tv Squawk on the Street CNBC June 17, 2019 9:00am-11:00am EDT
s&p 500 up about two points. >> interesting, the empire state, when that came out. >> big miss. bonds rallied on that. stock futures pulled back a bit. >> see the ten year at this point yielding below 2.9%. >> join us tomorrow. "squawk on the street" begins right now. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cram cramer buckle up for a big week three central bank meetings including our own, plus some pharma, m&a, future spread steady here. europe flat. two-year did see action as empire manufacturing goes negative for the first time in two years. biggest one month decline in its history. road map begins with bracing for the fed. investors betting that rate cuts are coming, stocks look to eek out gains at the open. >> pfizer is boosting its cancer
portfolio, buying array biopharma. the price tag, above $10.5 billion. >> and take responsibility for the chaos. apple's ceo tim cook with a warning for a silicon valley stocks are poised to open higher after two straight weeks of gains as investors await this week's fed decision on interest rates with a two-day meeting set to get under way tomorrow. a lot of discussion, guys, about whether they're going to drop the word patient, whether that clears the decks for july, or something more >> i think they have to say we're monitoring, monitoring, monitoring, in part because they get -- they cut and there is a trade deal within the next few weeks, which wilbur ross did not make it seem like there would be, they would look foolish. i say play it out. play it out. keep saying you're monitoring. that's a great safe way to do it and if there is more of a, like, the -- the index came out this morning, more of those, i think they can cut there is ample signs that things are good i had rh on last week. restoration harbor, business is
booming. i had quicken loans, the largest lender, business is as strong as it has ever been since rates went down. so it is a very big mixture. that's why i just want monitor if they cut, we say what do they know do they know something we don't know >> we're in that weird moment where we cut and we think, wow, what do they know? argentina had a big outage, do they know? outage by the way -- >> terrible. >> uruguay, too. do we know do we know >> 50 million people and we don't know to me, that's the biggest story of the morning, no one has focused on it. i do worry if they cut, then there is something really bad going on if they just monitor, wow, we live to play again. >> you mean in light of retail sales last week, atlanta fed went from 1-4 to 2-1 for q2, that's a 50% increase. >> there is a lot of good. there is a lot of good and some bad. when you read through the complainers, the people who say the tariffs are going to hurt
them, the other side, i heard everything from oh, david, soth b sotheby's, you need to talk about it now >> patrick dry is buying soth y sotheby sotheby's. this is not a large market cap company, but a name people know very well. and a large position percentage wise for third point, which has been on the board, dan lobe on the board for quite some time, it has not performed particularly well. 16 bucks a share watch that stock soar this morning as mr. draghi is the buyer here it is cash deal, as you might expect about 61% to the closing price on the 14th. and even a 56% premium to the 30-day trading day volume weighted average there is always frustration,
even after the fight with mr. lobe that they're not doing enough in terms of the data they have, they're not doing enough in digital we'll see whether mr. draghi can change that at all sotheby's, not going to become a private corporation after 30 years as a public company, saying it is the time to return to private ownership, to continue on a path of growth and success. so a large premium deal for sotheby's, not a great performer over the last number of years, a billion dollars in sales i was going through a lot of the numbers this morning i was trying to nail this down, but they beat me to it about a billion dollars in sales, a billion dollars in debt so the enterprise value is above that interesting move here on the m&a front for mr. draghi who, of course, is a multibillionaire because of altise. >> i felt that is to tie it into the fed, you buy master works, master works hold their value in hyperinflation beautiful mansions hold their
value. nothing else holds its value even gold doesn't hold the value like master works. if i were on the fed, i would say these tariffs are so inflationary, we can't -- we have to be vigilant. and someone else might say, are you kidding me we're in a deflationary cycle, that you cannot stop look at the fact when they put tariffs on steel, steel went down a great deal. it is an interesting bet on inflation. i think that we're more in a deflationary cycle and jay powell has some real hard decision-making, which is why it is so easy to punt. you should punt. he's got -- it is fourth and two. just punt. >> fourth and two? not even fourth and -- >> no. >> don't give it to marshawn lynch and go beast mode? >> no, no beast mode. >> how much time is left i could get the ball back. >> three time-outs, come on. all right. you'll get the ball back you can stop the clock. >> you would rather see a reactionary fed than a proactive fed and others would argue their
track record of reacting ain't good. >> if you say monitor, we have 50 bullish analysts that come on and say they're monitoring goldman sachs, with the negative -- they won't do this, they won't do that, they're monitoring, that gives you such cover. if you're the fed, you know, steve liesman can say they're monitoring, speaks to someone behind the scene, they're monitoring >> well, they also have this huge political football to weigh as well. the president over the weekend, of course, with george stephanopoulos talking about mueller and his own tax records and the federal reserve itself >> frankly, we had a different person in the federal reserve that wouldn't have raised interest rates so much, we would have been at least a point and a half higher. and we -- 3.2 is -- >> he's your pick? >> he's my pick. i agree. we have people in there that weren't my pick. he's my pick and i disagree with him entirely as you know. it is independent. >> i was going to ask you about that what do you make of critics who
say it is just inappropriate for you to be talking about -- >> i'm allowed to. in the old days, they used to speak to the head of the federal reserve often and very much part of the administration from the standpoint of talk and that when we settle, you have no idea how important it is, but i'm not happy with what he's done. i'm not happy with the fact they have done quantitative tightening he doesn't make that decision himself. but i would think that the head of the federal reserve has quite a bit of power no, i'm not happy. >> got stanley fisher, former vice chair on the tape saying if trump wins in 2020, powell is out. >> yeah. that did feel like the tax speech on the water front. trying to figure out -- >> not the charlie you were my brother, speech. >> exactly. >> it was my night. >> it was my night i think that the president is basically saying that powell has to go. and, look, i think every time he does this, it makes it harder
for powell to cut. does he not realize that look, if i were the president, the only thing i would be worrying about is that biden, sleepy joe, is beating me in the polls. so therefore president xi is going to play the long game and bet that trump loses, biden comes in and this whole thing ends and huawei wins. >> it is a long game >> president xi -- >> couple of years, that's also making a big bet there is not going to be support on the democratic side for continuing to try to fight this out >> i think this is what we're going to be talking about for the next year, which is that if -- >> oh, god. >> you don't have to work. >> why are you adopting the president's nickname for joe biden? >> sleepy joe? i don't know it is funny. >> is it >> no, it is very mean it is actually very mean but i -- the other day i called steve tusa meany and steve tusa came back and said, meany? i don't know the president is a meany that's what something my 5-year-old, i taught her, don't be mean, don't be a meany, the president is a meany what does it mean?
it doesn't mean anything it is a different world. >> he was my brother charlie, shouldn't look -- >> stephanopoulos -- >> which one is charlie? >> charlie, i'm a bum. >> very good acting. >> very good we have m&a at the top, pfizer announcing it agreed to acquire array for 48 a share in cash 62% premium over the friday close. they specialize in drugs to treat patients afflicted with cancer and other high burden diseases jim, where there are a ton of unmet needs. >> look, anytime colorectal, anytime you buy into a cancer pipeline, it is a winner because it is -- there are so many miracles happening i mean, genuine miracles happening in cancer treatment. and pfizer needs something that last quarter from pfizer, i felt they had nothing. >> nothing >> interesting time in mergers and acquisitions in largely
speaking big pharma because there is plenty of cheap companies out there, you look at, and you say, why doesn't somebody buy this? it is trading at a fairly low multiple that's not where they're interested that's not what they're -- >> they want spec. >> exactly exactly. >> they want established services, excuse me, established science without earnings. >> yes >> and gene editing, oncology, rare disease, that's what the big companies -- >> versus bristol-myers, which is down off celgene, established company with earnings, doesn't have the pipe. you're so right. that's really good, man. >> i was speaking to a couple of bankers two weeks ago about this broad -- >> you missed every major m&a before you went on vacation. >> i make a point of missing the big deals. >> i knew you would miss them. great info, though, go ahead this is what i've been working on >> so you can look at any number of companies out there, generics are dead, seems to be a commodity business, that's why they're -- >> you see -- you need a
microscope. >> say again >> teva. need a microscope. >> it is unbelievable what happened to teva that's one part of it. you can look at any number of other companies well beyond generics. >> stock, stock, stock >> they do the only question, jim, are we going to see more of these types of deals where they continue to take their shots on companies that don't yet have a real revenue or earnings stream >> yes yes, they will and there are so many of them, they become public every day too, they weren't able to find a buyer, but i keep thinking about what happened, bristol-myers, i think celgene has a good pipe. that's like the -- it is antithetical by the way, look at amgen, look at how bad that stock acts they don't want an amgen, huge company anyway they want stock that is so hard to value, you really -- array has been a good one, but most of these companies, unless you have the sciences on the ground and they can say this thing is real,
it is such a dice world. holy cow and pfizer just feels like, look, we got nothing to lose you know what that is? that's a bob dylan acquisition when you got nothing, you got nothing. >> nothing to lose >> there you go. >> great line. >> thank you >> the ilia kazan and bob dylan, only 9:11, 9:12. >> by the way, i find that what is working, novartis why is novartis working? they have got the perfect combination of decent drugs and fabulous future drugs. that's what people want. what they don't want is something like bristol-myers, which is me too, and so many different categories, including revlimid people worried about revlimid, comes off patent, which is what you get when you get celgene novartis the winner the whole way. they have a vision, the vision is traced out by having both the future and the present
pfizer people feel like it doesn't have the present and needs the future lilly has okay, merck has one drug this is an area that is fraught, lilly had a setback with diabetes last week because -- >> it is interesting to see how large pharma companies are relying on small, no sales companies for their science. >> right. >> instead of having it -- they spent plenty of money on their own. there is sotheby's, opening up enormously and i'm hitting myself for not -- >> oh, stop it don't beat yourself up. >> they have been working on this sale for some time actually, i think, because i was sort of vaguely aware of potential weeks ago that they were moving into a sale mode patrick draghi, very interesting as the buyer he puts a release out himself. he made his money launching altise, wireless, cable. he says i'm honored by the board of sotheby's decided to
recommend my offer with my family, we're very enthusiastic to build together with this current management and their teams the future of sotheby's, a fascinating and multisecular company. such a celebrated history of uniting people all over the world through culture and arts >> i feel so good about that >> he says he has -- >> we are one. >> management, doesn't anticipate any change to the company's strategy it is just basically a very -- a fairly large go private at this point. and he's going to fund it by financing around and underwritten by bnp paribas and equity from himself. he's also -- he's not going to intend to sell any shares of altise europe. my intention is to monetize a small position in altise usa up to 400 million bucks by the end of the year due to the share prepurchase program, holdings go from 38 to -- or has gone from
38 to -- sorry from, from 34 to 38%, now reducing because they have been buying back stock. >> well, i don't know. i look at these deals, think about what he wants to do. doesn't want to be public. so he can take more risk, do different things this is -- >> some believe it has been hard to move the ball down the field here in terms of really exploiting all the data that they have. they know everybody who bid on something that didn't win. do they -- could they finance, how finance people there is a belief there is a lot more data they could be using. >> you mean like artificial intelligence >> i don't know. >> why not why not? >> seems natural, yeah >> i know, again, you know, you get a painting, you see the evaluations for paintings and they're more objective maybe than we realize, in terms of artificial intelligence. i remember when i was with jensing wong, out at nvidia, he's got artificial intelligence for what people are thinking,
can predict what people are thinking and also has the ability to be able to say, if i said to you, this is scary, get this, this is going to shock you, david, if i say to you get out of town, he would know whether he means get on waze and figure out the best way to get out of town or saying you don't know what you're talking about he's got it with paintings this painting is worth a lot, this painting is not he's thinking about things we can only dream of. get out of town, well, hold it, do we need a trip ticket >> if you can figure that out -- >> that's why alexa and google voice are starting to get that. >> i think that spotify is figuring out -- how about what painting you want? jensen will have chips to do that people laugh at nvidia they see thestock going down they won't be laughing soon. kind of like carry, they're all laughing at me. >> always waiting. >> that's the end of the block speaking of all of the tech
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are highly inflationary. 40% of the world has highly inflationary currencies. so you want a real currency. if you want to understand how big this is, lisa ellis at moffet nathanson the best on it, libra, white paper coming out tomorrow, this will get facebook to take out this high and people will start thinking about facebook as giving this away to the 2.8 billion unbanked people in the world. it is going to be the real charm offensive because it is run by someone who came from pay pal, dan shulman, remember dan shulman is unassailable in terms of his privacy concerns. they have to distance themselves from facebook. >> who is this a threat to >> it is interesting, because, you know what, they have the mastercard and the visa lined up, they have everybody lined up the friction people in the data processing people behind it, normally that's who you would be worried about. this is what i would regard this as paper leaping over plastic, right to currency. it is digital. or a crypto, using block chain
doesn't franchise it it is the companies that -- it is the countries that they're not in anyway, these payment processors so watch this, this is going to be the biggest thing that happened to facebook in years. we won't be talking -- >> years >> years, yes, because this is going to be their attempt to be able to give away something that everybody in the world will love and they can go and -- >> goodwill initiative. >> wow and they need a billion dollars, they'll get it. >> even out all the bad things >> everybody i talked to who i thought would dump on this week and this weekend said the same thing, no, this is it, this is what facebook should have been doing all along -- a long time ago. disenfranchise, get enfranchised by the empowerment of facebook, all the things that are the -- tim cook talks about the chaos of tech. this is a uniting universe that makes everybody think, you know what, i thought that facebook there were bad guys, but facebook has to find a way to make it so libra is here and facebook is -- facebook as
moffett tells us is creepy they did one of those polls what teenagers think about facebook, it is creepy like steve tusa is a meanie, facebook is creepy if they can distance it, libra, it will be worldwide libra. >> got it. we got an opening bell coming up here five minutes from now a lot more to talk about a lot of stocks to watch "squawk on the street" back right after this heading into retirement you want to follow your passions
talk to your advisor about brighthouse smartcare. brighthouse financial. build for what's ahead℠ you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just under two minutes on a busy week we talked about some of the m&a this morning regarding biopharma, obviously sotheby's, we'll see slack direct listing later on this week >> yes. >> speaking of being public or private. >> the direct listing, we saw that with spotify. it is okay it tends to be more democratic in a process that we know from last week, some people got revolve, others didn't week before, some people got beyond meat, some didn't this is what you do if you want to try to please all
but please all may be pleasing none so i don't know if slack goes up or not i think that slack is a -- a lot of people use slack. i use slack. i don't know to me, i like the process that has been working is the actual ipo process. >> yes >> very exciting. >> average tech ipo this year, up 30% and that's after lyft and uber disappointed crowd strike, chewy, fiverr. >> i did a lot of work on chewy. they did get pictures, they sent me pictures of my dog. chewy is a great business model. chewy is 60% of the subscription, we know, subscription really works. beyond meat continues to go up there is a belief that beyond meat has got the zeitgeist because it is gmo. ethan brown is a great proselytizer, zoom has been an extraordinary deal pinterest hangs in there the crowd strike kind of came out of nowhere and then, boom, it was great >> yep we'll see what lies ahead. best western international just pulled their filing. >> really?
>> their s1. we'll watch that and let's get the opening bell and the s&p 500 at the big board, it is flex lng, owner of carrier vessels for liquefied natural gas celebrating its listing. at the nasdaq, sba communications, owner and operator of wireless communications and infrastructure >> that wireless communications and infrastructure lies in david's hands about whether sprint and t-mobile will get the number of powers you need makes it so it shouldn't be sold anyway f the anyway if these two get together, there will be more money to build -- they all need so many. there is just 5g is just a tower. >> 5g requires a lot of -- >> infra. >> yeah. >> and by the way -- >> relatively close. >> it would be huawei that had all the infra. now samsung is number one. people don't think samsung, they really want to start thinking,
samsung says we have it, don't think you'll be losing in 5g a lot of my work at marvel, great 5g player. and people just think, listen, don't think this is the end of the world that huawei is not -- do not think that. huawei is -- everybody tells me the same thing which is that xi watches huawei every second xi needs huawei to stay in the game, because huawei turned out to be far more serious 5g player than anybody realized. not just current, it is future. >> huawei a bit more open and transparent. their ceo talking about they could see as much as $30 billion reduction in revenues as a result of the inability to access chips and everything else in the u.s. market to make things not doing the pc they were -- >> you missed broadcom broadcom, $2 billion cut, and i thought the stock would have been down 10%. it rallied near the bell no one can figure out how -- you look at starbucks, nike, apple, broadcom, don't look at sky works, that's been not a good
example, these are all acting as if there would be a deal and it just -- the buyers don't quit but the retailers act as if there is no deal sellers don't quit with the exception of walmart, people feel they have got the scale, costco, that they don't have to raise prices as much as the other guys the story in the journal today, new york times about retailers go under, yeah >> indeed. your point earlier about wilbur ross downplaying the notion of a deal in g-20, what he said earlier this morning >> we suspended the talks as you know some weeks ago because we felt that things that our mind had been agreed were no longer agreed so there was a backward movement we need to recoup that and go forward and try to close out the remaining issues. >> watch that, he said whether in ten minutes, ten months or longer, it is not possible to judge. >> i got to tell you, i heard
that, i said the market should be down on this. but there is just tremendous hope involved at all times if -- if trump goes down in polls, there is a deal. if trump goes up in the polls, there is no deal that's what people are determining. i don't know i think that -- i'll say something really -- did you see the stuff that relies on china for the most part, there is some that are very important for national security. i don't know how we let that happen but a lot of it is going to end up in a landfill people hate -- the millenniums hate landfills >> the example of u.s. companies that can't source domestically, the lead example is fireworks. >> they're not indispensable i did a fireworks show at my house, police came, told me to stop it, and then someone else did them again and i ran i ran. caught me in the trees. >> isn't trump doing something for the fourth of july, sort of taking the usual celebration in
washington and making it his own? are they going to be using u.s. made fireworks there >> we still make them. the chinese historically made fireworks, remember that thing with the marco polio. >> the gunpowder thing >> yes. >> now marco polo is a bunch of good restaurants >> dunkin' will start delivery through grubhub nationwide and fedex partnering with dollar general for pickup and delivery. >> can you imagine the margins on that? fedex is leaving amazon and going to dollar general. you make more money off dollar gen. fedex, why do people think fedex is really involved with amazon never more than 2% people just refused to acknowledge it dollar general is probably the best acting retailer other than walmart, which acts great. fedex is just floundering because people feel there san example that people feel they'll be kept on the tarmac because they diverted a couple of boxes
of -- chinese boxes. what do you make of that >> whatever you say is what i make of it on that one, i just defer to you. >> really valiant answer. >> value added >> good new drugs. >> good new drugs? >> a gastric pipeline. >> there is. >> what do you think of agios is in the next one? that's next. go read the new yorker piece by dr. grutman, you'll understand why it is next. >> i usually read all those pieces. >> four years ago. >> that was a while ago. >> got to file things away have to use the hard drive. >> the problem is that four years go, i probably read that, it is long lost. >> read it again. >> need a western digital hard drive right here >> how did you get that implanted in your head so many years ago? >> state university of california san francisco,
amazing what they can do. >> sotheby's share price, it is up 57% that is a very large move, not typically seen even in an m&a situation. company being sold to the billionaire patrick drahi, who, of course, is known in this country perhaps for the man behind altise, the huge wireless player that also at one point controlled altise usa. he still owns 38%. no longer connected to the larger altise in europe. this is a separate deal from all of that. taking his own money, selling a little bit of altise usa and off to the races to try to make sotheby's a better company in private hands, says he's not going to be changing management. interesting to see that deal certainly at, well, there were a number of value players in there. dan lobe, of course, owned this stock for years. remember there was a fight with
previous management, that was back in 2014, they got a lot of board seats, lobe's among them and it has been a frustrating ride along the way stock has not performed particularly well. but at $3.7 million enterprise value, they're selling it at a multiple ebitda that is perhaps a good deal higher than had been anticipated. >> dan lobe, you missed this, david, sony, back in the firing line, very undervalued company very undervalued company. >> yeah. wants them to move on -- when it comes to sony, i think let's wait through the summer. i actually was talking a lot to people involved in that. >> put that on hold? >> yeah. it will take a while what i'm told on a slow burn third point is not taking it particularly hostile approach here they're not pounding at them they're trying to be somewhat more collegial and they do want them to do something with
semiconductor business but when it comes to sony, we'll watch and wait. >> david, while you're away, a deal with raytheon and united technology >> yes, i'm aware of that one too. >> it happened -- you'll keep raising all the things that i -- >> they used to call me the needler. needler. >> the problem was i didn't realize that utx was moe because they were getting rid of -- >> when we go moe, it means moe, like moe, larry and curly. i think he has to say, i'm going to sell if i'm not happy greg hayes sat here, while you were away, greg hayes while you were away, greg hayes was here, more fun than ever. >> i helped book that. i helped book that thank you. >> speaking of industrials, guys, we got a couple of calls bmo cuts dow >> i just feel like they should take a -- >> and tusa on ge this time on the wynn business. >> my god, can i tell you that
they have the stock. here is the new wrap on tusa i don't like tusa saying ge is claiming this, that, this, that larry cole has not claimed anything i don't like this idea that cole is hyping wye ining wind, envir, not hyping turbines. this idea that tusa has it in for him right now an don't like it could have put this note together with friday's note. larry culp is many things, but not a hype artist. >> you're referring to tusa's use of quotation marks in a sarcastic vain >> yeah, that was vicious. i don't think tusa thinks it was vicious f you're larry culp, not a great father's day present >> no. >> i want to talk a bit about deutsche bank because -- >> the so-called bad bank. >> all i got to say is the name. it is worth mentioning because the ft this morning has a front page story about another or a significant restructuring.
i've been hearing bits and pieces of this they have a lot more but talking about them, what i've been hearing is the possibility that the bank might say good-bye to its u.s. equities business. >> really? >> yeah. >> remember they bought bankers trust, charlie sanford. >> i do. >> wouldn't necessarily be the case i think what i've been hearing was more that they would take equity derivatives and house it with foreign exchange. but basically shutting equities and maybe rates here in the states, the ft has more on this. but larger question is, you know, will any of it work? it is very hard when you speak to other ceos, it is hard to pick apart a investment bank if you're a ceo and calling on a ceo, they want capital solutions. they don't want just one part, they don't want leverage financing, they want everything. so it is not that easy to sort
of string to profitability when it comes to an investment bank deutsche bank, jim, you can take it back at this point, how many years, 12 years to when -- 11 years when they didn't really recognize the holes in the balance sheet, when they could have, and recapitalized when they should have and then there is plenty of blame to go around for management that came after that period of time where they did a lot of long dated things that they got paid up front for that really hurt them in the long-term. >> i think this has been a continual lack hole in europe. got to get this resolved one of the most important things to resolve before you get growth that good bank, bad bank stuff that doesn't work. you need the guarantee of bad loans and -- >> the potential deal with commerzbank did not happen but it is now having an impact here in states and in potentially new york as well people are going to lose their jobs >> we have to focus on it, you
can't get any growth in europe if you don't have a good banking system the largest bank in europe is santander. and santander, look at that stock, $4. i think santander did some layoffs, they did a good job i think they're ready to take over europe, believe it or not very serious player. underestimated including by her father who fired her. >> her father fired her? >> yeah. >> really? >> yeah. happy father's day boom >> wow >> so relatively flat open we'll see if we end up marking time here ahead of the fed later this week. to bob pisani, bob >> happy monday, everybody relatively flat open, some of the more defensive sectors doing a little bit better. but the stuff that we care about right now for this week, which is china-based stuff, all a little bit weaker. semis had a terrible day when broadcom, china etfs we watched carefully. every day opening down the last few days metals and mining, energy, trade-related names or
international commerce related all to the downside. it is basically a two-story week this week. it is about what the fed is going to say and it is about china trade talks hopely resumiresume i ing here broadcom, 8% at the open on friday, still weak, applied materials, lamb research, all to the downside two stories, the fed and what is going on with china. the important thing here is can the fed set the stage for a new easing cycle this is a tricky transition they have to do on wednesday. nobody really thinks they're going to cut on wednesday. but a lot of people think they're going to cut in july they have to basically imply a dovish situation without actually sounding like they're pannin in panicking. the financial times was talking to mr. coray from the ecb. he was talking like more cuts coming from the ecb and implied they might be proactive, maybe a new stance this was sort of the tone of it. and a lot of people took that to mean maybe they'll do something even before the data
dramatically weakens china, what can we do there? can the trade talks get back on track? they'll be meeting at the summit, that will be june 28th, the president and president xi and a lot of people anticipating something is going to happen with that. look at the s&p, just bear in mind, 2% from historic highs 2945 right there. 2% away from that. and a lot of supposition on the idea of trade and progress being made on trade and of course on the federal reserve. meantime, that lollapalooza last week on the ipos, we got a big week planned why shouldn't there be a big week planned we have with the success last week, everybody trying to get out there, five biotech ipos this week, big grocery, independent grocer, big deal this week, personalis going public and slack, a direct listing, not technically an ipo in the sense there is no real underwriting going on, nobody going in from a firm that is
buying up existing shares or companies that offered shares and selling to the public. it is a direct listing, so it will begin trading and all of the shares will essentially be available to trade on this week. so that will be very interesting to watch look at the numbers last week, why wouldn't you go public in these kind of numbers here beyond meat, crowd strike, chewy, these three in the last week, the numbers are eye popping. you can't say everybody is suddenly going into the cybersecurity space. these are three different companies across three different spaces bottom line right now, ipo business on fire the ipo etf, up 34% this year, opened on friday at an historic high everybody kept saying we can't handle all the ipos. 200 projected so far the numbers are really holding up terrific. back to you. >> bob, thank you very much. big week, let's get to rick
santelli, bond pit picture at the cme in chicago >> absolutely. not only that, we have four central bank meetings this week. ours, bank of england, bank of japan, central bank of norway, so there is going to be a lot of information. but the most important thing is to realize all central bank policy is pretty much fundable, hence part of the demand in treasuries, long dated one week of ten-year note yields, we didn't make a new stab at a low yield close on friday but we have 2.07, 2.08ish, three different bottoms. that is the low goes back to september 2017 look at five-year chart, we'll start that in september '17 because five years, big maturity that joined the rest of the curve friday with a new cycle low yield close at 1.83. when you talk about these low yields, everybody starts to get a bit nervous. but in the end, there is lots of
reasons why. some of them do have to do with sluggish growth. look at empire today, negative number and some of it does have to do with demand. but this particular chart is a barclays investment grade securities trade chart you can see that that spread differential is really well behaved. and well behaved is a good thing. finally, the dollar index, it had a real barnstorm of a rally on friday. it is giving some of it back you can see on the two-day chart, we made a stab to get closer to 98 many are very confused about the dollar index at the end of the day, of course, the fed direction, especially should they frame more of an easing with further meetings down the road this week, may be the dollar index would pay close attention. carl, david, jim, back to you. >> rick, thank you very much see you in a bit tim cook delivering a warning to the tech industry yesterday during his commencement address at stanford, cook said silicon valley companies need it take responsibility for the chaos
they create. mentioning data breaches, privacy violations and even making a reference to theranos take a listen. >> lately it seems this industry is becoming better known for a less noble innovation, the belief that you can claim credit without accepting responsibility [ applause ] we see it every day now. with every data breach every privacy violation. every blind eye turned to hate speech fake news poisoning our national conversation the faults miracles in exchange for a single drop of your blood. it feels a bit crazy that anyone should have to say this, but if you built a chaos factory, you can't dodge responsibility for the chaos. >> remarkable address.
significant because of jobs' famous commencement address at stanford ten years ago. >> and quoted throughout by tim cook and talking about the idea of trying to go your own separate way, but also mentors may leave you prep ared, but thy can't leave you ready. i think the overall theme of this is if you do have ideas, make the ideas so that they are helpful to mankind, and not what i would regard as being pernicious this was not an anti-facebook, just anti-the idea that, please, let us be the best line. we lose the freedom to be human. bring back being human and i don't know, everything from artificial intelligence to social media says that you being human is under assault i like this. i think people should get the speech. >> worth a read. >> really good. >> when we come back, jim stewart on ipos and valuations after those stellar debuts last
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about when he makes this decision it does matter. >> was it a unp downgrade thursday, right? >> yeah. norfolk southern was really great. i say be careful of this group this is the group that is the world that they have to deal with not the world of adobe which reports tomorrow or facebook which is doing well today. >> tonight >> i have a private handshake. interesting. but the wbig one is iff why is that important? because think about beyond meat. how do you get that taste? that delicious taste. >> i tried one. >> when? >> really? >> yeah. i cooked it up. >> coeure a genius how was it >> i'll tell you tomorrow. >> what tease. we will see you tonight, "mad money" 6:00 p.m. pulitzer prize-winning columnist jim stewart on the surge the dow is up 6. the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow.
♪ nothing i can do ♪ i only want to be with you >> good monday morning welcome back to "squawk on the street." the new york stock exchange, some tepid movement in the markets to start the week. obviously, a big week ahead whether it's central bank meetings or ipos or earnings on tap. >> we begin with fix ready the 737 max ready for test flights again as the ceo speaks out. live to the paris air show. >> downplaying a deal. secretary ross commenting on the prospect of a trade agreement. >> saying sorry. target responding to its technology troubles, two major outages over the weekend. >> phil lebeau is at the paris
air show the 737 max crisis an trade tensions dominate the headlines. phil has more. hey, phil. >> hey, carl the 737 max, it is hovering over this show like a dark cloud. people talking about it. when will it be flying again this discussion, this report that there is going to be test flights, recertification flights this week, boeing shot that done it's not just the faa that decides whether the recertification flight happens it's also boeing here are what some of the key suppliers and customers for the 737 max have to say about when this plane might be flying again. >> the fix is done the aoa sensors, the logic, that has been done. this is really getting the regulators to understand how the fix has been implemented and giving them confidence to re-certify the aircraft. >> it really is up to the regulators and boeing to prove to everyone, to us as buyers, to the airlines who operate the
aircraft and most importantly to the traveling public this aircraft is safe and they have made it even more safe. >> i have great confidence we are going to see this in service sooner rather than later. >> by the way, again as we take a look at shares of boeing, we can't stress this enough we talked about it earlier today, this report that there will be recertification flights this week, boeing shot that down we talked with dennis mullingberg. expect the flights in the next week or two, but not this week take a look at shares of lockheed martin. we talked with the ceo today her message is clear they are coming off a strong year and it's getting even stronger, especially for defense spending in europe. >> i will tell you amid all of that consolidation and other activity in the industry, we are seeing growth for lockheed martin our programs and our capabilities are well supported by the u government's bunks. defense spending is increasing
in europe and around the world and we are growing >> by the way, we talk about commercial airplane orders and deliveries when we are here at the show clearly, that's a big focus. the defense side is getting more attention in attention this year largely because we are seeing more defense spending around the world. we heard that from marilyn houston and others supplying the defense sector back to you. >> phil, we went through -- you had greg hayes then there was two other people. just can you identify who they were for us? >> john pfluger, who is the ceo of air lease corp. they are leasing out hundreds of airplanes to airlines around the world. in fact, they are the launch customer for the airbus airplane that was announced today the a 321 xlr. then david joys, the ceo of ge off accreditation. remember ge and saffron has the engines on the 737 max
they are intimately involved in getting the max back to certification and back in the air. >> is airbus riding high at this show as the main competitor to boeing >> yeah. you bet. you bet they are in fact, we are going to get an order tally a little bit later on today it's likely going to have most of the orders going to airbus this year. not too many orders going to boeing but yes, with the a 321 xlr, that's a big, big focus of the air show this year we will be talking with the ceo of airbus a little bit later today. >> phil, thank you. take a look at shares of beyond meat. the poster child for this hot ipo environment. up more than 550%. the race to the public market continues. slack set it debut the ipo market set to post a record by dollars raised this year pulitzer prize-winning columnist jim stewart, welcome. >> thank you.
>> how does this ipo environment feel to you after yet another week of very well received new issues >> well, you know, frankly, i think it's very positive if you look at the valuations now, we are not talking about the boom times of the past i think by the highest multiple to revenue last week was about 12 now, compare that to when snapchat went public at 58 times revenue. now, that is a drastic discount from them. and i think that is what has set the stage for some of these rallies. even uber and lyft, which have disappointed in subsequent trading, did not go public at huge multiples torevenue i mean, they had other issues, obviously. but i always feel much more confident when it's the big gains are coming from the public trading as opposed to what the investment bankers were able to squeeze out in the initial offering i wonder what happened on wall street because they must know they could have gotten a little more
out of some of these things given the demand, but they are accepting a more reasonable valuation on their end that is, again, i think a change in the past. and i think it's a positive. >> your point is they are pricing conservatively >> yes i looked at chewy, which is a -- you can get your head around what they do especially if you have a pet. >> which i do? >> which i do, i have two cats and it's only three times revenue. i mean, that's very -- >> so profits don't matter >> well, with the startup, i don't think you can ever look at profits that much. i mean, ultimately, yes, of course they do and you want to see -- i always say it's based on the numbers, you know, in ipo, but it's based on the story and the story has to have some path to profitability. and if they don't have one, then that obviously is a problem. >> so if the bankers have discipline, do retail investors? you are not talking about where
they are trading now you are talking about the offer price? >> some of these are looking frothy to me again, as an investor i think, well, is this sustainable? what he is the competitive advantage here is there some technological edge and i think that's one reason -- like take beyond meat, for example. i'm not a food expert exactly and no doubt they have done something, you know, good here people really like it. but can the big players here, can they replicate this? my guess is yes. i remember -- i'm dating myself -- when frozen yogurt first came out, and i don't remember what it was there was a frozen yogurt company and everybody went crazy over it. it was fantastic it was the hot stock of the moment and then everybody did frozen yogurt by the way, frozen yogurt kind of went off a cliff period, you know so that was a bust and i'm not saying that's what's going to happen to beyond meat but there are big players who can replicate this
even chewy, amazon sells pet food they are searching for it on there is kind of a mess. i don't think they really have their act together in the pet segment. but they could, you know walmart is out there you have some big players and distributors there, potential competition. again, it's only three times revenue. so i don't think it's priced at an outrageous level. >> it's funny. the two largest issuances, i think uber certainly was far and away and i believe lyft may have opini been second. in terms of the actual amount of stock sold, they have underperformed -- well, lyft has. uber is a buck or so from the price. so dollar weighted in terms of actual how much stock has been issued, it's really not that great an ipo market. >> that's a good point i hadn't really thought about that but i like the idea that there is, the market is discriminating, investors are discriminating they are, obviously, looking beyond the fact that, oh my god,
we have an ipo, i'm going to throw money at it because some are doing better than others not everything is a beyond meat. >> no, a pet food company traded more than three times sales. is there something going on there that we're not aware of? >> i am not aware. i gather pretty soon they will have the technological ksh they will know your pet better than you do. >> they send nice condolences when your pet dies, apparently. >> i think it's probably kind of the most basic, which is one run it didn't have a great sizzling story. but again i think the fact that investors are, you know, drilling down a little bit here is a healthy sign. >> i wonder if some of the more reliable hot stocks like alphabet or facebook have not been performing well i mean, really since march and even worse lately since the anti-trust investigations have
launched i wonder if there is a supply and demand story there >> there could i think there is no question the darlings, they are more mature they are just getting older. their growth pattern is, you know, is leveling out to varying degrees. and they are facing more competition as we keep hearing cries for more antitrust enforcement. then the regulatory cloud hanging over them, which will go on at least until the next election, maybe beyond so, yeah, i think there is probably a hunger for something like what is going to be the next one of these. somebody was putting together a new etf sort of thing to invest in ipos. that makes me a little nervous because we are getting down to the mom and pop retail trader, want to get in on this and wall street pounces on that to that to me is a canary in the mine shaft we ought to pay a little bit of attention to as i said, i think it's a pretty
healthy market the market overall has a very firm tone to it. >> because investors are looking for growth and where rates are basically nothing around the world and growth is threatened by trade, right? >> exactly but i think we also have overlaying that now what the election is a year and a half away a lot of talk about this i am hearing more and more from investors, yeah, they don't like the trade stuff very much. but trump as a president is probably more tuned into the stock market than any president we have had. he has the economy he has the stock market. he has to head into that campaign with a healthy economy and, from his point of view, he wants the market hitting new highs. so he better wrap this trade stuff up at some point, declare victory. >> like 20 people emailed me it's tcby. >> yes, exactly. that's right i don't know my god
that was so hot in its day. >> what did it stand for >> the country's best yogurt. >> they had a whole chain of like stores. but, you know, there you are. >> even in cincinnati. >> we couldn't remember. >> jim stewart, thank you. good to see you. >> when we come back, sotheby's is going private david has details on that. 58% gain almost. plus, made in the usa not possible more china tariffs loom. why one ceo says buying american is not an option. meantime, a nice decent gains at least from the opening trade. quk tntp 25 pois. "sawonhe street" is back in a moment. innovate... using feedbaco to introducing products faster... to managing website inventory... and network bandwidth. giving you a nice big edge over your competition.
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upgrade today. call, click or visit a store. take a look at shares of sotheby's. look at that up 57% why? well, patrick drahi is going to be the owner of the sotheby's. they are going private mr. drahi is buying it 57 bucks a share in cash that's about 2.7 billion equity value. this is not a particularly large company. it was a.6 billion equity value prior to this enormous premium he is paying for it. you get 3.7 billion. that's what they're using as the headline this morning. interesting in the sense it's a well known name. a number of years back it had a fight with the investor dan
lobe, whos thhas been on the bor since then if you go back, not a particularly great performner that time. there had been a focus on digitization, on using more of their data but it would seem at least that mr. drahi's opinion, the company will be better served in private hands doing some of those key efforts, of course, at sotheby's. he says he is not going to change management. he says he is making this investment for his family through his personal holdings with what he calls a long-term prospective. and, importantly, for any public market connection here, no connection with altise europe or usa. it's going to be funded by financings that come from ebnp paribus. they have been buying back stock. i have gone up to 38% ownership.
again, a very large premium. there were those in the stock though because they believed there was value there, value play perhaps that it was being undervalued, that they are not cog enough with data, doing enough digitally we won't know if he is successful because it's going to be his problem now he is willing to pay for it. >> he is kind of an interesting guy, too you have covered him over the years. for telecom giant an having the controlling stake in the u.s. >> altise europe no longer has that there is not a connection between europe and the usa and, yeah, listen, i would love to get him to do an interview. he would never sit down and actually do an interview he is a very interesting man. >> i also read that now two french citizens own the biggest art auction houses in the u.s. christie's also owned by a very
rich frenchman too bad. we won't be able to spot bubbles now. >> no. i know actually, this guy said it was a good tell. >> it's got a long track record. a pretty good market tell, yeah. >> sotheby's >> the stock itself. not just the art auction results. >> okay. we can bring you in now. >>i'm here anyways. >> you know, i figure, why not >> he is here for our etf spotlight. quality stocks versus value stocks. >> off wall street people think quality and value have a similar meaning. not really quality stocks have been holding up the stock market. there is an etf qual that follows high quality companies high return on equity, low debt, stable earnings, familiar names in here. that's the white line. you see the performance over year to date the rpv is a pure value etf.
s&p 500 stocks that follow very strict metrics you see how much that has lagged right there. essentially, buying the cheapest stuff in the market has been a really poor strategy relative to buying some of the most expensive but highest quality stuff. it's kind of as you get what you pay for type model this cycle it's happening that way partly because of the cyclical uncertainties, global growth questions right now the biggest holdings will give you a flavor the quality etf, it's j&j, apple, mastercard, facebook. the stock has done very poorly but has long history of erpg stability and very high-quality balance sheet. you look at the rpv. sickles and financials in there. ford motor company coty is a depressed in consumer products metlife, prudential and baker hughes ge. if you think it's cyclical, less high-quality companies back in the fore, rpv is probably dry
poudner that regard, guys. >> i wonder what it says about the fact that growth stocks are redining themselves. we were talking about jim stewart about some of the faang names are not performing that well me nor. >> the ipos benefit from the lottery ticket mentality that already paid off for the faangs, right? i think there is some idea like this is finally undiscovered growth, at least in some of the software areas and also maybe we are going to buy companies that are going to get bought by the guys who will be looking for growth down the road once the sense of inevitable about fangs open ended growth was challenged, i think us hyou to shake some people out of that idea that they can't miss stocks. >> mike, thanks. when we come back, tempering expectations of a last-minute deal what commerce secretary ross is saying about a possible trade
deal at g20. and as china tariffs loom, one company saying buying american just is not an option. "squawk on the street" will be ghback the dow is up 22 don't go away. is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. every day, invesco combines ideas with technology, data with inspiration, investors with solutions. because the possibilities of life and investing are greater when we come together. ♪ ♪ as your life grows, so do your needs. ♪ and with bank of america and merrill, the benefits you get can grow, too.
get an update on the trade war with china the commerce secretary wilbur ross says the president is ready to plead with 25% tariffs on the remaining $300 billion in chinese goods if a trade deal is not reached. this is what the secretary told phil leb owe at the fares show. >> very hard to put a timetable on things. i think that we will eventually probably make a deal, but if we don't the president is perfectly happy with continuing the tariff movements that we have already announced, as well as imposing the new ones that he has temporarily suspended. >> secretary ross downplayed the prospect of a deal being reached at the g20 later this month. the u.s. trade rep is kicking
off seven days of hearings for public comment hundreds of companies are scheduled to testify, including best buy, roku, vf corp., new balance. reuters has a piece about semiconductor companies like intel and qualcomm, quietly trying to lean on the government to ease the ban on huawei sales. >> there ais much emphasis on this g20 whether it's the place to make a deal or not, in prior g20s trump and xi could call a truce until they work out a deal that would be best-case scenario worse case, which they don't have a sideline meeting announced, investors have to assume that the $300 billion in chinese imports that come into this country, everything from apparel to sneakers, is going to get taxed. >> which would be all imports from china being taxed. >> right 500 billion. >> at 25%. so as the president likes to
point out, about 150 billion or so coming into the treasury. >> right he thinks tariffs are good for two reasons. one, because we collect money. >> we made the point with mr. navarro and others that it is being paid by the u.s. consumer. that still seems to be subject to debate, shockingly. i wonder whether there is any pressure at all geopolitically speaking on xi as a result of the huge protests in hong kong over this extradition law that is no longer -- at least it's been withdrawn for now it is tre interesting. i know a number of people keeping a close eye on that in part because it would be so important for hong kong, were it to actually have occurred, because hong kong has the most favored "trading nation" status with the u.s., both republicans and democrats have talked about stopping that if, in fact, that law were to have gone in effect. that doesn't appear to tbe the case any longer.
it's not fully withdrawn, suspended at this point. >> might inhibit a meeting hard to tell china does not want to be embarrassed by the u.s. at the g20. >> a bipartisan issue as well, senator marco rubio talking about it. >> and conceivably the administration all at least saying they would oppose it. if it went into effect, the question is would it impact trade then between hong kong and the u.s., which is different than china. >> i don't know. high bore rates are spiking a little bit. >> nerd alert. >> got to check that these days. >> he why. turning to the ceo of another company set to testify at the hearings this week steve pelke runs atlas pyrovision, the largest fire company in new england with significant significant exposure to china. good morning. >> good morning. thank you for having me. >> you are the lead example in the journal story on page one today. firms struggle, defined u.s. made goods is your phone ringing off the hook today >> yeah, we have had a lot of
members in our national association, the american pyrotechnics association, who have just tremendous concerns over whether or not their containers that are going to be coming in midsummer that are going to affect the fall sales, winter sales, and especially current. so there are a lot of small family businesses that are really alarmed at this point. >> your quote is, it would be great if i could say i am going to get my containers from u.s. companies. they don't exist i think everybody understands the dynamic in your industry but do you think your industry is hyper specific just because of the nature of the good? >> yeah, i think it's very hyper specific you have consumer fireworks that are f traditionally for backyard displays that regular consumers purchase for variety of reasons, for the fourth of july to family celebrations, new year's eve, and all kinds of celebrations. and they have never been available through manufacturing
of any consumer grade of fireworks. so all of those types of products have always been from china. when it comes to professional display fireworks, you are talking about regulations, hyper insurance demands that have been placed in the '80s and '90s, and close to that 25 or 30 companies that were manufacturing are no longer able to do so and, as a result, a lot of that transitioning has gone to china for about 85% of their total inventory needs annually >> wow so you're saying, steve, that fireworks, i mean, one of the most american traditions i can think, especially during the summer and certain holidays, we are checking them all from china? there is no alternative? >> no, there really isn't. you have some factories in italy, spain, even some in mexico but nowhere near the capacity to handle the global market of all
the needs of fireworks the u.s. consumes a tremendous amount of fireworks just in professional display fireworks is approximately 500 containers. consumer fireworks is 15,000 containers and all of these factories combined are lucky if they could fulfill 10% of the need. >> mr. pelke, behind a lot of the arguments that the administration has made is the idea that the jobs can come back here, that things can be made here i want to make sure i understand this industry went away largely in the u.s. because of regulatory burdens, i would assume is it also just overall cost as well is it still cheaper to have these made in china? >> well, even if you had the ability to be able to regain all of these factories, of all of these smaller companies, many have already gone out of business so now you are talking about a select amount of companies that
even have the skill set. and once you have the skill set, it's fine that you have amongst a lot of these small family businesses, we're not fortune 500 companies. these are businesses that typically have less than 25 employees, and you would have to have a very well trained staff it takes a number of years it would be virtually impossible, even if you had all of the labor force necessary to just convert all to full manufacturing in the united states >> i was just thinking, imagine the number of fireworks disney burns off every single day of the year, to your earlier point, steve. what is going to be the main take at your testimony >> well, i'm not personally testifying we have the american pyrotechnics association executive director, julie heckman, who is very versed in this subject she has been discussing day and night with many of our member companies overall the specifics.
she knows all the issues she is going to be testifying, i believe, on thursday because it was, that was the time that she was assigned but there are many, many companies testifying i believe over a week and a half in front of the u.s. trade commission >> so what if you don't get the exemption and those tariffs do go through on the next $300 billion worth of imports, including fireworks? what's your plan >> well, the plan, quite simply, is there would be -- for many companies, a small price increase, and some of the argument is that a lot of these tariffs are raising funds for something for the general budget well, first of all, if you are raising tariffs and there is no other alternative, you are converting what basically now is a 21% income tax on profits made from all of these small businesses and then basically transferring that, because now it's an expense, now you are paying a 25% tax on top of that.
so this whole thought process that you are collecting all of this additional revenue is just not true all you are doing is collecting the money now and not correctllg it down the road. >> steve, how much -- well, you have a plan for this how much will you pass along to your customers and how much are you willing to swallow in marchen if you get to 25%? >> many of us have had to swallow a lot of the other increases. china already has been going through various forms of inflation themselves so there is already been built in three, four, 5% increases that we have had to absorb just over the last five or six years. then the cost of shipping. and a lot of people don't realize just the cost of shipping all the way from china ports to various ports within the united states is usually 20% to 25% of the total cost of the fireworks. and now you are talking about how much more can we possibly
absorb and i think the general rule is it's going to have to be shared. it's going to have to be shared either through some of the manufactures and our suppliers in china it's going to have to be shared amongst all of us that are, that have all these small family businesses, and some is going to have to be passed on quite unfortunately, many of the municipalities that we perform fourth of july display for are, you know, sponsored by municipalities so it's going to cost them a little bit more in a very, very tight environment where you don't have a lot of people that are increasing their budgets for any reason, never mind for the process of tariffs. >> finally, steve, i wonder, are your chinese suppliers voicing concern to you about losing your business if not to an american supplier, i don't know, somewhere else in asia perhaps >> yeah, they are very concerned. and many of them have in contact with me and many other of our
member companies for the last few weeks when a lot of this new started to come in you know, there are going to be certain countries that are going to be, have a fortunate windfall, but it's not going to be anywhere near meeting the capacity of all of our needs in the u.s. so many of us are trying to ramp up some of our inventories and perhaps in the future we are going to be ordering less, but it's going to be very impactful on many of our small business families over the next year. >> steve pelky laying it out very nicely for our viewers. you have our thanks. please come back. >> yes, absolutely thank you for having me. >> thank you. all right. let's send it to sue herera, get a cnbc news update. >> good morning. here's what's happening at this hour iran says within the next ten days it will break the iranian
stockpile limit set by stay ron's nuke deal. they warn they need uranium enriched up to 20% to step away from weapons grade at the paris air show democratic senator patrick leahy says that iran's decision puts the u.s. in a bind, adding president trump's decision to pull out of the 2015 accord was foolish. >> pulled out of the agreement, which would have limited them. we were foolish to pull out of the agreement. >> back here at home, elon musk says he deleted his twitter account ten months after his use of the social media site landed him in trouble with u.s. regulators the tesla's ceo changed his twitter display to the name, that is, to daddy.com and he did it on father's day it is an existing website that provides parenting info to new and expecting fathers.
that's the news update. back to you. >> thank you, sue. as we head to break, a multi-billion dollar deal we want to mention. pfizer is buying array biopharma. it's worth about $11.4 billion that is an enormous premium. 62% over the closing price on friday that's why array is up almost 57%. the company specializes in treatments for diseases with few alternatives for treatment as well as cancer drugs oncology being a key franchise pfizer is building on. "squawk on the street" back after this
funds to a certain extent. not exactly sure what a rate cut will mean, but do you expect we will get one san >> it's interesting. i think the timing is interesting. the interplay with what the fed is likely to say at the june meeting and more than six weeks from now until the july meeting, which is when the market seems to be expecting the rate cut so what will happen related to trade between now and the end of july if the news is too good on trade, if there were some breakthrough at the g20, i think that takes pressure off of the fed to cut in july i think that interplay of timing of the two major macro drivers of the market is very interesting. >> all right and as somebody who runs a large cap value fund, how are you viewing concerns about global growth what are you seeing in terms of multiples? would you change anything in the composition of your portfolio? >> i think the range of outcomes is very wide there is obviously some uncertainty about the economy,
but we had people from a major financial services conference last week and the major banks aresaying there are no signs o credit deterioration in the economy. all of the negatives on the economy are coming from the survey data rather than hard economic data. the survey data could reverse quickly if you get the fed rate cut or a deal on china trade i think that could be the recipe for a very strong upward movement in the market, but there are other scenarios where those two drivers do not come to pass, where the economy does deteriorate a little bit, and then you want to be defensively positioned it's hard to make the cyclical versus defensive call right now, especially with safe dividend stocks trading alt risk having uation we are looking for new opportunities in industrials and health care, and those kinds of sectors where there are good quality companies with good balance sheets without making a big bet on the direction of the
economy. >> what does fed chair j. powell say this week? >> the fed is in a bind, obviously, right there is pressure from the bond market they are looking for three, four cuts, odds of a july cut, 80% september, 95% there is obviously political to cut, yet the economy, which clearly is slowing, is still in decent shape and the fed probably assumes that it is pretty much at a neutral policy right now but, you know, we are only a couple hundred basis points away and does the fed do insurance cuts like greenspan fed did in '95? those ended up being successful. or does it hold its powder and i think the fed will probably give the market something, but not as much as the market wants of the then, obviously, trade figures in very largely in whether something will happen at the g20 at this point i think market expectations are pretty low. so the fed will have some heavy
lifting to do at this week's meeting. >> eddie, stan fisher is on the tape this weekend. he suggests that the fed might not have moved in december if the president hadn't been jawboning them so hard is there any -- what's the calculus in terms of the fed trying to move their pinn independence and perhaps that changing their otherwise agnostic fed decisions >> i think it's a good point i think the fed always wants to have its independence and does not want to be seen as reacting to external stimuli, including the remarks from the president and i think, again, that interplay, i think if you put yourself in the mindset of the president, the sequence of events he wants is he wants trade, i think he doesn't want to trade too quickly if there is a quick trade deal, say, at the g20 or signs of a deal at the g20, i think equity markets will rally
i think the yield curve will steepen and pressure will come off the fed to move in july. and so i think the sequencing of all this matters a lot i think any deal with china is likely to be pushed out somewhat so the fed can move first and then a deal with china comes later. then you hit 2 2020, the electin year with a lot of positives that could come to pass depending on the sequencing of how this plays out. >> do we believe that this entire breakdown in negotiations over trade is a construct for the president to get lower rates? >> i don't think so. but i think this is a long strategy, a long game with a lot of moves in it so i doubt that, you know, things are unfolding only to force monetary policy. as eddie said, obviously 2020 is around the corner and keeping the economy strong will be important. you know, having a fed that is on the right side, i guess, of the market will be important
you know, the fed has to be worried about tips break even lower than even in december. i think ultimately what the fed does will come down to how important is that inflation mandate and the fact that they have been running below it for a very long time >> gentlemen, thanks so you both. >> squawk "squawk on the street back in a moment don't go away. direct messages have evolved. so should the way you bank. virtual wallet from pnc bank. just one way pnc is modernizing banking to help make things easier. pnc bank. make today the day. why go with anybody else? we know their rates are good, we know that they're always going to take care of us. it was an instant savings and
my degree from snhu has helped me tremendously. the flexible class schedules allowed me to go to work full time, run my catering business and be a mom and parent. when i reached this accomplishment, it was like, it's here, it's happening, it's now. we at southern new hampshire university are the ones who succeed. we are the ones who break through. live on the floor with my first guest, jerome snider from pimco. many years after the 2008 crisis, savers were getting the deals. rates were zero.
they have had a better time of late with banks thinking there is three, maybe four eases built in, that mentality actually is going to have a psychological affect on the institution, thus to savor. >> right, investors want safety. they are looking to trim the volatility in their portfolios now that the forecasts are cut to the downside, things are going to be a little bit more hesitant to show the investors a little bit more interest on the savings accounts february tvly, a ceiling has been put on the safety of yields, which investors can actually take at this point in time and earn. investors have think holistically about - >> right, because there is an optionalty if an investor believes in a half-full scenario and the bank doesn't, that's going to have an effect so they may have to alter their strategy. >> a good defense is probably the right place to be given the uncertainty. the fed is going to be changing forecasts. some beliepeople believe three
four others don't investors have to search what that cost to safety is going to be through lower yield they will have to broaden the net, think outside of the traditional savings of money market funds and savings accounts thinking of to be defensive, take advantage of those higher rates actually at the front end right now through floating rate securities, senior floating rate securities is actually not a bad place they take advantage of higher current income along the way and effectively bring forward the notion that investors can actually earn 2.5 to 3% in short-dated securities and still be defensive even though the fed may cut rates over the foreseeable future >> now, on the corporate side, and of course corporate is offering alternatives to governments and sometimes at a higher yield, the barkley sprayspread now is roughly about 127 basis points is it worth moving for the extra risk into a corporate security >> we've been defensive of corporate credit for quite some time at pimco, since early 2018 so it's important to be
selective in terms of that risk. thinking about it as a beta is the right place to think about it you can find opportunities in selective high-quality credits that are short-dated and self-liquidating that offer some additional yield well above treasury yields, well above t-build yields and in this low rate environment, quite honestly, 50 or 100 basis points is a lot to saver. >> and many of these securities we can follow the default trends and the default trends in the higher quality corporates has been on the very slim side, has it not >> exactly so when you want to think about it, through active management, you can alleviate a lot of the tail risks, be selective, find assets that are actually high in quality, maybe right for upgrades in this environment, and also steer clear of those that are potential for downgrades, that have m&a activity, dlench ieleveraging, cetera so there's some opportunity to be defensive and not fall into this trap of low-yield savings accounts >> very good advice.
jero jerome, i thank you. "squawk on the street" gang, sarah, thank you >> over to jon fortt with a look at what is up next for "squawk alley. good morning, jon. >> good morning, sarah we've been talking about the ipo market has been red hot. we have something a little bit different coming in a few days slax's direct listing. and that's coming up on "squawk alley. from managing inventory... to detecting and preventing threats... to scaling up your production. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.
welcome back to "squawk on the street." i'm dominic chu. stocks posting their best level of the day so far. but modest gains for the s&p 500 and dow and nasdaq overall tech and energy helping to lead the way higher, but one sector in particular you want to pay attention to is communication services that sector is up for eight out of the last ten trading sessions among some of the stocks that are leading that sector to the upside so far today, you've got shares of netflix and facebook and twitter all moving solidly to the upside. the one laggard to pay attention to is shares of walt disney after analysts at imperial capital downgraded the shares to a more neutral rating, cite krooing valuation. keep an eye on those disney shares and the rest of communication services and now, back downtown to you at
the new york stock exchange. >> thank you, dom. well, trade, of course, and what the fed is going to do continue to be the focus of the market and i assume will be the focus in the last hour of trading today, as well >> how the market is positioning for these two critical event risks, that is the federal reserve, which is meeting and going to be coming out later this week and of course, g-20 next week. jason trennert is with us. and we'll speak to rick half halfenbin who is testifying in washington this industry, especially if you're in sneakers, has been one of the most vocal, begging the administration not to go through with those tariffs on sneakers >> all right, guys see you later. see you this afternoon, sarah. when we come back, tim cook's new warning for silicon valley mek le srtins a mont with the dow up 54.
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"squawk alley" is live ♪ ♪ good monday morning. welcome to "squawk alley." morgan brennan that has the morning off. we're kicking off the hour with big tech tim cook over the weekend speaking at stanford university's commencement, saying that silicon valley needs to take responsibility for their actions. >> lately it seems this industry is becoming better known for a less-noble innovation. the belief that you can claim credit