot of companies saying private longer because there was a lot of money available in the private markets. we're now getting to the point where these companies have gotten to the stage where they've either got to go public or i don't know what they're going to do, because they're not going to keep raising money in the private market to fund these type of losses the public is obviously a good source of capital. i think there's somewhat of irrational exuberance here in terms of the new ipo market, which is going to be here for the rest of the year, because they're all names the consumers know that's a big thing levi last week, lyft going, pinterest -- >> you said irrational or rational >> irrational. irrational alan greenspan's famous '96 quote. >> yes, yes. >> so i think that we're going to -- we're in a time where it's going to be a consumer ipo market, consumer brand ipo
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market consumers get excited. they call their broker at schwab or wherever else, online, send him a note and they want to have a piece of it. that's exactly the way they want to be in the last crazy ipo market >> sounds like a recipe for a lot of people making some bad bets so what are the metrics in this wave of ipos, in particular, while people are starry-eyed about names they know, what are the metrics that names should be paying special attention to. >> but i don't think they're paying attention to any metrics. >> but what should they be paying attention to? is it cash flow? >> how about profits >> profits, okay >> how about dramaticlosses, sos can become self-sustaining >> but they're focused on growth rates, alan, to be fair. and a lot of them still have growth rates that may not be quite as high as they were a year or two ago, but still far higher than what we're going to see any typical company. >> when you get to the levels we're at now, it's going to be very hard to sustain these kind of growth rates going forward.
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i'm not picking on any particular one, i just think that -- what i keep saying is, watch the first couple of quarters and see -- we're going to have a lot of people buying it we're going to have flippers if you remember that word, going to be back in the parlance again. and a lot of people will make money and a lot of people are going to get hit at the high tick and could see a significant drop, particularly if there's any disappointment and i have no way of predicting how any of these companies are going to be. i'm not an investor. and you know, shame on me. i wish i had been there, you know, when they were valued at 10 million or $20 million. but when they're valued at $23 billion or $100 billion or $160 billion w billion, you can't beg too many errors >> so is this a market top >> i honestly don't think -- that i wouldn't say. i think that the private market has taken it a pretty long ways.
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think of the capitalist we put in from the institutions and i think they're at a stage now where it will be very difficult to do another 100, $200, $300 million private rounds, with these kind of losses so i think we've got to -- it's appropriate. the public market is ready, the question is valuations, and i don't know -- i don't know how you value. i mean, you value it certainly at a multiple of revenues, i don't know, was it $23 billion, they're saying, lyft is $24 billion? that's ten times revenues. you know, doesn't sound crazy, but i don't know what it's going to look like going forward and you know, to go -- to double your money, you've got to go to $50 billion. >> right, but people are making thematic assumptions as well about the growth of ride sharing and what that opportunity is long-term. >> yeah. first of all, you know, i'm a -- i've said it, i think, here. i'm a vea user a shared user, but i'm hearing
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in a lot of these rides i've taken in the last two or three weeks, there's an enormous stimulus that's going on to getting people to use it 30% discounts, 50% discount. >> lyft has been doing that a long time, too and i wonder, can they keep doing it after they're public. >> i don't know. and the drivers are getting spiffs to get them to work, to shift from one place to another. i think we're in an interesting -- i'm going to watch. i don't have the -- well, i don't think i can participate in ipos, even if i wanted to, because i'm in a classified category of fiduciary, but i wouldn't -- i wouldn't -- i'm more comfortable watching. >> we've had a lot of vc money tide tied up in these companies, more of it for longer now with all of these more mature names going public right now, what does that do for innovation and the next wave of start-ups? >> if they all do well, it's going to stimulate it even further. but the private equity market is
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booming right now. there's so much money anxious to get involved and there are so many young companies being formed i don't think there's any shortage of deals. >> but to morgan's point, when you were doing investing in some of the names that we all know so well, whether it's office depot or america online or cadence, the private market was not nearly as mature as it is now. these companies stay private so much longer. and a lot of their growth curve, a lot of their greatest growth years happen as private companies. is that a good thing >> i don't think it's a bad thing. >> you don't >> it may be hard to -- you couldn't have possibly have funded a lyft or an uber in a public market in view of the capital they've had to raise >> you don't think so? during the dotcom boom, that's what everybody did they went public nobody stayed private. >> not in the amounts you're talking about. i don't know -- >> it's many billions and uber is 8, 10, something up there
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>> we worked -- did $2 billion in revenue and lost $1.9 billion. i learned one thing early in my career, that ultimately, everything has to be funded by free cash flow you can't have shareholders forever subsidizing the growth of companies, which has been happening now and because you're going to say amazon grew that way, amazon grew, you know, at a somewhat different period. >> true. >> speaking of -- >> netflix is on a pretty good, not picking up a lot of -- >> i've got to get your take on apple news plus. you've been an investor in publishers and digital publishers, also in apple. can this work? this model of pay a $10 monthly subscription, get all of these publications that, i mean, many of them themselves were charging nearly that much independently >> i think apple can do almost anything it wants. it's got a great consumer brand, people trust them. i think this is a concept. we'll see whether it works or not. >> but can it work for the
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publishers >> yeah, i think it can. i mean, if it gets them greater traffic and, you know, that translates into more advertising, i think it's an interesting experiment there are a lot of people who are supporting it, as you know, to start out, and, you know, it's an interesting idea i think at the end of the day, we've got to have subscriptions in news, in general. you know, we're an investor in axios and axios has not had any sort of subscriptions yet. it's grown through sponsorship advertising and promotion and events but ultimately, i hope we'll be in the subscription area, also >> you think this is going to push some ad-based players to really get some subscription-based content that maybe they hadn't had before, so they can play in this premium tier >> i think they would all love to have a subscription element i can't think of any publisher that wouldn't want to have a subscription element look at, pay walls are really, have been pretty successful for the journal, for the times, for
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a whole bunch of publications. so i -- i think it's going to be -- i'm excited about the opportunity, still, no one else -- i think i'm the only person in the world that still likes media companies or -- >> i like media companies. >> we've been investing -- we've been investing in the podcast business we're interested in that area. >> why >> i think they're a very great source of content. and there are lots of ancillary, subsidiary rights that come out of the podcast business. and i think that subscriptions will become a part of that business at some point sooner rather than later. >> you know, just to broaden out a little bit, on the heels of this apple news, apple news news, it does seem that you've got tech companies that are now investing in the news business and this idea of human curation. you have e-commerce business that are working to expand their
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brick and mortar businesses. >> there's an irony to it. forgive, maybe i said it before, using an ethnic expression, but there's a lot of chutzpah involved in amazon now opening bookstores when you think about it. but i tell you, i will tell you, seriously, almost everyone -- we're in a lot of direct-to-consumer plays, selling, you know, through the internet and -- which have done very well but almost every one of them is having a store presence. they're all opening one, first a pop-up, then they open a permanent, then they open two. they're all finding out that being on main street is not all bad. and it helps their online direct-to-consumer business as well they're reinforcing. so i think they're finding out they can't just be have an online presence. they need a physical presence, as well. which i think is great
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we have a lot of empty stores around the country >> sure do >> next thing you know, the niche players in these bundles will be asking for carriage fees from apple hey, you know, you want to carry my publication, pay us a little something. alan patricof, the legend, thanks for being here with us at post nine. >> don't miss our special coverage of lyft's public debut right here on qua"squawk alley" friday and coming up, the fight over tech continues over an unlikely target, dating apps all the tas deilnext when "squawk alley" returns. i'm working to keep the fire going
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welcome back to "squawk alley. the dow is down 97 points. dating app grinder is caught in the crosshairs between the u.s. government and china and it may force the sale of the company. kayla tausche joins us from washington with the latest on the story. kayla. >> hey, morgan grinder was expected to be taken public as a stand-alone entity, but its foreign ownership piqued concern of u.s. government officials and the company is now being shopped around by an investment bank instead. the authority to block foreign investment in the united states, it's called cfius, and it was expanded last year by congress and treasury to allow for the review of any deal that puts what they call u.s.'s critical technology at risk chinese tech deals were of high interest to u.s. officials in
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broadening these rules, but the expectation overall was that an unprecedented number of deals could be reviewed by the panel a year ago, cfius blocked the purchase of money graham by alibaba's payment platform because of the personal data at risk in that deal. grindr is a messaging app for the gay, lesbian, transgender and it's unclear what the specific national security or technology risk was of concern to the u.s. government but kyle bass tweeted this morning that he thinks china wants to build a plaque book on sexual exploits of u.s. persons to use for blackmail this deal was never submitted for cfius review, bass tweets. we should note, the companies going through the review are completely confidential. rod hunter, a cfius attorney at baker mckenzie says the concern is most acute for data on government employees or military personnel who might be using the platform grindr's parent company and treasury did not respond to a request for comment, but this
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would be a very high-profile undoing of an existing deal, guys >> yeah. you know, it's interesting, kayla, an financial was trying to buy moneygram and they were stopped as well. there was concern there from cfius. it had to do with location, understanding where military personnel may have been, because they're very active on bases i'm not sure what this is about, but location also is a part of some of these apps, as well, which could be a concern when it comes to the military. >> definitely. and when i was talking about to people, david, who were involved in the re-writing of some of these rules, they raised concerns about even a rental property being near a regional federal reserve. if a chinese occupant was able to get some confidential data about where the u.s. economy is headed to potentially use in negotiations on trade, for one example. so it is a very broad review that the u.s. is now going through, with anything from location to personal data, even financial transactions up for scrutiny >> yeah, kayla
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it looks like location data, messages, in some cases, even someone's health status around something like hiv, for example. i just wonder, is cfius looking at this particular transaction now in light of the fact that we've seen the rules and the oversight of cfius tightened and basically given more power in the past year, or is this just something that wasn't looked at before in general? >> we should note, we have not confirmed these specific details of the reuters report, that the treasury department has reached out to essentially change the course of the ipo for this deal, because of concerns about foreign ownership. that's what reuters is reporting. and we have not been able to confirm that but it would be in line with this idea that the u.s. government wants the ability to retroactively go back and look at old deals to find out if under the new law, those deals now present a new national security or personal technological risk and if this story is true, then that is pretty much in line with what we would expect here.
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>> yeah. kayla, thank you >> sure. >> kayla tausche well, tesla's elon musk now has a court date he'll square off against the s.e.c. on april 4thright here in manhattan on federal court, not too far up the road from here as the commission tries to hold him in contempt of court for his tweets on tesla's production levels the company's new share, robyn denholm who took down for musk after agreement that he step down due to his tweets weighing in on his twitter behavior saying in an interview, quote, twitter is part of everyday business for many kpeskt execu today. from my perspective, he uses it wisely >> i was with her until she said "wisely. "effectively"? et cetera, et cetera but elon musk has done a number of things on twitter maybe not since this s.e.c. order, that even he has suggested might not have been wise >> i just can't help but think we're going to see a tighter definition come out of this in
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terms of what material is in terms of twitter and in general the guidelines because it doesn't seem like there's necessarily -- and also, we haven't seen all the paperwork around there but it doesn't seem like there's necessarily a very specific definition, and i wonder if that changes now, especially when you hear someone like the chairman of tesla to say the word "wisely. >> the idea is for him to at least be monitored in some way, but when the chairman of the company is using that term, think about, remember when he went after the person in thailand he has done some things that are certainly not wise >> even he seemed to have difficulty arguing the wisdom of some of those tweets and more and more, the s.e.c.'s hand seems to be forced here we'll see how it works out down the road, as you said, in court. >> yeah, should be interesting interesting morning, interesting day. up next, she has expressed some reservations about bitcoin that got some attention. we'll have an exclusive interview with one of bank of america's top executives, cathy
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welcome back the fin tech ideas festival is happening in san francisco where leaders in banking and technology are coming together to discuss the latest in innovations in our industry. our deirdre bosa is there live with a special guest >> i'm here with cathy bessant she is operating and chief technology officer for bank of america. thank you for joining us >> thanks, deirdre >> the conference kicks off later today. we're in san francisco, so i want to talk about a big announcement here in the valley earlier this week. and that is the apple/goldman sachs credit card. the early reviews are in many have been underwhelmed. but does that miss the point is this a way for goldman sachs to build out its consumer banking business is that going to make it more competitive against your consumer banking business? >> my reaction when i saw the
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announcement was, first, competitively, all of the features that are in that card are offerings that we have today. the card plastic for swiping itself all the way through to the mobile and electronic wallet the idea that there would be special rewards for the use of the mobile is only good for us, because the more we train consumers on how to use our mobile applications, zelle for payments or pay at the point of service electronically, that's just good, good for the industry >> and i think you're correct in that everything that it's offering is already out there, but perhaps not packaged together in this sort of neat digital apple wallet package a lot of millennials, though, still don't have credit cards. so is this going to open them up do you think it's going to be effective, perhaps not in getting people to change, but in bringing a wider audience and a wider market into credit cards through goldman and apple? >> well, almost every major bank is in the apple wallet today and so, again, you know, i'm not sure that it -- our job for our clients and customers is to be
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where they want us, when they want us, 24/7. and those offerings, i think, really work, and our customer growth and our utilization prove it >> so you don't think this is a game changer for apple or goldman sachs? >> we see new cards in the marketplace all the time i think it's an interesting announcement and we'll pay a lot of attention to it. and we'll always do what's best for our clients. >> now, here at this conference, data privacy, also a big topic in silicon valley. this morning, a story in the journal about equifax and fico, working together to sell more consumer data to the banks now, as b of a, do you buy that data are you worried at all about equifax's security measures given the latest breach? and its ceo recently said it's out of the penalty box with its clients. is that true >> look, we look at it this way. we have for decades carried the most personal customer information that exists and we manage their money so, our entire architecture is built on the knowledge that we're in the trust business. you know, also, that we're
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regulated. so the standards to which we're held to have been high for a long time. whether we buy new data or not, i think, is less the issue for this morning, and you know, but, because we don't lack for it in order to serve our customers, they give us a ton of it and we protect it mightily >> is equifax out of the penalty box? >> well, i honestly believe that we should all behave as if we're under scrutiny every day, penalty box or not our customers are the ones whose lens really matters, and their standards couldn't be higher >> now, you did mention, you already have a huge amount of data you use it to make loans and sell different products. a lot of the backlash that we've seen over the last few years has been directed at big technology, big names like facebook and google banking has largely been at the sidelines. do you think that that's going to change in the year ahead? should banks be under the same scrutiny should you guys be working with regulators right now to shape this legislation that's coming into place >> well, we work with regulators every day and we design our
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systems with the assumption that as hard as customers work to protect their data, they may not be as successful as they would hope to be so we design everything to assume that we've got to protect our customers at the point at which their data is used you know, we've been under regulatory coverage for a long, long time. and i think that has given us a culture of protection and a culture of safety. you know, we're the company that describes its strategy in two words, responsible growth. and responsibility includes protecting customer data >> do you think that's different at big tech companies? do you think there's work to do here for them? >> well, i do think the standards are different. that's a fact. there's no other way to think about that i think what has happened in the marketplace has proven that we have to be much more thoughtful about how we protect consumers and how we assert that customers own their own data we operate under gdpr outside of
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the united states and design what we do in the u.s., as if we were under that here >> i've only got a minute left, but i've got to get to this, because you're -- my colleague interviewed you earlier this week, made a lot headlines bank of america has the most block chain-related patents, yet you said you were highly skeptical. you said in this interview, show me a use case, and i was shocked, because that's like blasphemy here, especially in san francisco. explain a little bit and you say you haven't received any backlash against your comments >> no, i haven't they'll probably throw rocks at us today, deirdre, when we're on stage, but we do have 90 patents, because if block chain becomes a reality, we want to be ready and be able to capture the benefits for our clients that said, i have not seen a use case at scale and i've, you know, been in this job for nine years now. i've seen a lot of hyperfocus on individual technologies come and go, and i sort of was trying to
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throw down the gauntlet and say, show me a use case >> so ten years from now, are we going to see one or not? if you had to bet? >> if i had to bet, i am bearish. i think that and i hope that it works. i want it to make us better. but i have not yet seen a juius case that tells me i'll be dependent on it in ten years >> cathy, thank you so much. guys, back over to you at the new york stock exchange. >> some bold statements on apple and block chain. deirdre, thanks. now let's get to sue herrera with an news update. sue? >> i do, indeed, john. here's what's happening at this hour, everyone senator kirsten gillibrand has released her tax returns for 2008, showing she paid more than $29,000 on income of $214,000. the new york democrat became the first presidential candidate to disclose the latest tax filing the first cases of cholera have been confirmed in the cyclone-ravaged city of
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mozambique the city of 500,000 is still struggling to provide clean water and sanitation after being hit by a massive cyclone on march 14th a coalition of opposition parties urging egyptians to vote against constitutional amendments, which would potentially allow president el cici to remain in power until 2034 that is 12 more years after his current term expires in 2022 and colombian singers shakira and carlos vives attending a hearing today at a madrid court over a plagiarism lawsuit filed by a cuban musician he claims and alleges that parts of his 1997 song were plagiarized in the colombian duo's award-winning 2016 hit that song won last year's grammy latino award and you are up to date that's the news update this hour guys, i'll send it back downtown to you morgan >> sue herrera, thank you. when we come back, 2019 shaping up to be a big year for tech o
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ipos with uber, lyft, pinterest all expected to go public. we'll speak with silicon valley experts larry haverty and eric hippeau to get their thoughts on the ipo thoughts meanwhile, the nasdaq is down 1%
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welcome back to "squawk alley," getting a quick check on the markets right now. stocks are at session low, the dow is down 170 points right
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now. the s&p is down 24 and the nasdaq is down 87 points what's leading everything lower, health care stocks, also, tech and utilities. as we do see those treasury yields tick lower, as well meantime, lyft, the big focus of the week that's slated to be the biggest tech ipo since alibaba's debut in 2014. the ridesharing company will also lead the pack of start-ups going public and the tech unicorn ipo is just starting uber, slack, pinterest all waiting in the wings with more on what you should know before investing, we have eric hippeau as well as larry haverty with ljh investment advisers good morning to you both eric, i'll start with you. there's a lot of reasons that you could say why right now doesn't feel like 1999 and the dotcom boom and bust but one reason you could potential say it does is the fact that we have all of these major tech companies coming public that are just
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hemorrhaging money right now how do you think about it? >> well, wall street loves money-losing, vc-backed tech companies. of the 100-plus companies that have gone public, there's $1 billion or more in the past eight years or so, 64% of them were losing money. so, it's just a continuation of the same trend what's very different, though, from the dotcom area is that these companies and lyft is a good example, have substantial top line revenues and a substantial growth and i think that's what's attracting the people on wall street >> which i think begs the question, larry, as some of these companies go public, should investors, retail investors, for example, be investing in them? >> well, i think it's a very, very dangerous for retail investors. you've created an environment here where there's a lot of attention. the supply of stock that's offered in these offerings is very, very small
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90 days later, the supply increases. generally when supply increase, given certain demand, prices fall in addition, i think the market naively assumes that other things are equal and if you take a couple of examples in the ridesharing business that have happened in the last week or so, the first thing is that logan airport in boston has put a surcharge on ride-sharing companies, because they've been causing congestion at logan airport and that's interesting, because i spent 40 years in boston and logan airport was recently remodeled. so it shouldn't be having congestion problems. the second thing here is that if you look at these companies, in order to hit profitability, they have to have -- they have revenue growth, sure but they have to convert an inordinately high level of revenues to profitability. in other words, the costs have really got to disappear in order to make the earnings appear.
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and at some point, wall street is going to want earnings. wall street has love affairs, but some of them are very temporary. so it's just a very, very edgy stew pot, if you will right now. >> for me, it's not so much about the losses we see companies going public with losses all time it's the trajectory that has me scratching my chin when you look at lyft and the amount of discounting and marketing that they're doing, both to attract drivers versus uber and also to keep riders spinning around in their ecosystem. once they go public, does that continue to be sustainable, as they have to make some case that they're going to be profitable, eventually >> no, they're probably going to have to tighten up their business model and the subsidies, both to the drivers and in some cases to the riders, are going to have to be facphasd out over time. but there's a lot of doubt whether they could ever make money. and now they're nicely
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profitable maybe on the basis of, you know, their cloud business so these businesses always figure out a way always with the right management, will pivot into a way that there will be a path to profitability. >> larry, you're no stranger to some technology names in your portfolio, the likes of alphabet, for example, or apple. why wouldn't you have interest in having exposure to ridesharing, which by all accounts, regardless of surcharges or whatever it might be, is going to be perhaps a dominant form of transport in this world for some time >> i think if you look at the success of the companies, in the google, the apple, at the end of the day, they deliver bits and lyft and uber are software companies. but they deliver bits, only with the assistance of human beings who preserve the service that makes the bit delivery profitable so that amazon now has been getting into some businesses,
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where instead of delivering bits, it's using people to deliver bits, namely whole foods. and all of a sudden, some of the technology in the food delivery has been having a problem. and amazon's richly valued and maybe some people aren't going to like the value. it's 40 times ebitda so here you're dealing with a treacherous situation, because there's a lot of humans and humans are very, very hard to control. and these companies have already hit the viewpoint of the regulators uber brought in a new ceo because of regulatory problems so you have the government, they're there. it's a treacherous field, david. >> eric, with all of these companies that are expected to go public this year, how would you be advising some of them, as they come to the public market >> well, as you would expect them to have a plan, and you would expect them to know what the next, at least two or three quarters are going to look like. and yeah, you probably have to
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answer the question, at some point, as to when are you planning to be profitable. but i think that's, you know, if they have a plan to sustain growth, and i think in the case of lyft, it's very smart for them to go out first, before uber because there are probably some investors that want to be participating in the category, but might not want to be in all of them. so they're probably taking some investors off the table. so that's a good strategy. >> what about casper, which your firm has invested in >> well, there was a report today saying they're looking for underwriters casper is a fantastic company. we were investors in them from the very beginning they're category leaders, so it would be, to me, it would make sense for them to go public. >> gents, thanks for joining us today. eric and larry and eu regulators going head-to-with silicon valley tech companies. one woman in particular has been leading that fight
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margrethe vestager will be joining "squawk on the street" tomorrow at ten o'clock a.m. eastern. but for now wr, rick santelli, a are you watching today >> i'm watching the markets, especially the fixed income markets. europe, germany, in particular auctioned off bunds at negative yields for the first time since 2016 we're all in this together at wt 'rgog tk about after the break. you trad? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ a place with one of the highest life expectancies in the country. you see so many people walking around here in their hundreds. so how do you stay financially well
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i'm scott wapner here's what's coming up. halftime report, top of the
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hour big call on the market today from our very own josh brown what he says you need to be doing with stocks right now. plus, is a big fed fight looming? we'll discuss the growing debate over whether interest rates should be cut, what that could mean to your money and the stocks likely to move on their options action today pete najarian has that in unusual activity it's all coming up at noon david, we'll see you in about 15 >> okay. look forward to it earlier this morning, council of economic advisers chairman kevin hassett joined rick santelli to discuss the global economy take a listen. >> the question is, as we look forward, are we more likely to have upside or downside surprises? and i think that the downside surprises really came over the last six months and involved the economies around the world and there's not a lot more negative news that, you know, could be worse than what we've seen in those places >> let's get over to the cme now and rick santelli for the santelli exchange. rick >> thank you, david. and i'm glad we picked that
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particular part of the interview. because that really does say it all. chairman hassett is calling what many traders on this floor discuss every day. nah what happened at the end of last year, indeed, was an awareness. everybody became aware that trades investing, many companies and ceos might have had some better guidance as the scene has come along, but global slowing is really starting to hit. and it's affecting the u.s. and the u.s. has its own slowing on other interviews, kevin hassett has talked about us having gdp, and he mentioned i ours, for five years at over 3%. and i'm not saying that can't happen his rationale for that happening is that we have planted certain seeds that are going to grow and they're going to be continuing to give over time. the issue i have is that also works for slowing. we became aware of the slowing at the end of last year. and even though he may believe
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that we now are moving beyond what we recognized as slowing and all of those things are in the rearview mirror, my problem is, is that those seeds of slower growth are also going to grow and develop and affect us over time. so it becomes an issue, that if you have the u.s. economy and we want it to go up, we want it to be better, and we have our own set of variables pushing it, that's a good thing. whether it's regulars, whether it's tax reform, ongoing issues, capex starting to get better, productivity going up. the big problem that we have is, is that this has to work harder as the headwinds of europe, china and japan push more. and even though these may grow over time, the problem is, maybe those will, as well. how can we prove this? well, we really can't, but we can kind of shadow box some of this and one way to do that, look at the following chart. this chart is ten-year yields
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minus bund yields. that has been a big topic today. bunds went negative about a week ago for the first time since 2016 and today germany had an auction of bunds, where at the auction they were moved as negative instruments, first time also since '16 now, one would think, if our economy is really holding in solidly and it's europe that's really the antagonist in this economic weakness, that that spread should be widening. well, it reached the widest i've ever seen around 270 in november of last year now it's at 245. you know what that somewhat tells me same as the end of last year that we have our own issues of certain areas slowing, even though we're humming along pretty good. but when you add it all up together, this is a questionable outcome. and even though q1 is always weaker, boy, does this make q3 and q4 that much more important. jon fortt, back to you >> rick santelli, thank you.
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and for now, let's get to ylan mui. she's got some news out of d.c ylan >> reporter: transportation secretary elaine chao was on the hot seat on capitol hill this morning. shep fielded some tough questions about the ethiopian airlines crash as well as the safety of boeing's aircraft and she defended the faa's certification process. >> the faa does not build planes they certify but this method of having the manufacturer also be involved in looking at these standards is really necessary, because once again, the faa cannot do it on their own. i am, of course, concerned about any allegations of coziness with any company, manufacturer,
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whatever >> cihao says that is why she hs requested the inspector general to conduct an audit of the process and set up a committee to look at this issue as well. the acting director will be be f this and get back to you if there's any news >> all right thank you. i know you will. 50 women filing a lawsuit against tech giant sales force about its sale of technology to back page. that's a company that facilita e facilitated sex trafficking. as we head to break, let's get a check on the markets s&p down a percent nasdaq a percent and a third squawk alley continues after a quick break. imagine traveling hassle-free with your golf clubs.
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welcome back a lawsuit in san francisco filed against sales force accusing the company of helping sex traffickers exploit 50 women josh lipton joins us now with more >> 50 survivors of sex trafficking are blasting sales force. they are saying they knowingly helped notorious website backpage, described as the biggest form of sex trafficking in the country it alleges that sales force provided back page with data and marketing tools arndsnd a custoe
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database it was among the vilest and rogue companies concerned only with their bottom line in a statement, sales force saying it takes the allegations seriously but would not comment on the pending litigation. we are deeply committed saying the ethical and humane use of our products bob o'donnel said companies can't always know what the software is being used for that's a risk. mcadams alleges that salesforce must have been aware of back force reputation they started work in 2013. the same year that 47 state attorneys general blasted back page as a pro-hub of human trafficking. sales force contract would have run through 2018 but the doj seized the site that same years effectively shutting it down pop
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the suit was filed it's a strong allegation now we have to wait and see how salesforce responds to these allegations. back to you. >> thank you for bringing us the latest on the story. a quick check on the markets as we head to break the stocks still under session lows the dow is down 210 points after being up as much as 100. earlier in the session, the s&p is down 1% the the nasdaq is down 1.4%. pretty broad base selling. got more squawk alley after this break.
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welcome back got some news on palantir. another tech unicorn that's expected to go public this year. they have won a competition to build the army intelligence system what's known as the distributed ground system. this is a contract that could be worth potentially more than $800 million. why it's notable here, oi coit e the first time they have marked the soft care company ware comp to a military company.
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they have been named for this stage of the larger program. it's notable since there aren't many out there we have reached out to palantir and the army they were competing against ratheon. they noted they are one of two companies that have been awarding the ten-year, multiple award contract last march. they are disappointed in the army's decision on this initial delivery order but represents a relatively small number of systems and ratheon will continue to work for future orders really notable because we have been talking about this relationship between silicon valley and the government. we get this when google ceo is meeting in washington. >> yeah.
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dod is a very important customer it has been for a long time. that's an existing relationship. they are expanding >> yeah. very much what they do as we approach the noon hour, major averages continuing to struggle the dow is down just under 200 points with that, that will do it for squawk alley let's sent it over to the judge. i'm scott wapner bond yields are falling and the rally might be stopped in its tracks why is one of our panelists arguing your biggest mistake is to get out of stocks the tweet heard round wall street josh brown makes his case for stocks today, fed fight what's behind president trump's back of stephen moore and what will it mean for the markets

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