kids are liable to say -- remember art linkletter? i have a newfound admiration for what he was able to do. where's becky? >> we're here. >> that does it for daus. join us tomorrow. right now it is time for "squawk on the street." bye, guys. say good-bye, everybody. >> bye! . ♪ that's television. wouldn't you say? one of my favorite days of the year. all those kid. just gorgeous. >> makes me miss my own. >> good morning. welcome to "squawk on the street" on the single busiest day of earnings season. i'm carl quintanilla with david faber. jim cramer is at the home of villanova, university in suburban philly as the "mad money" tour rolls into the key state. >> it's take your kids to work day?

i got 1,300 kids that are joining me. not all necessarily related but great to have them. >> we cannot wait to walk through some of these numbers with you and hear a little bit more about the tour. futures this morning amid this barrage of earnings. a miss for 3m though. jobless claims falling more than expected. some of the european markets on track for yet another day of gains. five straight. but in spain the unemployment rate jumped to an all-time high of 27.2%. bank of santander reported a 26% drop in quarterly profits. it is the single busiest day in terms of the number of companies reporting. mixed results so far from 3m, conoco. >> the report of verizon making a $100 billion individual for verizon wireless, it may month quite right but we'll have a lot more insight on that developing situation giving my own reporting. >> amazon reporting results after the bell today but rumors

of the set top streaming box are swirling this morning. we'll begin with a big day of earnings. 3m posting a miss cutting its outlook. fellow dow component exxon-mobil beating the street. the airlines southwest exceeding forecasts while united continental reporting a narrower than expected first quarter loss. jim, we got to zero in on 3m. shaving about 10 cents off the range for the year. talking about softer demand in some end markets. how important is that? >> i want to deemphasize it. first, the new ceo is doing a terrific job. this again is one of those companies that's uniquely industrial international. a lot in asia. that's not where we've seen a lot of strength. it is typical of what we've seen from some of the other guys that do big international work. the reason why i say don't want to emphasize it too much, caterpillar saw a similar amount

of weakness. caterpillar's now up five points from when they reported. >> another big component today, dow beats by eight cents. sales were a slight miss. on squawk this morning, saying china demand is stabilizing. they're on track for 7.5% gdp but they aren't planning for material, macro economic improvements. >> well, look. this is very similar to what miss coleman talked about when dupont reported. they saw china stabilize. one of the things that's been a theme here, everyone who talks about china has said that it's stabilized. the only people that say that china is falling apart are the macro economists. i think the fact is that china's kind of settling in at a little lower level but it is not anything that's massively disappointing despite what the bears say. >> ups beats by 3 cents. they stand by full-year guidance. average volume up 4% domestically. export volume out of asia, jim, up 8%. that's certainly speaking to what you are saying. >> yes.

here's an example of a company that is also -- i hope we get to colgate -- procter & gamble reports a not great number, then colgate blows it away. people were short colgate. fedex reports are not great numbers so people bet against ups. then ups delivers. these are pair trades. some companies are doing better than others. we have to focus equal on both because there are some blow-out earnings this quarter. >> is that about execution then? we come back to this any number of times. are they dealing with the same set of facts in terms of what the world marketplace looks like and simply operating better, one is, than the other? >> yes. because i think despite the fact that i use colgate, you may use crest, toothpaste is very similar. colgate's done a little bit more innovation. colgate is saying, listen, our share of toothpaste -- i'm just using this as an analogy -- our share of toothpaste has never been higher. colgate is saying this is not a choppy environment, it's a good environment. proctor used the word choppy. i use the word choppy when i'm in my 17-foot boston whaler and

i'm about to head out. i don't want to hear choppy. i want to hear smooth. >> another name that sort of sounds a lot like colgate, at least in tone from the numbers, is hershey. beats by 5 cents. twizzlers, rees, kitkat, volume up 7 versus 5. some of these commodities get a little easier. >> i read your tweet. i have to tell you, one of the things that's amazing about hershey's, they are literally talking about the specific line extensions of the kitkats and twizzlers that make it so their numbers are really going up. at the same time raw costs going down, hershey's a new company, we all watched this stock triple. we keep thinking when is it going to run out. answer is as long as they keep innovating, as long as raw costs go down, hershey can still go higher. looking for par, general wall street gibberish for $100. >> i find this fascinating. i can go back not that many years ago when kraft did the d

cadberry acquisition. that's since split off. but there was so much talk about shelf space and hershey's inability to fight against this giant and it would be squeezed and it needed to do a deal. there was a lot of speculation surrounding hershey at the time as to whether it might pursue a transaction. here they are knock being the cough off the vault. >> i think a couple things happened there. one, hershey decided to bite the bullet and get away from expensive, local pennsylvania labor. moved a lot of business to mexico and secondly, they decided, okay, look. we can start -- don't forecuss only on convenience stores. blow it out in the supermarket. it became a slap happy duopoly between cadberry and hershey. everybody's been winning. just turns out execution hershey when new management came in, they basically had had a company that had not done anything for years in terms of innovation or excitement and that management came there and made hershey seem like its a's selge.

>> let's do southwest. beating buy 5 cents but this morning on squawk we talked about something you are very familiar with, some of these delays that are the result of faa budget cuts and the sequestration. here's what he said on squawk earlier this morning. >> the american people pay all kind of taxes. all kinds of aviation taxes that go directly to fund the faa. we pay more in taxes than we get in services from the faa. so perhaps if we're going to have a furlough of the services, maybe we ought to have a furlough in the taxes that the american people pay also. >> ouch. he's right, jim. when you buy a ticket, you can see -- you know what taxes are embedded in that. >> yeah. let's don't forget, big problem with sequestration is the board you look at when your plane will take off will str have it on ti.

then you get on the plane and the pilot says, oops, we'll be sitting here because of the sequestration. i thought the defense down 9% budget was supposed to be hurt. people being hurt are people who are flying. i share southwest's concern. but i also have to tell that you if something happens in the senate in the mechanics 24, 48 hours on sequestration, you're going to wish that you bought these stocks but it is just a ridiculous thing if the faa, the one organization that we actually have interfaced with, is the one that is saying, hey, look, we don't have enough traffic controllers. look, it is so bogus as to make your skin crawl but at the same time it is washington and haven't we come to expect that? >> does it take any other shine off of the year that the airlines have already had? >> well, look. i got to tell you. right now southwest, while good, is going to pale in comparison of amr and u.s. air. that deal is a made in heaven deal. it is going to eliminate a lot of competition. the justice department doesn't say that. but then the justice department's anti-trust division

has become a little more pro-trust, a little less anti-trust. we have harley earnings to get through, pulte, some oil companies, exxon and conoco. but david you are also watching some of this verizon, vodafone. >> yeah. jim and i have talked many times on our set at post nine, of course this morning another report indicating that verizon is eyeing $100 billion bid for vodafone's wireless stake. we talked about this earlier on "squawk box." vodafone shares will likely be up. i can tell you there has been no formal offer made by verizon to buy the 45% of wireless it doesn't own. the two companies speak all the time as you would expect partners to do. remember there is no operating control from vodafone. the asset itself is completely controlled by, from an operational standpoint, verizon. so it is purely an economic asset for vodafone. but, boy, is it a valuable one,

that's gone up enormously in value. yes, verizon has made no secret of the fact that at this point in time given its own stock prices so strong, given how low interest rates are, it is a particularly good time for vodafone to consider a sale to verizon because verizon will tell you, well, we think we can give you a price that you're really going to like. and so they are trying to get vodafone to the negotiating table. not that they don't speak all the time, but to sit down and really work over a term sheet that involves that purchase of that 45%. it hasn't happened yet. it may happen in the future. it may happen in the not-too-distant future. on may 21st vodafone will report its earnings. let's see what those looks like. let's see what the shareholder base of vodafone has to say, how vocal they are. they've already been somewhat vocal with the ceo of the company. in meetings he's had with some of those shareholders they've related to me he said, i'm an economic animal, too.

i'll consider doing it. we think we can do something here potentially. if we were to, of course, we would be interested in returning a lot of that capital to you. you have a european wireless business that's challenged and you got this huge asset in the u.s. that you don't control. verizon has made no secret of the fact they want to get this done now. but whether or not this happens now continues to be the question. it is a well choreographed earth by verizon to try to get the shareholders of vodafone to say do it now we want to see some returns now from this extraordinarily successful investment. that's where we stand. >> okay. look. i think this is amazing because it is $100 billion. fees galore. i think it comes on the heels of not just the lower interest rates but also the fact that at&t did not deliver, david. you told that truth.

very few people really saw through the numbers. you did. i think it is interesting that even though people are thinking it is going to be a cash and stock deal, verizon's stock is pretty strong. what does that say? everybody wins. vodafone's up, they need the money. verizon's up, they need that wireless. wow. deal made in heaven for everybody. >> it could be. of course, this is a unique time in you conceivably could go to the capital markets as verizon would and raise as much as $50 billion and do so at an extraordinarily low interest rate. and so lock in a cost of capital that would just be extraordinarily strong for you. there are a lot of things lined up here but what isn't lined up is what the strategic rationale on vodafone's part is right now, what they are thinking, what they really want do. it may not be what the shareholders want. that's where verizon's trying to play it, trying to at least get those shareholders to say we want to see you act now. it is not clear to me vodafone's yet ready. when and if they sit down at the negotiating table, i promise i will have that story for you, i hope, and have it first, carl.

but that's not today. >> any reason why it might be leaking earlier than it should? >> you know, there is an effort under way. listen, it was extraordinary. we made note of it last week during verizon's conference call when the cfo chose to make a comment on the tax efficiency of a vodafone sale of that stake. say we think it can be done in a very tax efficient manner. that was very interesting on verizon's part. they are entering the fray here, no doubt about it. so do they look at stories like today's, then me talking about it and say, no, we don't want that? no, they want that out there. i think they want to try to galvanize that shareholder base at vodafone to speak loudly. i thi already begun. the question is again whether it results and mr. colao saying, okay, let's see what we can get done. >> as people see the headlines all over the financial media space. we'll come back with a lot more with jim from villanova. we'll step into the world of wall street, the markets and

goldman sachs. the c.o.o. gary cohn is coming up. and a live one on one with mcdonald's ceo don thompson tomorrow. we'll hear of his recipe for growing the fast food chain in this economic environment. dow got walloped on proctor yesterday. 3m today won't help. futures are wide open at 42. back in a minute. [ female announcer ] it's time for the annual shareholders meeting. ♪

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shares of amazon up in the premarket ahead of the company's after-the-bell earnings tonight. published reports say the online retailer is developing a set-top box to stream video content. product is said to be due for release some time this year. there may be no better stock where the fundamental analysts and the technical analysts argue. right? i mean i think -- i don't know what the estimate is, but the percentage every the revenue expected or the earnings tonight expected versus their overall revenue is amazing. >> it is. when you look at the stock price from a multiple perspective, if there are ever true believers there are true believers in jeff bezos and the vision he has for this company. we've talked about it many times. there is a willing nose give him a break what it comes to missing

or making a quarter that perhaps others don't get but for good reason. he has delivered. the latest streaming efforts, very interesting, i think, competing with netflix as they are, trying to ramp that up, develop their own device potentially, at least according to reports that would allow them to do that so you don't rely on an xbox or anything else to stream. you know more about your customers and are more connected to that. always worth reading the annual report. it came out a couple of weeks ago. he always put in the 97 letter, too. it is always interesting to read, jim. >> here's what i feel about amazon. you're absolutely right, they're the only guys who don't play with real money. they're the only guys who can pretty much be totally free of the price to earnings multiple. we think of google as a high multiple. it isn't, it absolutely low. the only guy that's allowed to

have a free rein is bezos. a lot of companies say the weather was bad during the first quarter. if weather's bad, that's good for amazon. if u.p.s. says things are good, that's good for amazon. i don't want to get in the way with these guys. they're just too powerful. >> lot of peaks and valleys there, as you pointed out, technically. >> but your point about u.p.s. tieing in with this is a good one. e-commerce was a big part of them making and beating the quarter. although deferred. interestingly, we talk a lot about customers who go to u.p.s. or fedex being a little bit more cheap. deferred volume was almost double next-day volume as people try to take some of the lower price options. >> amazon is in a position now -- go ahead, jim. i'm sorry. >> it's still a dollar trade environment. people say it isn't that urgent for me to get it immediately. at the same time, let's not forget there's just this march of progress with amazon where it

is more than just -- they're selling you everything now. this is interesting that best buy and amazon can do well. isn't it interesting the possibility netflix and amazon can do well. whether it be fiscal foods or your home streaming something good on your box. >> within amazon you got to car name like zynga. i think the average daily user's -- active user is down 21% year over year. they did unveil draw something 2 yesterday but people worried about some of these metrics. they do have a fair amount of cash, $1.7 billion. >> that's pretty much their claim to fame right now is cash. it is interesting that this was the week last year where omg pop draw something was perhaps the rage in the country and scramble words was just so powerful. it just showed you the faddish business of what they're doing

is horrendous. do you know that last year at this time they had bigger market cap than electronic arts. now electronic arts has doubled their market cap. if zynga didn't have any cash in the balance sheet the stock would be at 48 cents. >> jim, how's villanova? we were looking at some of the distinguished alumni over history. bradley cooper. maria bello, beautiful actress. and my favorite, jim croce, who apparently became friends with don maclean when they were students at villanova. >> howie long. i don't have that channel. i have a cable problem. of course the great brian westbrook. but i will tell but villanova. villanova's spirit about the show that we're doing tonight is, without a doubt, the highest level of excitement i've seen on any college campus. it is also my hometown and remember, the 1985 wildcats did take the national championship. that's like yesterday here on campus. >> we're going to hear a lot

more about that. that's saying something, jim, because you've seen your share of campuses on these tours over the years. when we come back -- >> this is it. >> when it comes to giving investing the old college try, cramer has a few lessons for us. we'll get his mad dash from villanova straight ahead. one more look at futures as we listen to a little jim croce. opening bell is in about eight minutes. ♪ if you go down there you better just beware of a man named lee rroy brown ♪ (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade.

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we're about five minutes before the opening bell. we really got to dash today, jim. not a lot of time before that market open. want to talk qualcomm, i understand. >> look, this is a revenge of the nerds. we have intel going higher. who disappoints qualcomm? they did what they were supposed to but not a penny more and that's not enough. >> we'll watch that stock with so many others. the parade of earnings. coming up we'll get the separate earnings, we'll separate the earnings winners from the losers. that opening bell now just four minutes away. get ready, another big day of trading. more "squawk on the street" straight ahead. ♪

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about a minute and a half until the opening bell. you're watching cnbc's "squawk on the street," live from the financial capital of the world. it is earnings days don't get any busier than this. 170 s&p components for the week. the lion's share coming today. a lot of big economic bellwethers. we've already walk through some big ones, the u.p.s.s, 3ms and dows of the world. we've had eight instances this year where the dow's moved less than a point. if it hadn't been for proctor, dow probably wouldn't move much at all either. >> what's incredible, carl, is that the average -- yesterday was a day where the good part of the averages came from the areas that had actually been disappointers. you get intel. microsoft, what a horse. proctor, not that good and a lot of soft goods players were all bad yesterday. everything had to even out. proctor was minus 40 for the dow

but a lot of the big dow stocks that are in industrials just acted fabulously. that's why i don't want to write off 3m so quickly. >> we'll see what kind of effect that has on the dow as the opening bell at the nyse. at the big board, fiber children's foundation, empowering children from underserved communities and over the nasdaq, umb financial based in kansas city, missouri celebrating its 100th anniversary. jim, we've not done exxon yet. get through the mum ber here. 212 beats 205. it is almost an impenetrable earnings release. what do you make of it? >> i think i'm looking at a bunch of stocks right now to just speak generally that literally are ignoring bad. we're ignoring bad and we like -- we like anything that's good. we'll extrapolate anything good. i really like the tape here, carl. i really like it. >> we've mentioned zynga briefly.

we talked about hershey. only thing we haven't talked about is the nfl draft tonight which i'm sure jim has some thoughts on, too. pulte wasn't too bad, average selling price up quite a bit as the housing streak continues. >> yes. pulte, the problem there is that it was up the most of any s&p stocks. it's very har for that one to repeat but if you take a look at lennar and horton, some of the cohorts, pulte is just kind of marking time a bit before it reaction sell rates. i want to buy pulte. pulte to me feels like now it is the unloved housing plight, it goes to 22 in the next few weeks. >> we should probably look at a couple other food stocks. safeway is off about 8%. i haven't work my way through some of the headlines there but we all know about some of the concerns regarding the grocery chains. >> look. i think black hawk is a great deal. i'm a believer in these stocks. kroger. watch whole foods. they'd been in a big funk from

'84 $84 to $87. i still like the group, kroger's the leader. >> jim, what are you hearing from villanova? you did the show last night. talk about how various demographics see the market right now, see investing. any lessons that you got last night and that you think you'll get today? >> i think that youth rules. when we think about youth, a lot of people feel that way -- some of the things we'll talk about tonight are hopium. no, i think when you are youthful you can take chances. you can buy a regeneron with hope the anti-cholesterol drug works when other statins fail. look at selge and say maybe they are going to cure multiple parts of cancer. can you do that because in your 20s you got years and years to see if somebody gets it right. >> reversing what we saw yesterday, the downdraft in shares of all the major

biotechs. all of those reverseing today. not quite as up as they were down. nonetheless the buyer flocking back to those names. >> you mentioned -- we got to watch -- cell gene allegedly disappointed. you know who's trading on returnings? bristol-myers. they did not deliver what was expect pd. >> regeneron is going to start to see some volume in the next few days. haven't done harley here yet, jim. they did match with 99 cents. their shipment forecast for basically intact. shipments up 17%. gross margins up to 37. >> domestic players are doing so well. compare that to 3m. 3m is a great american company that happens to do many and many

things overseas, lets the united states in overseas. harley a uniquely american name. americans are spending. harley obviously you don't need a harley. just like you don't need a royal caribbean cruise but americans are spending on cruises. americans are spending on motorcycles. they are spending much more than any of the macro numbers would indicate except for periodically what you hear is that the consumers are willing to borrow little money again. i think you have to borrow on credit to buy harley and they're doing it. >> you mentioned revenge of the nerds earlier, jim, when it comes to a qualcomm. we talked to broad com yesterday. win of the big winners today was f-5. their forecast was below consensus blaming demand from the federal government amongst others. why the boost? >> look. f5 has just been what we thought was a terminal down trend. we like stocks that we thought were in terminal down trends. look at the three downgrades we got of microsoft right before they reported, including some

very high-profile ones. these stocks turned out to be much cheaper than people realized. when you see stocks like f5 trading below market multiple even though they're fast growers, you're tempted to sell a company like qualcomm. and buy an f5. buy a hater and stay away from a loved darling. >> when you talk about apple, because of the earnings earlier in the week, today samsung does confirm that the galaxy s4 is going to be delayed at least at t-mobile and sprint due, in their words, to what they're calling overwhelming demand. i wonder if that gives apple a little bit of room here to operate. the review from david pogue in the "times" today calling it buggy, saying that nobody in the office is going to notice that the got the latest and greatest if you got the galaxy s4. >> i learned something about supply and demand from the great mickey drexler at j. crew and before that, gap. if you can't meet the demand you

screwed up. it usually means that there are larger issues there. a series of articles i read about samsung, maybe they, too, are getting too conservative. this may be the peaking sentiment in favor of samsung and the -- not that and sl going to be red hot again, but if samsung is not so sainted that does reflect well on apple. >> all right. let's get to bob pisani watching what else is moving. morning, bob. >> happy thursday morning. the main trend continues for earnings. we're about 40% through the quarter here. revenue shortfalls. you look at 3m. revenue shortfall. trading down. revlon. notable revlon shortfall trading down. stanley works. otherwise good report but short on revenues. that stock is also trading down. that's been the major problem here so far. why are we having this problem? well, the biggest concern is europe. look at 3m. look what happened. so we had u.s. sales up about

2.3%. europe, middle east, africa, sales down, 0.8%. company after company now -- i follow the big multi-national industrials. that's what you want to watch for the global outlook. that's where their primary problem is occurring. so top line growth is a problem. europe is the specific issue. it is even weak in the united states. i'll give you an example. they were expecting numbers of 1% to 2% up in europe. most of of these big multi-national companies that i follow. instead they are getting 0% to down 1% numbers. in the u.s. they were expecting numbers up 2% to 3%? instead they're getting numbers 0% to 2%. just below expectations. but europe is notably weak. that's the big issue. so what are they doing? you see companies starting to announce more dividend increases, starting to see buybacks. dividends are on the rise. we saw chevron announcing a dividend last night. 167 companies in the s&p 500 have raised their dividend so far this year.

that's more than in many prior years and april is not over yet. most of these numbers they follow through april. more companies are paying a dividend. 406 companies in the s&p 500 now pay a dividend. that's the highest since 1999. buybacks are also increasing and if you look at the announced buybacks an even the actual buybacks, those numbers are going up. i'll have more numbers on that in the next couple of hours to show you what's going on. one problem -- the other issue besides anemic top line is margins are getting tougher. we've got here it's tougher to raise prices, getting tougher. there's less top-line growth and in europe they can't change the costs that much. that's creating some concerns about margin compressions. meantime elsewhere, most of these numb percent aers are pre. ryland talked about numbers, up 54% even with acquisitions 35%, organic growth?

that's pretty good. m/i homes, contracts were up 30%. we had a bounce in precious metals. have you watched some of these gold stocks? everybody hates gold. gold is up mother -- another 2% today. these gold stocks are now being bought from the bottom. i think the big thing here, jim, we are hearing a lot of stories about indian buyers. women of india, largest gold buyers in the world sw, have ta note of the drop in prices and all sorts of stories of women hanging out at some bazaar in mumbai snatching up very large gold pieces. i've seen nice pictures that ap and reuters have had recently on that. guys, back to you. >> bob, thank you. bob pisani. even though gold went down, gold coins soareded in demand. i think that the gold common stocks are bad. i think gold futures not so

good. gold coins, more on fire than ever. people want to own gold. they want to own gold. >> you're right about that. someone else who might agree, rick santelli at the cme group in shchicago this morning. >> it is not a matter of owning, it is where you own it from. a two-day chart of 10s, hey, something should jump out at you! you see that 1.72 mark? it is rather significant. open the chart up to two weeks, we've compressed these yields. a close on a yield base above 1.72 will be significant. intraday violations may find some renewed activity. maybe stop loss action, maybe new positions. it is technically significant. the british pound. hey, let's celebrate the uk avoided a triple-dip recession. their gdp number, up .3. what did it do to the pound? up, up and away. look at this chart starting in early february. you can see we haven't settled above 1.545, pretty much since

mid-february. something to pay attention to. dollar not having a good day today. now let's look at the truly bizarre. all right? we know southern europe has its issues. just look at unemployment rate. but if you look at yields, everything looks rosy. look at a one-year chart of italian 10-year hovering just above 4%. look at a one-year chart of spanish yields hovering around 4.35. look at portuguese yields hovering around 5.84. these yields have moved markedly lower. funding doesn't seem to be an issue. unemployment? a different story. jim, back to you. >> carl? >> look, again i come back to saying that bonds are worldwide too expensive. money flowing everywhere out of bonds. i wouldn't even be surprised if bond call santander finishes up today. bertha coombs at the nymex. >> morning, carl. energy is mixed.

gasoline continues to extend its gains after that bigger than expected drawdown yesterday in the government eia energy report. this morning we are looking for nat gas to build of about 27 to 31 billion cubic feet. that's little less than an hour away. here we've been watching gold. everyone is talking about the fact you are seeing physical demand for jewelry, for gold coins. we're also seeing futures now up at a better than one-week high. one thing that people are watching is government demand. the imf reporting russia and turkey did buy gold in march. what's interesting is 2012 was one of the biggest years for gold purchases from central banks. so they are right now among the biggest losers with this pullback in gold going into bear territory. david, it will be interesting to see whether they continue to be buyers this year. back to you. >> it will indeed. interesting rebound there, bertha coombs, thank you. talk about rebounds, take a look at shares of microsoft. we had the downgrades, we had earnings that were actually well received by the marketplace.

the stock went up. and then on monday we told you about value add. up sharply yesterday following through today with another 1% gain. microsoft reaching $392 level for the first time in quite a bit. we're going back to valueact, i think. in the days that have since passed and talking to a number of other large microsoft shareholders, i think there is -- it is only a 1% position, if that, in the overall company. but that being said, valueact -- which by the way is not a punch you in the face kind ever activist but a much more patient, work with the, company of an activist that doesn't even get active unless things are not going well. nonetheless, it has garnered a great deal of attention amongst other shareholders who make a number of points. the fundamentals that attracted valueact to microsoft are ones we've heard about a number of

times. 10% free cash flow yield, for example. but they also came back in their presentation on monday and said forget about windows, tablets, pcs, microsoft is into plumbing. a lot of the focus of the presentation was not about succession or what they might do as an activist. none of it was. it was about the power of the company's enterprise business versus pc sales and what they believe can be the continued ability of that company to benefit from the plumbing. not the toilet seat. i'm quoting bill gates. quoting bill gates. >> not talking about american standard. >> there we go. microsoft, enterprise versus pc sales. that was from 1990, that quote by mr. gates. that's sort of where the central part of the argument from valueact why they continue to see value in microsoft and its ability to actually grow. it is still growing. forget about that multiple. this thing's still growing 8% a year. that's not bad where that -- at

least given where the multiple on the company is. but it is interesting to remember that ballmer and gates together control roughly 9% of this company. number of years ago there was 30% so there is room for a lot more to take place here than may have been the case in the past. just worth coming back to i thought, jim, given the move the stock has had this week. >> yeah. david, look. one of the big stories here, people who think this is only a pc play have now gotten it wrong. if you look at some of the better research, bernstein for instance, posted goldmans, talked directly about how entertainment business has come on a lot. the online business has come on a lot. if you want to split this company up and bring up the value, those businesses are really on fire. xbox, new xbox coming out in a couple of weeks. is what's driving the company. they've cut the costs of the windows business but, david, there is a real excitement brewing there and analysts who think this is just a pc company

are getting it wrong. it is cloud, it's entertainment and it is online. microsoft is better than they think. >> yeah. again, keep an eye on valueact. it could be some time down the road. keep an eye on what's still a wrest shareholder space. there are big names happy to see an activist in those shares. >> interesting. a lot of people argue, you take out dividends, you could have bought in the last three months and gotten the gains from most of the past ten years. >> that is right. incredible, isn't it? dead money for ten years. only recently. >> thanks, guys. when we come back cramer has a lot more than just textbook advice for you. he'll share it from villanova after the break. shares of angie's list have been on a tear this year. the consumer review service has doubled its paid subscriptions in just 18 months. we'll talk with the company's ceo and co-founder on how he plans to keep that momentum going. dow, relatively flat here given bad news out of 3m.

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boo-yah! >> boston college! >> boo-boo ya, cramer! screaming eagle boo-yah! >> columbia! >> thanks for coming to boo-yah university! >> boo-yah! >> you you can't battle that kind of enthusiasm. that is ridiculous. villanova college of business is the 16th stop on the "mad money" college tour. if you don't know already, it kicked off at harvard back in '06. jim, i was just tweeting about you back in your hometown asking whether or not you get it with or without whiz. you must be having a great time. >> this is the best. to come home is fantastic. to go to a school that is just devoted to the show. i can't believe how many people we have. i'd say the percentage of people of the entire populous is huge. one of the things we forget, younger people may be strapped with debt. younger people may not be able to have as much money on hand.

but if they invest and they invest with hope, they are the ones who do the best. they've got their whole lives ahead of them if they don't necessarily hit it out of the park initially. >> you're going to talk to buffalo wild wings tonight. i'm sure the conversation is going to be a lot more broad than that, too. >> yes. one of the things that i like about buffalo wild wings is that they actually do trade off the price of wings. the other thing i like is that there's just seems to be a tremendous amount of interest between sports and this company and by the way, i got to say, when i'm on villanova's campus, the 1985 game looms large. yes, they did go all the way. this is a terrific sports town, as well as an academic town. villanova exemplifies every bit of that. >> are you in the actual arena where the '85 wildcats practiced? >> i am in the -- i am in where everything takes place in villanova in terms of basketball. i got to tell you that this was not a particularly great year

but it doesn't matter. these fans are not like philly's fans and eagles fans. they are thick and thin. even when the team doesn't deliver, they still love them. that's why i love 'nova. >> can't wait, jim. we'll talk a lot more. 6 ♪

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. let's get "6 in 60." jim, fmi up almost 20%. >> yeah. reaction sell ration of growth. they really got it right this team. >> you say cliff's natural put up a decent quarter. >> yeah. this is a return to the mineral stocks that we've all been thinking since china's been away these stocks wouldn't work. wrong, they're bottoming. >> duncan brands. slowdown in some comp stores. >> they are saying it is weather related. i'm going to give them the benefit of the doubt. >> stock's up 4%. jargen. >> you break up the tape measure one can't believe how much they are taking. it goes higher. >> earnings and cabela's.

>> there were a lot of people who felt gun legislation. but it failed. >> western dig joining the party. >> again, low mobile tech is just doing so, so well, whether microsoft, intel, western dig, they're all good. >> you think this is a turn where tech suddenly takes the leadership role that it hasn't in the past? >> yeah. i'm glad we finally see it. one thing that's been discouraging, the only groups doing well are the drugs and foods. technology is a gigantic part of the s&p and that can lead us to the next level. i think it is going to do it, carl. >> we mentioned buffalo wile wings tonight. what else do you want people to know about the show tonight? >> well, i think that one of the things we'll do -- usually we don't get personal but this is home. i got to let the students ask me some questions and i'm going to ask them some questions. little bit different from our previous college tours. we are going to try to figure

out exactly the soul of the market and what people should be doing who are younger. i'm going to address those people directly and they're going to address me. >> jim, we cannot wait. see you tonight, 6:00 and 11:00 eastern time. thanks for rolling with the punches today. jim cramer at villanova. when we come back goldman's ceo gary cohn. do not go away. 50-day moving average, tdd# 1-800-345-2550 i saw the trend. tdd# 1-800-345-2550 it looked really strong. tdd# 1-800-345-2550 and i jumped right on it. tdd# 1-800-345-2550 tdd# 1-800-345-2550 since i've switched to charles schwab... tdd# 1-800-345-2550 ...i've been finding opportunities like this tdd# 1-800-345-2550 a lot more easily. tdd# 1-800-345-2550 like today, tdd# 1-800-345-2550 i was using their streetsmart edge trading platform tdd# 1-800-345-2550 and i saw a double bottom form. tdd# 1-800-345-2550 i called one of their trading specialists tdd# 1-800-345-2550 and i bounced a few ideas off of him. tdd# 1-800-345-2550 they're always there for me. tdd# 1-800-345-2550 and i've got tools that let me customize my charts tdd# 1-800-345-2550 and search for patterns as they happen. tdd# 1-800-345-2550 plus webinars, tdd# 1-800-345-2550 live workshops, tdd# 1-800-345-2550 research. tdd# 1-800-345-2550 whatever i need. tdd# 1-800-345-2550 so when that double bottom showed up, tdd# 1-800-345-2550 i was ready to make my move.

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♪ ♪ welcome back to "squawk on the street." let's get the road map for the next hour. coming soon to an airport near you -- big-time delays as the faa furloughs kick into gear. impacting timeliness and convenience. we'll talk the latest on the furloughs from d.c. to california. plus, and inside look at wall street, the markets and the global economy and the mystery that remains to a certain extent goldman sachs with the firm's president and coo, gary cohn. reports of verizon making a $100 million bid for the part of vodafone is doesn't act may not be all it's cracked up to be. if you've been anywhere near

an airport this week, you know someone who has, you're probably pretty familiar with the faa furloughs and flight delays. lawmakers in washington now scrambling to avoid the blame. let's talk more about the impact of those furloughs on air travel. seth, good morning to you. we've had gary kelly from southwest on this morning and it is clear the frustration regarding all of this is bubbling up not just to flyers but obviously to the heads of all these big airline carriers. >> absolutely. gary's airline, southwest, is particularly impacted because so much of southwest's business is about carrying people between cities that aren't all that far apart. cities where if you had to jump in a car and drive, you could. of course, people in the northeast, sometimes the train is an option. those are the trips that are most impacted by this sort of thing. but here we are thursday morning now with the weekend just a few days away. a whole different set of travelers about to potentially

get exposed to this. it's been business travelers during the week, people who grin and bear it and move on, even if they're not happy, but when you have kids in toe, a whole different story. people are going to be upset. the important thing to watch, who are they going to blame. that's going to translate into the politics of it an sort of who has to blink in the end and perhaps do a deal. >> what's your read on politicians' willingness at this point to find some way to solve it other than changing the approach routes to various airports, for instance. >> well, this will not last forever. this is a solvable problem and in this country usually we solve problems that we can even though we don't get it done the most efficient way possible. there is certainly the possibility we'll see proposals in congress right now to do a short-term fix, give the faa more flexibility, perhaps even shift some money from elsewhere in the department of transportation. so certainly part of it is going to depend on if one party or the other feels like the public is

turning on that party -- if we remember back with the fiscal cliff, the republicans sensed the public was xwlaming them more so they ended up doing a deal. in this case the white house is saying, hey, this is your sequester, congress. but some republicans and some airlines are saying there is far less impactful ways to deal with this to cut the costs without impacting the public. if the public buys that argument, then that's where i think we'll see some sort of a deal that lets the faa reallocate resores, stop impacting the public as much, recall those traffic controllers that are on furlough and maybe put off some longer term projects. >> is it obvious to you -- the layperson would look at this and say, obviously southwest is going to be affected more than maybe any other carrier because of the numb perf number of cycles they have. are they going to feel the brunt of this more than anyone else? >> yeah. southwest's biggest revenue mark by all appearances anyway is

houston-dallas. that gives you a kind of idea of, can you drive from houston to dallas. you can't drive from new york to paris or los angeles to hawaii. certainly some more impact there. on the other hand, they don't have as much exposure to the very most congested airports in the northeast. if you're jetblue, on one hand you're happy to be dealing with those thousand-mile flights where people probably aren't going to hop in the car instead, if they are going to travel at all. but on the other hand you're more exposed to that. so everybody feels it. but in terms of any structural shift where people are saying i don't want to deal with the airport anymore, it is those short-term flights that are most impacted. that happened back after 9/11, by the way, with the tsa security hassles. and that didn't totally recover. southwest got rid of some of their very shortest routes simply because people sort of push out that barrier. they said if the flight is four or five hours or if the drive would be four or five hours, yeah, i'll fly.

if it is only a three-hour drive, i might drive or take the train instead. >> finally, seth, what's the likelihood airlines use this assen a as answer cues for just inefficient operations, the kind we know they have all the time. retailers use weather as an excuse when the results aren't that hot. >> we have a lot of people using this as an excuse, right? the white house obviously saying it is the sequester. republicans in congress and airlines saying that this could be done differently. yes, absolutely. airlines, to their credit, by the way, have finally been running a rather reliable operation. a few airlines, delta and us airways in particular, had been putting up some really good numbers. so especially those airlines. united was a little bit messy last year. and has been recovering. but if you see delta and us airways, for example, suddenly become very unreliable, then that tells you that probably is what's going on now because they had been running rather reliable operations. >> certainly lately.

seth, it is something everybody who flies has to at least think about. seth kaplan, "airline weekly." meantime concerns over what the flight delays will do to summer travel spread further into the travel and leisure industry. 300 members of the hotel association have been lobbying the hill. choice hotels has 6,000 hotels franchised across the united states, stephen, within your part of the industry clearly emotions are running high. >> well, simon, yeah. you've got a situation with a manufactured crisis where they are playing games at the expense of what is a fragile economy and the american people. we are talking about even based on the faa's numbers, are you talking about potentially $9.3 billion of lost economics, not including the airline. $1.4 billion in revenues. and 83,000 jobs. just based on what they are

saying today. >> how do we get to this stage? why is the industry so weak that it isn't able to prevent this? within hotels but also within the airline industry. in many senses the lifeblood of the economy. why are you not able to better lobby to prevent this from happening? >> that's a good question. we were down on the hill the week before last and this week. there is a bill before congress that will fix this, called the dependable air service act of 2013. it is bipartisan. they are creating the crisis earlier than it needs to be because they're playing political games. what we need is some sensibility in congress to pass a bill that's going to allow them to get the cuts that need to be done but do it without potentially throwing the economy at risk. in the travel industry this is 14.6 million jobs. 1 in 8 jobs that they are talking about putting at risk. we've got a situation where it is our biggest serviced export and they want to start slowing it down for political reasons. there is no reason that we're doing this this early.

and there is no reason we can't get a bipartisan bill that will fix this situation. one has been introduced and we need get that passed quickly. >> in the meantime, i imagine many of your members are fiscally conservative. they do think there should be cuts in federal spending somewhere. >> they do. but what we're doing is putting the firemen and police up front like you always do in a budget battle and they're risking what is a very fragile recovery in the economy. we have slow job growth to begin with. we do not need to be moving backwards. >> you are 6,000 hotels are very much aimed at the grassroots of business, middle america. what's this state -- i appreciate that you're reporting in a couple of weeks' time -- but what is the state in general of that area of the economy as you see it from the people that pay to have your brand names? >> the answer is -- it's been reasonably positive. if you follow smith travel, we've been pretty good for the beginning of the year and we've tracked that pretty closely. it's been a healthy start to the year but we are very, very

correlated with employment. if people feel concerned about their jobs, they're not going to travel or stay in our hotels. and it is an exaggerated effect with a little bit of drop in employment we see a big drop in demand. >> mr. joyce, it is nice to hear from you. thank you for joining us. stephen joiyce, ceo of choice hotels. hampton? >> we're starting first, we've got updated stats on at least the faa on the delay picture for yesterday. 4,185 flights delayed for all reasons and were primarily due to staffing. another 975 resulting in weather related delays. om 200-plus cancellations. that's, frankly, worse than tuesday when we had 1,025 delays due to staffing issues. again, 900-plus related to weather. the private numbers we're getting show a different story.

from flightstats.com, roughly we're seeing 400 flights a day cancel. 6,800-plus delays. the worst airports, no real surprise -- chicago and newark, around 36% of flights delayed for one reason or another. dallas-ft. worth, about 32%. earlier today on cnbc the ceo of southwest airlines talking specifically about the sequester and the idea that, you know, a lot of taxes are paid specifically earmarked for the airlines and for the faa. well, now he says maybe it is time to start thinking about withdrawing those taxes especially where travelers are concerned for all the services they're not getting right now. >> the american people pay all kinds of taxes. all kind of aviation taxes that go directly to fund the faa. we pay more in taxes than we get in services from the faa. so perhaps if we're going to

have a furlough of the services, maybe we ought to have a furlough in the taxes that the american people pay also. >> now here at our location, in about 20 minutes we are expecting an anti-skwequester demonstration. obviously in the shadow of the tower you see behind me. what this is all about, not just symbolically but in very real terms, the number of controllers in towers like this one across the country. the other thing is, frankly, we're seeing perhaps some movement from the white house and/or on capitol hill. all we have to say is this -- if it is going to happen especially in the senate, it basically has to happen in the next 48 hours because the senate is out for a week-long recess starting this week. carl? back to you. >> hampton, thanks so much. i want to switch gears a bit here and talk about amazon. the street anxiously awaiting the first quarter earnings report from one of the enormous retailers out there. this of course comes after the bell. also along with these reports

out there that amazon is thinking about producing a set-top box to help its streaming business. who else to turn to but cnbc's jon fortt to understand what's going on here. >> that rumored set-top box would be the latest move by the company to get customers to spen more time with am done. there's not a lot of money to be made in set-top boxes of course. apple sells apple tv for just $99. earnings wise on amazon the street is looking for 9 cents eps, which would be up 22% from a year ago. that's phenomenal considering so many companies have been missing on revenue. big reason why analysts expect the in-line quarter numbers from the research firm. there is also an expectation amazon's kindle fire which is estimated to have sold maybe 8 million units over the holiday quarter is continuing to boost media sales as people use it after they've got it unwrapped an everything. big question is how guidance will look. wall street wants a second calendar quarter to look much like the first. just a little more profitable.

22 cents of eps on just shy of $16 billion in revenue. but it is not clear that europe is going to help here at all. remember, ebay reported some softness in europe. germany in particularpy amazon tends to give a conservative guide from the first calendar quarter to the second down about 6% whereas the results usually come in about 3% lighter. that means they could guide closer to a mid point of around $15 billion. analysts expecting that. we don't know though how the stock is going to react. sometimes analysts on misses and the stock pops. >> the stock behavior on amazon is not always a teller on what's happening. jon, a busy night for you. thanks a lot. auction site charity buzz auctioning off the chance to sit down with the head of apple, tim cook. bids are already topping $180,000. about two weeks left. proceeds will benefit the rfk center for justice and human rights. brings us to this morning's squawk on the tweet -- if you paid more than $100,000 for

coffee with tim cook, what would you ask him? tweet us @squawkstreet with your responses. >> they're offering half-an-hour to an hour. they're not quite sure. depending on how much you keep him talking. >> we'd certainly take him at this desk for half-an-hour. >> i'm surprised one of the media organizations hasn't been. we'll just film it then. we're keeping up with goldman sachs. a live and exclusive interview with the president and ceo, gary cohn. plus, resident goldman rock star as far as many people are concerned, the man who coined the term break jim o'neill will be on the program. as low rates kill yields. stay with us on cnbc. with fide, but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends,

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goldman sachs asset management holding its annual growth market summit today in new york city. mary thompson is there with an exclusive. mary, good morning. >> good morning, carl. we are happy to be joined this morning by gary cohn who of course is the president and coo of goldman sachs. thanks so much for joining us. we appreciate it. we're at the growth market summit. my first question to you is where is the growth? >> first of all, thank you very much for being at our goldman sachs drug market summit. we've got over 500 clients from 45 countries to talk about growth in the world and growth markets. we obviously believe the growth that's coming in the growth markets and as you go around the world you have different views

of these different growth markets but overall our economists and legal have excess of 6.5% growth in the growth markets. a lot of that will come out of asia, whether china or southeast asia, some of it will come out of latin america, south america. those are areas where we are very confident there will be growth. >> let's talk about china. a number of people are talking about how it is going through a transition right now, a transition of slower growth. how does that impact some of the smaller southeast asian economies where you see this growth? >> no one is 100% sure what's going on with the growth in china. china is the big economic engine in asia. so what happens is, as china grows, expands, countries in the prif rieriphery of china, wheth indonesia, malaysia, singapore, the philippines, they end up growing with china because they become big exporters. many of those countries are big commodity exporters. as china grows they increase their consumption of

commodities, they increase their imports. those countries increase their exports. there is a natural pull and push going on in the world. china needs the pull to some extent for those economies to grow. >> so let's turn our attention domestically because there are concerns that the u.s. is just kind of stumbling along. what is your view of the u.s. right now? >> i think the u.s. is stum pling along. i think your characterization is right. that said, we have enormous opportunity in the united states. we have the cheapest natural gas in the world. we've got an abundant labor force that's willing to go back to work. we've got enormous opportunity to finance projects. there is enormous capital in the system. capital is looking for a home so we have the natural ingredients here in the united states to really see a growth and a growth economy. >> but in your first quarter call there was concern or harvey schwartz, your cfo, said clients are pulling back a little bit. in march they pulled back.

what are you hearing from your clients. what is it that they want to do if the environment doesn't pick up, if the growth doesn't pick up at all here in the u.s. or around the world? >> what harvey said in our earnings call is where we are ka. what was going on in march is going on in april. clients want to grow. clients want to deploy capital. clients are always looking for opportunities to increase market share and earnings for their shareholders. that said, they have a fiduciary responsibility to their shareholders so they need to be confident that there will be an adequate return on investment for investing in their businesses. and right now the confidence level is relatively low on getting the return that's necessary. >> were we going to see more companies that are sitting on a lot of cash like apple? are they going to be paying higher dividends? are we going to see more stock buybacks? are they thinking of breaking up the companies to increase shareholders value right now? >> in the corporate boardroom today, all of those are topics, whether they be break-ups to

increase shareholders value, whether it be increase dividends or increase share buybacks. companies would much more prefer to invest the capital in the business and growing the business than return the capital. but if there's no better alternative than returning capital, they have a fiduciary responsibility to those shareholders to return the capital and you're starting to see more and more of that. i think that's a trend that we'll see for the near-term future. the good news is these things can change relatively quickly. >> let's talk about your own business. because in the last quarter, goldman sachs actually had the highest return on equity. measured a profitability that's been had in a couple of years but a lot of that was done through cost cutting. can we expect to see any higher roe this year if the markets remain the same and does that mean more cost cutting ahead for goldman sachs? >> we're all balancing cost cutting and efficiency with revenue opportunities. it's one of the things that

makes our business model somewhat difficult to predict and somewhat difficult to manage. we're always trying to judge what's going to be happening a month, two months, three months, six months, nine months, 12 months from now, and sizing our capacities in line with what we think the opportunities are. right now we're in a position where we think the opportunity set is going to remain fairly constant to where we are. we feel like we've spent an adequate amount of time right-sizing the operations of the firm. we've gone through a fairly significant downsizing in people, and nor importantly, costs. we've taken a lot of costs out of the run rate. and we'll see what the future brings. if the future is as we think it is going to be which is similar to now, we feel like we're in a good position. we reserve the right to change that at a moment's notice though. >> one of the change must be forced upon you. there is a lot of chatter in washington about breaking up the big banks. it may be death by cap for the big banks.

as president of goldman how are you planning around this? >> we are clearly watching what's going on in washington, in brussels, in other parts of the world to what's going on on the regulatory issue. we're aware of the conversation on too big to fail, in making sure that taxpayers never have to bail out financial institutions. we're very supportive of taxpayers never having to bail out financial institutions. we will continue to be an active participants in the dial loogue. we'll see where this dialogue takes us. we feel adequately capitalized right now. we're continuing to build capital. we are striving to be well in compliance of our basel tier capital. and we are fiduciaries for our shareholders. we want to make sure we have enough capital to run our business as efficiently as we can for our clients an our shareholders. >> gary, thanks so much for taking the time to speak with us. we've been speaking with gary cohn, coo an president of goldman sachs. david, back to you.

>> thank you very much, mary thompson. take a lot at this. shares of service provider angie's list soaring today, up more than 60%. wow! 60% just since the start of the year. what about fears over slowing growth, potential cash crunch? we'll tackle the tough topics with the company's ceo. a big day for the oil and natural gas names. earnings out of exxon and conocophillips. who better to short through the numbers than citi group's faisel khan. ♪ [ male announcer ] a car that can actually see like a human, using stereoscopic cameras. ♪ and even stop itself if it has to. ♪ the technology may be hard to imagine. but why you would want it... is not. the 2014 e-class. it doesn't just see the future.

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shares of vodafone and verizon both up rather nicely this morning on renewed reports of a story we've been following for quite some time saying that verizon is getting closer or more anxious than ever to try to get a deal done by which it would buy 45% of verizon wireless that it does not

already own. our own reporting, my own reporting on this that we've shared with you many times indicates, yes, there is an ongoing effort by verizon to try to get vodafone to the negotiating table, by many more vocal on the subject than it's even been in the past while it has said many times it would have interest in obtaining the possibility. the cfo went to far as to say that they believe the tax consequences for a potential sale by vodafone would be rather minimal. one reason that's been cited at least generally speaking as to why vodafone may not want to pursue such a deal. vodafone for its part only has to exits -- it can either sell to verizon tore can ask to take the company public. if you do that though, that is not a tax advantaged way to go about trying to monetize that state. the question for vodafone continues to be whether its ceo is really committed to the process and the idea of trying to sell for as much as $100 billion perhaps that 45% stake,

take in enormous proceeds, then proceed from there. what do you do if you do that? but verizon, no doubt, trying to choreograph it would seem at this point enough voices, galvanized perhaps that shareholder base at vodafone to get its partner to the table. remember, they are partners here. to negotiate a deal. no offer has been made at this point. many have pointed to a $100 billion number, half cash, half stock is a real possibility. it continues to be a story we'll closely watch because you don't get that many hundred billion dollars deals where they have to borrow $50 billion in the capital markets. now do you? >> that is going to be a big day, if and when it comes. it will be a big day for a lot of people, including you. break news on nat gas inventories. bertha's at the nymex. >> nat gas futures right now moving higher. the inventory number an injection of 30 billion cubic feet. it was right in line near the high end of what number of analysts and traders were looking for. right now we're at about 4.21.

we were averaging 4.17 going into this. we're still off of the 52-week high for the natural gas contract of 4.42 hit on april 18th but we continue to see natural gas storage well below the five-year average, more than 13% below the five-year average and even below the three-year average. as far as demand over the next week, the forecast is for finally warmer whether so we may see less heating demand. let's hope so. back to you. >> bertha, thank you very much. a lot of attention this morning of a survey from royal banksuggf central banks are buying stocks. jim o'neill, a rock star tomorrow, will be on the network to talk about that ahead on cnbc. still to come -- he's back. gary kaminski makes a cameo appearance this morning. we'll fiend out what he's been

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exxon-mobil shares are lower after reporting earnings this morning. faisal khan is the senior natural gas and gas utility analyst at citi. he joins us on the phone. faisal, start off with exxon. give me your take on a quarter that at least is not being

particularly well received by investors, though i mean, to be fair, the stock is not down dramatically. >> yeah, sure. so i mean the company beat the consensus at $212 versus the street at $205. a t looks like a lot of it came from lower corporate expense. some look at it as probably a lower quality beat. but on our numbers the company beat on stronger chemical earnings. they had record earnings in the u.s. chemical business. production was a little bit higher than we thought on stronger gas volumes out of europe. the company bought back $5 billion of stock in the quarter and in a situation where we think oil's relatively flat over the course of this year, we think it represents an expensive stock in people's portfolios. >> you do. there are those who say perhaps it does no longer deserve that valuation premium to a number of its peers. you point out the stock buybacks help that eps number. of course they're only pumping

3% more oil than they were 12 years ago. >> yeah. it is kind of misleading if you look at the production volumes over the last few years. they've sold about 150,000 barrels a day of production. the way a lot of these production sharing contracts work is when oil prices go up you lose some of that production. that's just part of the formula. over the next 40 years, 250,000 barrels a left that is left the portfolio because of these production sharing contracts. a lot of people for get how these contracts work and what these companies do with these big natural oil companies and host companies they operate in. >> faisal, it has a more exciting stock for you in advance of the shareholders meeting in two or three weeks' time? >> it is. it is a controversial story. we've been a part of that conversation, so we do think that it represents an interesting sort of dynamic ahead of the proxy votethe middle of may. >> but only if elliott wins,

presumably. i see the price target is $82. is the price target 82 f in elliott wins and something else if they don't? >> no, that's our fundamental valuation of the stock. we're not trying to buy the proxy vote one way or another. we just think that's the fundamental value of the stock, assuming management executes on all the things that they've outlined and to some degree the large degree what the activists outline, too. >> on the activism front, i've heard the name oxy petroleum. there's no shares of the activism. but this election of iran perhaps being debated. what's your take on the likelihood that if he doesn't get elected chasing moves forward with this potential plan that you get some activity there? >> i think historically both those management key members have actually work very well together over the last 20 years. if you look at the history of

occidental over that time period, it's done very well. in these last few years their capital intense it has groity h. there's been some question about the business plan and how this company transitions going forward. but both management team members are at the retirement age at most corporate companies in america so there has to be a succession plan in place. the proxy fight is more -- or the proxy vote and some of the noise that you hear about the debate between the two management team members i think is mostly noise. >> finally, quickly on conoco, your reaction to those numbers this morning. >> i am not approved to talk about that because we haven't written anything on their report this morning. >> all right. well perfect. we're out of time anyway. faisal, thanks for your time. appreciate it. >> sure. now hybrids are really going mainstream. phil lebeau takes a look at the growing trend as part of this

week's nbc-wide "green is universal" initiative. >> when you look at hybrids, it was at one point a struggle for them to get over 1% of total sales in the u.s. that's not the case anymore. they are more hand 3% of sales. the top selling hybrids -- the prius dominates this market. two-thirds of all the hybrids sold in the u.s. are prius models, even though they're down compared to last year. what is it about the prius that works? they really were the first one to connect with mainstream america. that's why sales have increased. they've also expanded the line. prius sales topped 200,000 last year. one thing we are noticing not only with prius but with all hybrids is that it used to be sales would go up when gas prices spiked. well, that's starting to change now. >> it used to be that hybrid sales would increase when gas prices went up. now we're seeing they're just continuing to go up. i think they finally have gained acceptance with the mainstream. >> we're also noticing a bit of

a change when it comes to how much it costs to buy a hybrid. there used to be a premium that made it a little more expensive to buy one. but look at these numbers. when you look at the amount financed or the monthly payment, the interest rate, are you really noticing, while it is a slightly higher credit score for the person buying the hybrid, the disconnect is no long tler between a hybrid and a standard automobile. let's look at shares of toyota over the last three months, they've had a really nice move going well over $100 a share. many believe that they have some room for growth from here. that's the bottom line. hybrids now over 3% of the market. many believe it will be at 6% or 7% by 2015. >> it's been a slow grind but getting there little by little. hey, i know you got some thoughts on this would-be faa directive as relates to the boeing 787. >> an air worthiness directive from the faa. technically. it is not published until tomorrow but this is the

beginning of the final step that would lift the grounding of the dreamliner. officially it only applies to the united 787s because they are the only one with licensing, if you will, here in the united states. but this is the beginning, carl, of them lifting the grounding and you'll tart to see the dreamliners flying. we talked about it yesterday. ethiopian airlines are planning on having the first flight on saturday once battery fixes are made there. >> yes. we know what boeing shares have done in the wake of these most recent developments, up another percent today to $91.50. for more coverage of our "green is universal," check to green.cnbc.com. angie's list shares full-on rally mode this morning. they've basically doubled now so far this year. as far as many are concerned they are knocking it out of the park. we will speak to one of the co-founders, his first tv interview after the break.

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a phenomenal open this morning for angie's list. the stock hitting a new all-time high after its earnings call last night. the site recently passed the 2 million registered customers mark, each paying $29 a year. the ceo and co-founder of angie's list joins us now on cnbc. bill, welcome to the program. is this your first time on television? >> yes, it is. >> because usually we talk to angie, who is your co-founder. right? >> that's correct. she tend to be the public face. >> but as you approach now a

$1.5 million company, you're going to take increasingly center stage. what did you say last night on the conference call? some are suggesting you really knocked it out of the park. that's a phenomenal move this morning. >> well, think actually it was a very sort of predictable -- what we said was that we did what we said we were going to do. we have a predictable business and we like to state how we're going to perform, then perform to that standard. >> it's a very different business model. people are paying to be registered. 2 million of them now. $29 a month -- $29 a year. and no anonymous posts. talk us through how you differ from the rest of the marketplace. >> yes. effectively we're an honest broker of information on the web. i think the web is in desperate need of honest brokerage. we require that consumers pay because we're offering a premium product. they're not just paying for ratings and reviews but they're paying for the prospect of

better service. so it is our obligation then to deliver that and deliver a superior solution. that's what we do. >> i guess the problem that comes moving forward once you've got this many customers, how do you continue to grow at a rate that the market might want? i know this quarter traditionally the second quarter is big for you in investment. how much are you going to spend on tv advertising? >> well, our total marketing budgets are going to be -- they will increase. we have seasonality in the second and third quarter. it is when we make our investments. we're going to spend somewhere in the neighborhood of $27 million on total marketing expenditures for customer acquisition. that's a slight step up from last year. it certainly is a step up from the first quarter. our acquisitions have been working. we're very pleased with acquisition costs. we're confident in that. >> bill, when is profitability? a lot of models are trying to

bake in where the number of users have to be before you finally go in to the plaque. is it 3 million? is it somewhere in between 2 and 3? >> no, profit for us, we're recurring revenue business. so once we acquire revenue it lasts for several years. and so profitability is kind of a funny metric. we were obviously profitable last quarter and as the business matures, as the average age of the member base increases or the service provider base, then profitability comes very naturally. that's really more dependent on how much we're investing in future revenue as opposed to how many members we have. it's how fast we're growing the member base and making those investments that will determine profitability. >> so, briefly, bill, because we are running out of time -- which is the most important to you moving forward, mobile which traditionally is what we ask people like you. i notice on the conference call

last night, a lot of questions seemed to be about the store front, e-commerce, your ability to sell stuff on the site. >> yes. effectively, we're building a marketplace. we're billing a marketplace for local services and that is far and away our biggest initiative. mobile is a piece of that, but that marketplace has the opportunity, if we do it right, to completely transform how local service is delivered in america. that's a big opportunity for us. it's a very exciting one. it's going to take a lot of work but that's our opportunity. >> so, bill, the stock is doubled now just this year. the market capitalization is it now north of $1.4 billion. how do you feel? >> oh, my wife often reminds me in the morning -- hey, the stock goes up, the stock goes down, we feel exactly the same as we did at the beginning of the year. we had a good year last year. we've got a lot of good things happening at the company.

>> bill, it is good to meet you. thank you very much. congratulations on the results and the move in the stock. co-founder of angie's list. got a mover in the travel and leisure space. josh lipton has a moving to the leisure space. let's go to josh lipton. >> check out royal caribbean, which is shooting higher here. passengers shelling out more on tickets and entertainment. the company did say they saw some negative impact from adverse publicity. just one example t outbreak where people got sick. the most surprising thing to her, the company now seeing a slightly better outlook for europe. by the way, carnival also ripping into the green today. carl, back to you. >> all right. thanks so much. we should point out s&p is up more than ten handles. we're within four points of the all time closing high back from april 11th. currently at 1589. straight ahead, rick santelli

will take us on a trip to southern europe for a little culture and an lesson on interest rates. on this very program, a live one-on-one with mcdonald's ceo donald thompson.

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welcome back to "squawk on the street" and thursday's edition of the santelli exchange. a lot to cover today. you know, if you look toward southern european paper, government paper, whether you look at spain, portugal, italy, we see their rates are going down. that shouldn't really be so surprising. the bank of japan has enabled along with our central bank and others a lot of money out there that is being leveraged. we also know that many big bond funds and famous investors after mr. draghi brought out the big

bazooka. the big story is trends and reserve management which gives us a glimpse of the next area of focus in the markets. i would like to put this 2016 survey on the the screen. the policy of the federal reserve and e skrrks p have looked to diversify the portfolios in a variety of ways for movements along the yield curve. all right. that was 36 pages, that report. and i tried to read as much as i can. i'm going to give you the shortened version. it's a wonderful paper. basically surveyed 60 central banks. out of those surveyed they control close to 7 trillion. normally very conservative investing by central banks but

they have the save problem that you in tv land and satellite radio have. there seems to be a whole lot more risks than reward. but the issue is when you get involved in nontraditional investments from a central banks perspective, things like certain currencies you wouldn't consider or equities which is a biggie, there is a danger that everyone is loaded in the same direction. should central banks like the the federal reserve not be able to prime that well where some of the quantitative programs end, who gets caught holding the bag? what chairs are left when the music stops? all these things need to be considered. this is really an eye opening survey. back to you. >> you got that right, rick. talk to you in a little bit. when we come back in a little

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welcome to hour three of "squawk on the street." here's what's happening so far. >> we are focusing on operation of excellence and efficiency as a way to improve our numbers. >> do you have a number you think they can earn? >> $3.69. >> whoa! whoa! that is pretty good. you could be an analyst. >> colgate is saying this is not a choppy environment. this is a good environment. i use the word choppy on my 17-foot boston whaler and about to head to georgia. i don't want to hear choppy. i want to hear smooth. >> i think they want to try to galvanize it to speak loudly. i think it's already begun. the question is whether it results in him saying okay,

let's see what we can get them. >> that's important to keep in mind as people see headlines all over the media space. >> that's the opening bell at the nyc. >> they are creating the crisis earlier than it needs to be because they are playing political gains. we need sensibility in congress to pass a bill to allow them to get the cuts that needs to be done. >> there's an enormous amount of capital in the system. so we have the natural grn ingredients in the united states to really see a growth. >> good morning. we are live here at post 9 of the new york stock exchange. not alone today. let's get a check on the markets. the dow having a nice session despite the warning from 3m this morning. s&p is all almost to the all time closing high.

nasdaq is up almost 30. ups is trading higher after the company's first quarter profit jumped 7%. ups also reiterating the full-year forecast and nen as we said, #m is down after first-quarter results. the company posted higher profit but did trim its outlook. gary kiminsky making a return to post 9. this time as vice chairman. it's great to have him back. plus, goldman's jim o'neil joins us. find out what he has to say about the state of the economy and where we go from here. we'll talk to the chairman of the house transportation and infrastructure committee, congressman bill schuster about the possibilities of the furloughs coming to an end. first up, we start with a

situation at the nation's airports. the faa blaming sequestration for all the flight delays. hampton, good morning again. >> how you doing, carl? want to clear up some of the stats we went through in the last hour, as far as how widespread the impact of the delays and cancellations have been. this is data -- basically private data, handicapping the last two days. we had about 6865 delays and 402 flights cancel on wednesday. tuesday, 6,396 flight canceled. the most current data breaking down the sequestration impacts. on tuesday they were 1,025 delays nationwide due primarily to staffing and 975 delays related to weather. some private data also looks at what's happening at the nation's

busiest hubs. 35% to 36% of delays are happening at chicago, newark and ft. worth. earlier we heard from the ceo of southwest airlines talking about the fact that the airlines and the pilots have taken the faa to court. >> we're in litigation. we are in litigation with the government to bring this silliness to a rapid halt. >> and there is pressure mounting here in washington on both the white house and congress to get this fixed. carl, back to you? >> hampton, that's a big story all around the country. thank you. hampton pearson at reagan. now to amazon which according to several reports is working on a device to bring internet video to television sets. online retailer reports earnings after the bell tonight. shares up 40% over the last year. kent is the managing director of

who joins us to talk about. let's talk about whether this kindle tv is a game changer of any time. >> that it's a tv. it shows amazon is still committed to content and still committed to the home. so longer term it's with their strategy. >> coincides with the original content. a studio building a studio from scratch. how much rope are investors willing to give after years and years of giving him a lot of ro rope? >> this goes along with their hardware team. they want to this make sure it's about engagement, making sure their content is in front of consumers because there's so

much other staff amazon wants to sell to them. i don't see the content as a big driver as a stock but i do think it's important to read through the gross profit line that they report to the quarter and that's been is accelerating at least in the last quarter so fundamentally the stock is still strong even if they do pursue the other areas that will be less important. >> let's talk nuts and bolts. they're now charging fees to third party sellers. the rivals are getting more aggressive on pricing for cloud services. what do you expect operating margins to look like today? >> we're about 3% versus 2%. most of that is coming from an expected beat on the gross profit line. that's going to come from a higher mix of amazon web services, which has higher gross margins, swell to your point on third party revenues. >> some have tried to argue

their reliability or reputation took a hit over christmas eve. have they suffered in the long term because of that? >> it's a question that is asked a lot. when you really prioritize what is important to enterprise users or providers as long as your data is safe an outage here or there is not necessarily the end of the world. when you're talking about the price savings that amazon web services can provide and trillion the computation capabilities they can provide, too, in addition, it's worth the potential tradeoff and really from an amazon web services standpoint longer term. as more and more buyers of software come to amazon site sellers will see this as a distribute opportunity. i see the same market dynamics there as what's happening in retail. >> always hard to guess what the

end game is but certainly the stock is up 2% today. ken, thanks a lot. >> thank you. switching gears to chat with an old friend. gary izbeck. joining us with information about what he's tell iing clien, all 3 million of them. >> old friend that looks old, right? no, thanks. what is the message right now? >> when i left here and took this opportunity, part of what attracted me was the global scope in terms of everything. as i've now been able to spend the time there and try to get the messages, it's great to finally understand from the inside-out. i want to explain to people what the thinking is as we continue the dialogue. as i continue this role in the

month ahead. that global investment committee has a couple of mission statements. mike wilson really relies on the global reach to leverage all revenues of capital. provide the ideas and the open architecture of what that firm is. it means we're not just relying on the in-house but the reach of other avenues. mike ties this together for the benefit of the financial advisers that speak to the viewers and provide a strategy. here is the strategy now. this is how the gig is positioning and equities over fixed income. japan is the favorite marketment

also in the yen denominator. avoid the bank loan sector attractives. and informally emerging markets are relatively attractive. why is this important? because again you have to look at things as yo heard me say always as a relative performance. we're looking at the objectives of wealth preservation and growth on a relative basis. so there is the 10,000, 30,000 foot look down. the invitation is done by each professional. and so it's great to be engaged and try to make people money. i'm happy the equity markets have not disappointed since i was last gone. >> i no longer question your insight.

you have a lesson with mastercard imbedded in it, right? >> let's say this. one of the most frequently discussed things since i joined and left was the questions we got about apple. it wasn't necessarily because everybody on the sell side was bullish on apple. but you have to look at other things. when i think back to 1/2 the defining event that we brought to people on this show, it was when we identified every closet index fund had a full position on apple. fundamental changes have occurred since. but i will say is the individuals that help me trap and right there is the top of the chart that we identify ied s

fully loaded, that was the top. and i continue to consult with the individuals that track this stuff. and very simply put. no that i am saying anything is happening, but if you look at this name, 95% institutionally owned. they are flagging this as another example as a stock that every closet index is fully weighted in the name. pay passenger to the stock. it does matter. history shows us, at least with apple that this is the type of thing you need to stay on top of. >> great to have you. great to continue here. talk to you soon. when we come back, jim o'neill will join us with mary thompson after a break. oh, boy. [ groans ] ♪

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dow is up 71. take a look at the health care sector getting a boost from johnson and johnson. josh lipton is at head quarters watching that and more. >> check out johnson & johnson. here is your headline. johnson & johnson raising the dividend to 66 cents from 61 cents. johnson & johnson up today and up 21% this year. carl, back to you. >> let's get back to mary

thompson at the management growth market summit in new york city with yet another exclusive guest. hey, mary. >> hey, carl. we're speaking with jim o'neill who is the chairman of goldman sachs asset management. this is a bit of a swan song for you as you're retiring shortly but as we sit here at this growth market summit, what areas are people talking about as growth areas around the world? >> lots of diverse and fascinating things. i was rushing through an hour ago. >> clean water. we want to say you're perfectly healthy. they took water from the hudson river, purified it. you're here. well, because if this technology is going to be really expanded

and used, and i'm not joking otherwise half an hour earlier, but this is the world's future. the guy that presented it from lifesavers inventive company. if you can use that to get fresh water to 2 billion people in the big emerging world, wow. wow. >> you can change the track of a country's economy. >> so for china and particularly india and beyond the country which a number of them are showing signs of being very different. the ones that come to mind are the phil pooens, nigeria, where i happen to be two weeks ago. >> why nigeria? >> it's interesting because it's nearly 20% of africa's population. and there's two things that i hone in on.

modern technologies are allowing these places to jump through stages of development. when we were growing up would not have been the case. and secondly, the people in power or coming to power in some of these places are being brought up and raised in the west. and so they know about governments and what is needed to put in place to transform them in a way so many have struggled with. >> let's talk about the emerging economies, china. that's also a topic of converon h saying china is going through a transition phase. that's it's going to look very different in a few years from now. >> it's all about the quality of growth as opposed the to quantity. so china has been getting as much growth as it could and t not really bothered about some

aspects of quality. and it was greatly export based and state directed. we were in the really early stages deliberately done. prepared for a slow growth but shifted away to domestic driven consumption and sustainable quantity. so in this interim phase it's probably going to continue to surprise people. but to me it's already showing signs of being quite successful in adjusting and given how important china is for everybody in the world, it's fantastically important. >> but it could also play to the advantage of the united states, you say, this transition. >> in preparing for my talk i started off this morning with some new pictures created. i hadn't fully realized the way

they are boosting their shares. there's so much fear here about how much of the future will be eaten up by china. i think people are slowly starting to appreciate, because the evidence is shifting, that more and more companies are benefitg from the growth of the consumers. and for shifting back, the studies are closer to home. >> you actually put up an interesting chart, meaning you show the biggest trade partners for the u.s., the biggest exporters now what they might be in 2020. >> china was already on the numbers i just updated and i hope they're accurate it's cracked to the number three spot. by 2020, if china carries on at the pace it is, it's going to be number two and overtaking mexico. >> we also have to talk about japan. that's another market getting so much buzz because of the

stimul stimulus. >> i was just there a week ago today. so slightly different times. but this is a huge day. we also forget japan is still the third largest economy in the world. but there's a major shift going on and very forced on the mentality but i was there for a day first time since november and i thought it was going to big, and it's surprising me. all the people who didn't expect it to be big, this is huge. >> so for mom and pops at home, what is the best way to play it? are equities still a good value? >> to me it makes everybody fearful.

partly because of what we went to four or five years ago. so sort of the excess return is still high. and in many different parts of the world where i think that's still the case. >> i want to ask you about a survey that came out that talk about central banks buying equities. >> i caught wind of that this morning. i have not had chance to see it. part of that seems slightly off to me. i'm guessing what it probably shows is the bank of japan is embarking on more and more equities as part of its own qe. but away from that, i don't think people should worry about it. the sort of welfare part of some central banks, some countries, is being done within the central bank in a separate area and a

number have started to make that adjustment a few years ago. frankly it makes a huge amount of sense. in a world of floating exchange rates, why should central banks keep so much money in very short-term liquid things when they're not going to ever need it? so to help their future returns for their citizens, which at the end of the day is partly what life is all about, why would they not invest in that? >> okay. jim, we want to wish you the best on your retirement. thank you for joining us today. we've been speaking with jim o'neill, who is the chairman of goldman sachs asset management. >> thanks to you and jim. when we come back, bill shuster joins us to tell us who is responsible for all the flight delays. bny mellon combines investment management & investment servicing,

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the new york times reporting a decline in revenue but has a plan to turn things around. hi, julia. >> carl, "the new york times" ceo spoke moments ago to help with the decline in revenues that dragged on the top and bottom line results. it was no surprise that print advertising continues to fall by double digits. the company is blaming an increasingly complex and fragmented market. so the company is focusing a new strategy on the bright spot. the 45% growth in paid digital subscriptions over a year ago. mark thompson is ceo announcing broader digital options saying there will be a lower priced option as well as a higher priced premium all-inclusive subscription. thompson news strategy includes more video content, brand extensions into retail selling

related games and products and expanding internationally as well as the conference business. thompson did say the new investment ls will come with costs, we'll see if they can company sate for the declining ad revenue. >> they have office gossip that they're trying to deal with as well. thanks a lot, julia. when we come back, bill shuster weighing in on the effects of the furloughs. ♪ [ male announcer ] a car that can actually see like a human,

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welcome back to "squawk on the street." i'm john magerian and there's breaking news where the world's busiest option exchanges have been closed all day today. we don't know why, carl, but we know the s&p 500 options that trade there have not traded all day today. and many of these contracts are among the most actively traded on any option exchange. the only place they trade by contract is at the option board exchange which is closed at this time and we don't know exactly when they're going to come back up or what the problem is. is it a denial of service or a glitch? >> we don't know. when we do know, we'll bring it to you first. europe closed 90 seconds ago. simon is here with another day in the green. >> oh, yes. day five and many people are

looking forward to the possibility that the european central bank will cut interest rates one week from today. still hotly debated in europe. they suggested actually germany probably needed interest rates that were higher than they are at the moment, not lower. you see the green almost across the board. hey hey. the uk avoided a triple-dip recession, rather. the economy grew by 0.3% in the first quarter. the pound is rocket etting up almost 2 cents against the dollar. in the meantime you'll see spain is lower and indeed france. as commodities rallied around the world, some of the mining stocks, notably the second mining stocks have had a great day in london where most of them con gre grate in terms of listening as you'll be aware. spain is lower. the big spanish bank

disappointed today. profits down 26%. it's not just about spain. it's also about brazil where they're not making as much money as the market thought. that heavyweight is down almost 3%. a huge number of companies reporting today. also a focus within. we're also keeping an eye on what is happening in madrid. there is suggestion of a large march on the parliament there and an attempt to take it over. spanish unemployment for the first quarter confirmed at 6.2 million. carl, that's an unemployment rate in spain above 27%. back to you. 27.2. there's nothing good about that, simon. thank you very much. >> we are waiting for our camera, guys. the important thing is, we are approaching new highs.

here's what is important. put up the s&p 500 we have a rally going. we're up 2.25% on the week here. the old high is 1597 or so. that was the intraday high. 1593 would be the closing high. so we're not far away. four points from a historic high on the s&p 500. pay attention to that. and it's being led by materials, consumer discretion earnings, financial names. all of them are pooufing to the upside today. one thing i want to point out the global industries by and large are reporting weaker revenues. that is the main theme that we've been seeing. rockwell mised yesterday. it's to the downside here. these are the kpeangs that do big global businesses. business in is flat to down 2%. that's well below expectations.

u.s. is weak, too. flat to 1 pblgt. china has been mixed depending on the country. here are the two bright spots. u.s. construction, aero space. both are doing excellent. and it's reflected in the stocks this week. we had a great report from ryland and m/i j homes. all of the stocks moving to the upside, aerospace, everyone is wondering, what happened to the sequester? heavy on defense. when you get boeing, more in the general aero space answer, not much. you see boeing to the upside. they reported as well. that's a new high. that's also at a new high. i also want to note companies are counter balancing the new revenues by dividend increases. we see three companies announce dif tend hikes.

johnson & johnson and chevron all announced it. and the important thing is a lot of companies or a 130 companies have announced dividend increases. that's more than usual. a lot of them are trying to figure out how to offset weaker revenues. back to you. >> people still talk about the tax rate in some cases. looking favorable. maybe things get a little more clear by earnings season. frustrated travelers are facing mounting delays because of the faa furloughs. here's what jay carney told reporters earlier this week. >> this is a result of sequester that was never meant to be logged in these furloughs. that's the unfortunate fact of arbitrary across the board cuts like this. zbr the question is, can we find alternatives to this mounting frustration. congressman bill shuster is chairman of the infrastructure committee. he joins us this morning from d.c. congressman, good morning to

you. >> good morning. thank you for having me. >> we all hope this is going to be over soon. i'm sure you do, too. will it be over soon? what do you think? >> from the beginning we said the faa, the president has the ability to imp plemt these sequestrations they have implemented this to inflict as much pain on it will traveling public and to use it to pressure congress to raise taxes and raise spending. we don't need to spend one more nickel on faa. they have enough money. they have the flexibility to implement this without the furloughs. >> so you think that the d.o.t. and the faa intentionally, surgely targeted these cuts to affect the highest number of y flyers? >> absolutely. look at the way they've done it. they should have started there with the furloughs, not the people that provide safety in the air. they also, they are not looking at airports differently. they're doing across the board the same. so you have, in iowa, waterloo,

iowa, it's 80 flights a day, versus chicago o'hare. 8,200 a day. they should look at them differently. and the airlines have confirmed this with us. if it's done a different way they can be better able to mng manage their schedules. if you look back, look at what they did at the white house, the tourists and public coming to washington, d.c. they're doing the same thing as the traveling public. to use this to pressure congress to come back to the table and raise taxes and raise spending and we're not about to do that. >> it's amazing how quickly things turn into political footballs, congressman. the rnc has a hash tag, obama flight delays. obviously republicans are calling on those who are inconvenienced to call the white house. and we're all in this situation, congressman, because sequestrations happened in the first place, because the two sides couldn't come together. do both sides share some blame or not? >> well, i believe that this could be managed. and as of yesterday the white

house has said this flawed strategy of theirs. they talked to senate colleagues. they try to work out something. we're going to take a look at it. if we're going to put legislation out there, something to force the faa to be responsible. we don't want to do that. we think they should be able to do that themgss. we're taking a look at the legislation to force them to implement these things in a smart, management way that's going to allow the public to be able to travel and not see delays. >> how active tr the conversations between republicans and democrats about the kinds of solutions that you're talking about. i mean, is this happening on any kind of practical level? >> in the senate, i know my count counterparts are out there. they melt met with the administrator. the administration admitted this is a flawed strategy. they want to try to figure out a way to solve this.

but i believe they have the flexibility to manage this much differently and they haven't done it. we're trying all the time to push the administration to be responsible. >> would you rather have the tactical decisions made by the agency or push all of this back 30 days as some senators in congress have suggested? >> i believe that today they should be able to go in as manages of the faa and to implement these cuts in a responsible way. if you look at american companies and american families, they've had to do these types of things for the last four or five years and they've been able to do it, these companies are doing it. and at the the end of the day when they have to do tough things they come out strong and better organizations. the faa needs to roll up their sleeves and get back in there and figure out how to make these rub reductions in costs. >> congressman, i appreciate your insight. just about everything in the country has a vested interest in. thank you.

bill shuster, let's get back to john and jerry in headquarters and get more on the options delays. john? >> well, there are an awful lot of folks i'm sure being impacted by this. as you and asaid, breaking news that the exchange has been closed all day. they've not been able to trade the s&p 500, the vicks. normally they would be approaching almost 2 million contracts that have not been traded because it's not up. they have other opportunities. people can open and close trades in stocks like apple and ibm elsewhere because they trade virtually on every exchange. but those three products don't trade everywhere. they're the property of the s&p 500 or the chicago board option exchange. now there are a lot of folks

that are hedging as this is the end of the week. a lot of folks are looking to close trade. >> and it's hard to put into words what that kind of feeling islike when you are literally handcuffs and unable to make your move. john, it's also happening at the same time that they start to roll out products. >> melissa lee brought up the point that at the end of may they'll extend the hours for trade. we don't know. was it something similar where they had the denial of service for two days where they had hackers actively attacking them. and obviously the fact that

people haven't been able to trade. big institutions. public pension funds and folks that really need to move billions of dollars around very quickly at the end of the week. #. they've been shut out so far today. huge news. we know when we get more details we'll come back to yo. unbelievable outage. we'll get a lot more on that breaking story when we come right back. but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard and i helped create the fidelity guided portfolio summary. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

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if you're just joining us there's breaking news this morning. an outage of options trading. john is joining us at the breaking news desk. john, for those who haven't been watching up until this moment, do a reset here and tell us exactly what we know. >> okay, carl. the world's busiest option exchange the cboe has not been able to trade all day today. that's where the s&p 500 options trade. so folks that are managing big portfolios that have the full value haves can't trade today. the only place is at the cme where they have future options. but you can't open one place and close at the other because run is set. there is a bunch of issues here for all of the big -- whether mutual fund or pension fund that have big s&p 500 trades, you

can't trade in many of these positions would expire on the close tonight. you talk about the s&p 100 as well as the vicks, they only trade at the exchange, which is a huge advantage for them. today it's really a problem for them. for some reason they can't open the exchange. >> let's walk through various scenarios about positions may be in. let's say i'm in vix and i trade every week to just sort of hedge my risk overall. where am i today? what am i able to do? what am i not able to do? >> if you normally trade the vix calls against that position, which obviously hundreds if not thousands of institutions do on a daily basis, this contract is traded over a million contracts a day. then that's unavailable to you today. you can't do that because the cboe is closed. it doesn't trade anywhere else. it doesn't trade on the nasdaq.

nowhere else does that contract trade. same thing with the full value s&p 500. this is a 1585 contract that doesn't trade anywhere else. the futures trade across the street at the cme and the future's options. but there is no hope for the folks just in the security product to go across the street and trade. can't do it. >> john, don't go anywhere. brian is joining us. he is an options trader, and i think he joins us on the phone. brian, what do you know about this and what do you suspect may be behind it? >> well, i'm hearing it is a software glitch that they're having issues with from guys chatting on the floor and discussing what's going on. primarily coming from the spread book reporting system. they tried to open market this morning, options market, without using the spread book.

they were going to go open or electron click without using spread books, meaning options traded one month against another month in the same exact trade. that's a spread. they were going to stop that and let everything else trade, however, we were getting some complaints from floor brokers that you could end up trading through some of these spreads and there could be fills for customers. so the cboe made the decision not to open their exchange until they figure out some of the issues going on with this. >> so we literally have traders and brokers standing around waiting for this to open, don't we, brian? >> exactly. guys are sitting there scratching their head, talking with each other, trying to figure out what's going on. lots of traders on the floor, market makers in particular, having huge positions on multimillion dollar positions that are needing to be hedged out, and of course, as market makers we use options against other options to help spread ourselves off. and without access to that right now it's been a difficult situation. so certainly guys, you know, not

just standing around but really anxious to see this exchange get back up and running here. now one other comment, too. vix futures are are traded on the chicago future exchange are open. they are trading. want to hedge yourself with volatility, that is still a possibility right now. however, be wary, vix spot prices that are being reported right now may not be accurate. some of the vix price reporting right now is coming from pre-market information. be leery of what you're getting for the vix. . >> yeah, that's one more thing we need to worry about. john, i don't want you to go too far. and if you have questions for b. >> by the way, carl, just real quick, the cbo sent out a note saying they're working on bringing the exchange back up, acknowledging there's a trading delay, they're calling it. but they're going to be trying to bring it back up. this got shot out in an e-mail fashion just now. >> okay. >> brian, your specialties in the vix, i'm told, after schaub,

do you notice anything or are they fires that are burning on their own? >> it does seem to be fires burning on their own. i will say as we enter this high-speed model that we're in, things happen quicker and faster and, you know, broadband has to be a discussion when you upgrade certain softwares, that has to be taken very carefully here. i mean, we even saw in that little hack attack the other day, vix futures moving 10% up and down in four minutes worth of time. guys on the floor almost didn't get a chance to react in the electronic world to so much movement. certainly, we need to be taking it step by step and how fast we're advancing in this area of trading. >> well, it's an area investors know, it's an area that's already fraught with so much risk, guys. and to have to deal with

something like this adds a fuel to that fire. melissa lee joins us, as well, knowing more about options than i do. what's your take so far, melissa? >> it's interesting, carl. and i wanted to ask brian or dr. j. for that matter if we are seeing other ways of hedging against positions happening right now. you mentioned some other options futures are open on the vix. are we seeing upticks in volumes and hedges right now? >> certainly if you're looking at the spx, the cbo's c2 system, which is an all electronic exchange is up and running right now. you could go to that electronic market and get access to s&p options and certainly like you said before, you know, the vix futures are a possibility. but certainly, guys are going to have to look to other areas until we're up and running here such as the spy etf which tracks the s&p, you could go there and still access their option area. if you're looking for vix, you're sort of out of luck right now other than vix futures.

so the options market, of course, is closed and there's no area to go. that's a big concern right now. >> and dr. j., you hit on the etfs, that's how people at home might be affected by this outage. are we seeing trades happen? because the vix etf is a different sort of creature. >> right. there are a whole bunch of flavors whether you want the leveraged ones or the vsx which is the short-term volatility futures. that's where i believe a lot of folks will go because that's one of the most liquid contracts, mel. but, again, the spy, for instance, this is a product where the retail trades primarily in that. >> that's one of the most liquid contracts, but, again, the spy, for instance, this is a product where the retail do trade electronic, they trade on electronic trades for that. someone stuck unable to avail themselves of a future listed contracts could be trying to trade in the spy, that's where

you should see a boost in volumes to your point. >> we'll watch for that. by the way, john mentioned this earlier, but the exchange does have a statement out reads like this. the chicago board options exchange trading was delayed today. the exchange is working on bringing trading up, we will issue more information soon it is available. meantime, rick santelli has been watching this from his post in chicago. what are you hearing? >> it brings up two big discussions going on on the trading floor. the first is that the cboe like the cme is lucky enough to have humans. but when information advantages or disadvantages precludes them from rising to the occasion. so the main conversation here is that use people more of a backup but have that system somewhat insulated if possible. certain types of outages, indeed, may make that impossible. and the other issue is the issue you've been hinting at all day. is there a pattern here? have these hybrid systems gotten so complex? are there any issues with, you

know, exchanges constantly investing and upgrading or any of these issues? traders want to know all of this because as dr. j. is one of the better people out there that explains options and the uniqueness to the way they expire, they trade, they price, really, you know, think about september 11th and how exchanges closed. we could not stop options from expiring. that is a process that cannot be halted. so all these issues are being discussed here across the street from the cboe. >> brian, do we still have you on the phone? >> yes, i'm still here. >> it sounds like from what you're telling us, and correct me if i'm putting words in your mouth, it does appear to be a software issue as far as we can tell right now is i would say for lack of a better phrase self-inflicted. the notion of some sort of cyber attack here is not at the top of your mind? >> well, i can't make comment

directly because i haven't talked anyone directly at the exchange at a higher level to make an exact comment. that's sort of the chatter on the floor standing around market makers and brokers. it is coming from a software glitch within their spread trading ability. you know, the cboe provides fantastic liquidity throughout the day, especially in the vix options market and i'm sure we'll be able to be able to do so. the specifics on, i can't given comment on exact detail, certainly sounds like it's a software glitch they were trying to adapt to. >> by the way, guys, dow jones quoting some traders saying the cboe may open trading in single spx orders soon. of course, we already know the cbo is working on bringing trading up. we'll get more on this breaking story after a quick break. don't go away. effective pain relievers. tylenol works by blocking pain signals to your brain. bayer advanced aspirin blocks pain at the site. try the power of bayer advanced aspirin.

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[ telephone ringing ] [ static warbles ] [ beeping ] red or blue? ♪ big trading delay this morning. bob, another hit for market infrastructure? what do you think? >> yeah, look, regardless of the cause, any outages that stem from technology problems are not welcome here, anywhere else. by the way, it's not affecting the nyse at all. i walked around, talked to some of the designated market makers here. they're not seeing unusual

movement, any unusual heavy volume. but in a sense, that's besides the point. sophisticated investors obviously have other means of hedging out the market even though it's a problem creating hedges. i don't think there'll be any long-term problems, but not good when you have a technology issue. >> especially after a week like this. bob, thank you. that does it for us today. don't forget, tomorrow, mcdonald's ceo don thompson live from undisclosed locations. here's wapner and "the halftime." >> carl, thanks very much. welcome to "the halftime" show. four hours until the close. right now on the street, good day for the bulls, dow up 68, there's the s&p and nasdaq firmly in positive territory, as well. here's what we're following on the half. market maverick, the always outspoken marc cuban on the twitter hack that shook wall street, high frequency trading, and much more. bank on it, u.s.ru