stomach into knots ♪ ♪ >> good morning and welcome to "squawk box" here on cnbc. i'm joe kernen. becky and andrew are both on assignment, so check this out. i am joined by kayla. i don't say her last name anymore because it's not necessary. julia boorstin is to my left, camera right. and man of steel, robert frank is here, has a movie coming out a little bit later. you know what? i wish -- to me, man of steel, that that's taken, that nickname. that is a good nickname. >> it is a good nickname. >> could be referred to in many ways as the man of steel, but that's yours, right? i can't -- >> i prefer mild-mannered. >> mild-mannered? i don't know if people can see your "v" torso. >> i try to keep it under wraps. >> but it's hard. >> we actually have a phone booth upstairs and sometimes

robert says he's going on assignment and just hops in there. >> it's the only one left, i know. and you've got your pick of lois lanes, or you could use your wife. >> we dressed for it today. >> like super girl. >> i found my lois a long time ago. >> who is also now, is a journalist. >> that's right. >> sort of. sort of. >> all right. >> that's rebecca from the currency show we do and -- >> she was on larry kudlow last night. >> and we know her from "squawk box" quite often. >> you're right. sorry. the dow's coming off a record 18 straight tuesday gain, which i don't know, it must be belg-up yum? i don't know if anyone knows what it means. industrials, transports, s&p 500 and russell 2000 closing at record highs, the nasdaq ending the day at its best level since october of 2000. i don't know what happened yesterday. oh, actually, i do. stocks were higher right out of the gate, fueled in part by david temper's bullish comments on this show in a "squawk box" exclusive.

>> very similar to an early stage economy. we don't have inflation. you have capacity utilization is low, so you have room there. labor unemployment's high, so you have room there. there's no inflation on the horizon, so we have a little bit of room to run. >> he didn't give us any notes before coming on, before the interview, so my first question was, you were on a couple of years ago, market's up 45% since then. at that time, you said that either the economy improves on its own and stocks go up or the fed makes the economy improve and stocks go up. i said what is different now? either the economy is going to improve and stocks are going to go up or the fed's going to stay in and -- i said are you still bullish? he said definitely. so, i wasn't leading the witness at all, but there were other people who said he was going to come on and be much less bullish than he had been. >> he even said all of the factors are overwhelming leading into a bull market right now. >> he was unequivocal. >> and we don't get people like that. we get people that say, all

right, you know -- which i've ranted about recently -- people is thank you you don't want to commit new money, i would wait for a bit of a pull -- >> you guys basically had to go to a commercial break because he was listing so many reasons why market would go up. >> and he said in the end, after marissa tombe, itea tomei, it's positive traction in "my cousin vinnie," and they present all this evidence and the prosecution says case dismissed. >> it was interesting, too, he was actually doing the math. it wasn't just pie in the sky stuff. >> right. >> and that $400 billion, i call it the tepper dividend now. we had the tepper rally, $400 billion tepper'd. that was really convincing, and i see in my world around the wealthy there's so much liquidity in capital -- >> i don't know if i'd call him wealthy, but you saw what he made last year. if a guy can -- let's say you get a percentage of the profits that you make for your clients, and let's say that percentage is $2.2 billion in one year. do you remember when milk didn't use to make $500 million and we thought there was something -- i

guess there was something going wrong. i guess there was something. but we thought -- >> back then, that was real money. >> that was real money, but we said this can't be legal. and then maybe it wasn't. but you look at what happened. i mean, $2.2 billion, that's credibility. anyway, i've got more to read here. he also discussed the fed and everyone's favorite question, when will the central bank start to taper? >> if there's a true taper, there had better be a true taper, or else i think you might be in the last half of '99. so, guys that are short, they'd better have a shovel to get themselves out with a grate. >> among our guests ready to continue the conversation we started with tepper, mike novagratz of fortress investments. we'll find out why he says stocks will rise 30% this year. i once got grief from someone for making that prediction of a 30% rise. kayla -- >> i don't know who would have given you grief. >> i'm not going to mention any names. >> certainly not me. >> i'm not going to mention any names of people that -- >> i remember it. it was june of last year, and we

were just at the point where the summer swoon had started, the markets had given back all of their gains, even though we had a monster rally. >> and we talked about -- >> you talked about how silly my call was. >> we got 12% gains last year, which is not too bad. >> oh, you're using calendar years. okay, i said 30% and i said up. a lot of people, not only did they not give a number, they can't even give up or down, much less the calendar year when it's going to occur. let's go back to june -- >> fiscal year. fiscal year. >> let's go june to june. can we go june to june? >> let's go june to june. >> let's go june to june, kayla. let's go june to june. we were at about 1,200, now we're at 1,650. >> what do i owe you? >> i don't know. i never forget. >> my question's, joe, here we are, not a correction yet this year. what's your prediction now? >> i think we're going to talk to novagratz and he says 30% this year. >> and you agree? >> huh? >> you think another 30% this year?

>> here's what i remember. i remember three years in the '90s when we went up 35% each year in the face of the same type of sentiment that we have now -- no excitement, no one believes it can happen. every single person that comes in here -- >> tepper believes it can happen. >> huh? tepper does, but he's rare. yesterday i was reading an intro that said is this the rally's last gasp? and that's typical of the way people are thinking. and i said why didn't the writer, why not is the next leg about to begin of the bull? why isn't that what we're writing? because you can watch on the shows that we do in the middle of the day. i've seen "rally's last gasp" as a chyron at least six times over the past six months. every time we have a two-day period where it doesn't go up, we're calling an end to the rally, and as long as you keep seeing that, people aren't believing in this. >> but when we have a market that's in the red, it's not in the red by triple digits. i mean, it's very slow to go down. >> for one day, i know. at this point, in bear markets, bad news is bad news, good news

is bad news. in bull markets, it's good news is -- >> it's all good news. >> we just had our 18th positive tuesday yesterday, 18th in a row? >> right. then i said to tepper, you know, i tried to pin him down on valuation. and valuation is a hard thing to base trades on because things that are undervalued can get a lot more undervalued, things that are overvalued, they can go on -- you look at the tech stocks, whatever it was, it can go on. looking at greenspan, irrational exuberance went up 12,000. tepper pointed out, we're probably at 14, 15 times earnings with 0% interest rates and who knows had they go up? >> a lot of people are pointing to 20 times earnings as the bellwether of the rich valuation. >> there is this disconnect, right, between the markets and parts of the economy, i.e., employment. >> those are all lagged things. >> they could be lagged things. the market is forward-looking. bad news today out of germany in the sense of the peripheral problems in europe could become core problems. germany is the last man standing

there, and they're looking pretty weak. >> and you look at the recession in france now and then sort of the questions about what's going on in italy. so, obviously, there are a lot of -- >> in china, you know, china is also not recovering as fast as it looked like it was in the fourth quarter, but again, like bad news is good news, no news is good news. >> how long have we talked about europe? going on three years. >> two years, at least. >> people are saying germany is becoming this swiss cheese country. it's still edible, but it's not holes. now is the risk -- >> what's the expiration date? >> what's edible in germany? >> i also don't know, since cheese is kind of a fungus anyway, does it go bad? >> i feel like it can last for a pretty long time. >> it just changes forms. >> why is there an expiration rate on sour cream? go ahead. >> why is there? you tell us. maybe we're missing out. i don't know. >> that's why, what color do smurfs turn if they hold their

breath. a number of key releases today. the consumer price index and the empire state survey. ppi is seen as falling by 0.6%, the core component expected to rise 0.1%. later in the morning, capacity utilization and the national association of homebuilders survey. on the corporate front, another busy day with a few quarterly reports of note before the bell. we'll hear from deere and macy's. this afternoon, cisco headlining earnings central. tomorrow morning, don't miss cisco chairman john chambers joining. >> do they keep these things secret from me? i love john. we used to call him mr. chambers, and call me john, call me -- so, i just, they call me john. why do 7-elevens, which are open 24 hours, seven, 365, so why do they have locks on the doors? >> i don't know the answer to this, but --

>> you've got nothing. is it too early? is it too early? and you're on california time half the time, or are you back here now? >> i'm here for the week. >> a regular sleep cycle, maybe you'll get a little sharper. there is other news this morning. like every day, i see a jpm dimon story. the latest on the situation with jpmorgan and the likelihood that jamie dimon keeps the chairman and ceo rolls. the "ft" reports that shareholders and people familiar with early voting patterns say the proposal to split his jobs is set to get less than 50% of the vote. the article suggests that some of the bank's largest shareholders may back dimon but vote against other board members. the "wall street journal" says shareholders' support for splitting the rolls is slightly ahead of just 40%, and jpmorgan will hold its annual meeting a week from today. >> this is an interesting story because no one really knows exactly how the vote is going to go, and yet everyone's trying to handicap and see which side this is going to come down on. the "ft" is saying looks likely

he'll keep both. the "wall street journal" saying the split is starting to gain pace, but we only have about 40-some-odd percent of votes in right now or a little bit more than that. the "journal" had the number. so, i think it's probably too early to call, but a lot of people don't like this argument that's come out that's basically a vote of no confidence against jpmorgan. it was you either get jamie dimon as both or you get jamie dimon as ceo. now it is you either have him as both or don't have him at all. >> right. >> and i think a lot of people are afraid of that proposition. >> all or nothing. we recently had the same situation with disney. and even though the push to separate the two roles gained momentum, it still didn't manage -- >> who's the leading director at disney? >> iker's both ceo and chairman. >> if you have a strong director, i don't understand why it's even a decision. >> that's ultimately what shareholders decided and disney's stock is doing well. >> nothing bigger than two strong personalities trying to run a company, going back to

reid and weil trying to run citigroup. i actually go back to ancient rome with co-councils. >> you look very good for being that old. >> thank you, thank you. good history lesson. but i understand in the "ft," they're conflicted because they're sure they do it right. has it worked well in england, in europe? >> no. >> does it seem to be going swimmingly over there where they did this? did it solve all their problems? >> and enron a, there are a lotf examples. >> and look at iger and jamie dimon. can you find two guys that -- you know, you would look high and low to find either one of those guys to run those respective companies. you'd be lucky to find them. >> seems like this would really be addressed when the next ceo takes over. the board said they're not opposed to separating these two roles in the future. >> right. >> it's just for now, they don't want to separate them for jamie dimon because they don't want to lose him. so, i think we likely will see

the next wave of ceos now also holding the chairman role. >> this is girl power, i just heard from mary, from our style person, because of you two guys. i'm behind it. i'm leaning in so big time. >> leaning in? nice, joe, i like that. >> with your pink tie? >> yeah, leaning in. do you have more to read? >> i do. speaking of jpmorgan, the firm is -- >> am i in your way? i think i'm in your way. go ahead. >> don't block my camera space, my air space, joe, come on! >> believe me, i won't! i've seen what happens. >> jpmorgan, the firm is reportedly considering its options on bloomberg following the breach of privacy. meantime, "the journal" also reporting that china's central bank has started looking into potential data confidentiality issues involving bloomberg. the bank of england has blasted the company, calling the abuse abuser information reprehensible. boe coming out, the strongest central bank at this point announcing yesterday that it is launching a coordinated investigation into the spying scandal with other central banks. a bloomberg spokesman tells steve liesman "we regret the bank of england has taken this

position but we'll continue to engage with management and staff to address its concerns." seems like this is just a pile-on situation. of course, if you are a central bank or any sort of government agency, you are going to want to know what, if any, data was ever accessed confidentially by some of these reporters, but some of the news that's come out overnight and throughout yesterday, we're talking about this on air, but a lot of banks are rubbed the wrong way because bloomberg has a trading platform, it's building a credit research and wealth management arm. at what point does this data that bloomberg can access mean it can build something that could compete, if not as strong, then stronger than a lot of its own clients? >> right. that's what appeals to me more than the questions about journalistic ethics, which is kind of an oxymoron. not always, but at times. it's that this -- >> you're looking at me. >> okay, i'll look -- who -- >> oxymoron. >> you know what? if i had a mirror, it would work in terms of journalistic.

but if it is unfair competitively, i mean, you could be getting some proprietary information on how to do all these things from the best people. >> so, you're fascinated about the question of is bloomberg a resource or a rival? >> right. and like the "ap" story i'm not interested in because, you know, i agree with trying to find out how to stop stuff like that. and you know, a couple of the reporters, these guys, they're so pompous and self-righteous and sanctimonious. they get their feathers ruffled, but then the irs story just gives me -- i mean, that's the one that, it really is chilling. that is the notion that the liberal groups, they went right through, just like greece lightning. they went through in two days to get this. and see, i don't know where this leads, although it's definitely not just cincinnati. and i don't where it leads, but who benefited the most? who would benefit the most from this -- >> you know -- >> there's got to be a nice paper trail going up higher than it is right now. >> the initial reports, this is all because the irs needed a way

to screen the flood of applications -- >> yeah, yeah, yeah, i heard that. i heard that. >> they said initially they had a screen for both limiting -- >> i heard a video caused benghazi, too. >> i'm just saying, i'm making one small point, which is that initially they said it was both to limit and expand government. they were going to look at both those, but we have yet to see an example, a single example of a liberal group that got delayed or targeted. >> and what got interesting -- okay, so, we've got these triple scandals, and i don't know how this works out, but we're going to be bogged down. there won't be a lot of new second-term agendas -- >> as opposed to all the great work they were doing before, right? >> well, we'll see. but this is going to bog down some things. >> yeah. >> as they work through this. now i lost my train of thought, where i was going with that. but harwood's here, who might have some info. it went -- john, it went a little higher. it's gone higher than we thought originally but still not anywhere near the point where you think it becomes -- and i'm

talking about the irs. not anywhere near the pennsylvania avenue at this point, but it wasn't just cincinnati, right? there were some people in management positions that knew about this that didn't talk about it and didn't stop it? >> correct, but cincinnati itself isn't that important. cincinnati -- the distinction between cincinnati and washington is sort of a distinction without a difference because it's not like cincinnati is some branch office and they had one in seattle and one in new york and one in miami. that was the office where those determinations were made. so, the boss of the office or the division was headquartered in washington, and the place where the people made the determinations about those organizations was in cincinnati. so, that doesn't matter. what the ig said yesterday was that they interviewed everybody, or a series of players within the agency, and found that nobody -- or by their responses,

nobody outside the irs influenced the criteria that were used or this process as we went along, and the ig report itself was kind of mind-numbingly boring about the back-and-forth between various unit managers over criteria and language. but that's not going to be the last word on this, and congressional committees are going to look into it. and if it went beyond that, i suspect we're going to find out sooner or later. >> this is where i admire the mainstream media, because they smell blood, and it was "washington post" yesterday. i mean, there are guys right now that are, like, that are out there, they'll work 24 hours a day to try to -- they just love dirt, don't they? even though it's one of their guys, they're going to go full bore to try to find out what happened here, aren't they? >> yes, but -- >> are you? are you? >> one of the issues -- >> i know you're aggressively pursuing every possible lead here, right? >> i think one of the issues that is getting people in the press most agitated is the one that you said you didn't care

about, which was the "ap" story. >> i know, but "the journal," oh, my god, "journal," oh, oh. but that has to do with, most americans -- >> you don't identify with this whole journalism thing, right? that's an alien form to you. >> no, i don't want to join a club that would have me. i think you made the point that most americans aren't going to get too animated if they think you're trying to keep them safe, especially after what just happened again. >> no, exactly right. there are different constituencies for these scandals, and benghazi is pretty much limited to conservatives who have a very negative view of obama. the "ap" issue is something that most gets to journalists and their conception of their jobs and their role in american society, some similar -- >> their overinflated view of their role in society. >> but irs is a scandal that has relatability to everybody -- >> my train of thought, john,

and that is that it is going to be hard to get anything done for a while, and then comes obama care and its implementation. isn't the irs a big part of how we gauge who's complying and who's not complying with the mandate? i mean, aren't they going to be the point agency for whether people are complying with the law? >> well, they're going to be the people who grant the tax credits, which are written into law. >> oh, boy. >> for people who are buying insurance or -- >> well, we'd better get this cleaned up before -- there's a lot of problems with that law already. even democrats are worried about how it's going to be implemented. it's a train wreck. one guy's retiring because of it, isn't he? >> retiring because of health care? >> he said that he -- i mean, i read this in different places, but isn't bachus saying, look, this is going to be a nightmare to try and get this done? >> well, he's warned that -- >> and it's the law -- >> -- it could be a train wreck.

that's not why he's retiring. >> i'm connecting the dots. >> no, you shouldn't connect those dots -- >> my dots, my dots. >> but, joe, on the issue of an agenda, that's pretty relevant, because max baucus is engaged with dave camp, the democrat chairman of the house and ways and means committee in the house in trying to get tax reform through this congress over the next several months, which is an element of a potential budget deal, if they can do it. not easy, and all this stuff gets in the way, but -- >> you're not reading "the journal" today. we don't need a budget deal anymore. >> well, that is ridiculous to say we don't need a budget deal. >> say the federal deficit's expected to shrink more quickly. it's going all the way to $600 billion, instead of $1.087 trillion. relax, we're fine. >> yes, it's down, but that's not the -- the short-term deficit's not the problem. >> no, i know, it's entitlement. >> the problem's the long-term deficit. >> i know. >> and even in that cbo report, they say that ten years from now, the deficit will only be

3.5% of gdp, which is much less than it was in the first year of the obama administration, lower than 10%, but -- >> the move has halted deficit reduction talks and given politicians breathing room. you give politicians breathing room and they're going to take it, don't you think? >> it's given them breathing room, but -- and it's delayed the reckoning on the debt limit, but the debt limit's still going to have to be raised. and how do you raise the debt limit? how do you get house republicans in particular to vote for a debt limit increase? you've got to get some deficit reduction, because they've said -- unless they simply throw up their hands and say we don't care about that anymore, forget what we said before, they have said they want dollar for dollar spending reduction for every increase in the debt limit. >> well, it's going to end up between -- >> the need for that spending reduction is what could drive a budget deal. >> between all these scandals and implementing obama care and everything else, and i mean, you figure we'd try to -- going to do immigration, aren't we? i mean, we're going to try and do something. so, you wonder where this takes us, because you know, they move

very slowly. and what is it? what month is it, may? is it may? >> may. >> may. >> just a couple points, joe, on perspective. first of all, remember how quickly attention shifts in washington. >> yeah. >> it wasn't very long ago that all we were talking about was the boston bombing and the aftermath. >> right, right. >> that has now been completely wiped off the front page by the chitchat on these various scandals. >> well, cleveland was in between. >> benghazi is likely to peter out because most people in the public aren't that concerned about it. irs will not. that's going to continue. but you still have a need for both sides to act on immigration reform, republicans politically, democrats because they've promised it, and you've got forces driving a budget deal, too. we're not done with any action in the second term yet. >> all right, john. thank you. we'll see you probably tomorrow, i guess. thanks, john. >> joe, don't take any time off at the end of july. >> no, no way. coming up, the value of a good glass of wine. robert brings us the story of

wealth and what vineyards can tell us about the state of the global economy. then, shares of cisco up almost 20% in the last six months. we'll talk tech ahead of the company's quarterly results. stay tuned. "squawk box" will be right back. we used to live with a bear.

[growl] we'd always have to go everywhere with it. get in the front. we drive. it was so embarrasing that we just wanted to say, well, go away. shoo bear. but we can't really tell bears what to do. moooooommmmmm!!! then one day, it was just gone. mom! [announcer] you are how you sleep. tempur-pedic. welcome back to "squawk

box." becky and aen drew are on assignment today. among my colleagues on the set, man of steel, robert frank, who has a story of wealth for us this morning. it's weird for you to be covering a wealth story, isn't it? >> it is. it's a little weird -- >> not weird? what's your beat? >> i'm going to talk about wealth and wine. >> you're going to whine about people, you're a journalist -- >> i'm not going to whine. i'm going to talk about really good wine. >> oh, all right. >> lots of people collect wine, but only the super rich collect vineyards and rich chinese are snapping up vineyards from bourdeaux to napa. they're looking for good real estate investments. and for wine they can ship back to china, where wine has become hugely popular. one chinese buyer paying $30 million for a chateau in bourdeaux, and a vineyard in napa valley recently sold for $7 million also to chinese inve investo investors. here are two other properties on the market right now. the french chateau with a vineyard, 20 acres, a stunning home here, $5.8 million.

and if you prefer new world wines, here's one in california called domain beau soljel, 69 acres with a mediterranean mansion and a big outdoor kitchen so you can drink all that wine. what's interesting is these chinese buyers don't want people to know back in china that they own the vineyards, because if the chinese people think there's a chinese person behind their french wine, they don't drink it. so, it's a big status thing to have your wine from france. but huge, kind of the way wealth is remaking a lot of the real estate market around the world. this is a corner of the market that was left for dead during the recession and now the chinese are pouring money into it. >> this is a pretty wonky question, but i know when the chinese and other international domains make investments in the u.s. businesses, they have to get approved by the treasury under something called the council of foreign investment in the u.s. does that have to happen? is wine, not a national security concern, of course, but i mean,

is it intellectual property that we want to give away necessarily? >> it's interesting. it is a great question. not in the you'd, but in france, it has sparked an uproar over selling the national heritage, and it is part of national security. i mean, the wine identity, especially in bourdeaux, they're saying look, if the chinese are making wine in bourdeaux, can we still call it french? is it still bourdeaux? and there are politicians that are calling for a ban on chinese buyers for that very reason. >> wow. >> so, again, french identity is a very hard thing -- >> so, they're buying the chateau, but they're not changing the way the wine is made. >> they are. >> they are? >> yeah. >> so, they're taking over operations, getting in there themselves? why change such a good anything. >> they want to make the wines better. they're not going to be able to buy the lafittes, all these big sort of first-growth wineries, so they're buying kind of table wine vineyards that make pretty good wine, but they want to make it better and they want to cater to the chinese market which that's slightly different taste and maybe the labelling so it appeals more to to chinese

buyers. >> it must be pushing up the prices, though. >> that's their hope. and demand for wine in china is just insane. i mean, all of the biggest auctions right now for wine are in hong kong. that's where they sell the most wine in the world. and you know, we're talking $5,000, $6,000 per bottle for some of these wines. they're crazy about wine right now. >> well, it's happy hour right there now, 6:30 p.m.? i mean, they're watching our show, i'm sure. >> aren't there 2 million people there, too? >> a lot of people and -- >> a lot of wine. if everybody has a glass. >> over a million millionaires now in china and growing every day. >> what are the preferences? what is chinese taste in wine? >> generally, it is first and foremost a label thing. they buy by the label. >> pretty labels. >> just like they buy coach handbags and louis vuitton -- >> i've never heard of such a thing. >> yeah, exactly. so, they buy by label. then their tastes tend to be sort of more old world than new world. so, they like that sort of dark, earthy flavor rather than the big fruit that you get in

california. >> and will they be importing these wines to the u.s. as well? >> unlikely. again, there's so much demand for especially french wine in china that they can't fill it. so, you get a great real estate investment. you get to tell your friends in china that you own a french vineyard. and you get a great market for your products. so, you're producing income there as well. >> i would love to try a chinese french wine and see if it tastes any different. >> it's like the pepsi taste test, you know? can you tell what's pepsi, what's diet coke? >> i'd like to be able to taste the difference between french wine, i think. i use -- i don't use vintage years, i use alcohol content typically with wine. >> that's a good measure. >> don't you? >> yeah, gets the job done. >> you know what that leads me to, md 20/20. thunderbird. there are wines that are 20% alcohol, 40 proof, right? >> yeah. >> why would anyone drink anything else? >> what time do you start? >> what's that song, "5:00

somewhere"? no, i'm kidding. i drink very little wine. the red wine gives me the headaches? >> headaches. >> you're a white wine guy. >> that's good. >> i think rose yea. i see joe as more of a rose guy. the pink tie. >> i see why you don't think i drink beer because i have no beer belly. that's why you think i don't drink beer, because it's gone. all right, let's go. >> only michelob ultra. >> exactly. tech giant cisco reports third-quarter results after the bell today. joining us is brian white of topeka. for everyone watching cisco, we saw such a falling off a cliff in terms of corporate tax spending when ibm reported just weeks ago, and that really sent the markets in a tizzy after that. i mean, set us up for why cisco may or may not be -- or ibm may or may not be a proxy for cisco at this point. >> well, i think it's going to be a tough sales quarter and a tough sales outlook. so, you look across you know, our i.t. landscape that we

cover, we cut numbers in 75% of the companies for the june quarter after they reported. if you look at big players like oracle, ibm, companies like f-5, the networking, it's definitely been a tough demand environment. i think what investors are counting on from cisco is that they continue to execute on margins and continue to execute on their go-to-market strategy. so, cisco's no longer the big growth company that we used to think about, which is fine. you know, there may be a eps grower, but it's a value stock. >> but it seems like investors are getting used to it being more of an 8% growth story rather than a 50% growth story, as it maybe was in the late '90s, but when you think about the margins, which you mentioned, i know you think that mansion margins will improve slightly or at least stay the same. i mean, they're at 61%, 62%. the margins are pretty incredible for this company. >> right. >> and everyone thinks they're going to shrink at some point, but they've been able to hold up for the last few quarters. do you really think they'll be able to hold up this quarter and

take us through the quarters to come. >> so, i think there can be upside to our margin forecast, but it will be down sequentially, it will be down year over year in terms of operating margins. so, they've done a lot there. they brought in a coo to really focus on the margin profile about 18 months ago and done has phenomenal job. >> a quick question because i know we have to go, government spending. john chambers said last quarter, the fiscal second quarter, that the sequestration could potentially hurt the bottom line for cisco. have you seen that yet? >> you know, cisco talked about two years ago federal spending slowing. i think it will still be an issue this quarter, for sure. >> right. >> and cisco's stock is really likely to move based on the forecasts for the rest of the year. what do you think the company's outlook will be? >> i think eps can be in line and i expect sales light. this is stock trading at 7 1/2 earnings, ex-cash, 2.7% dividend yelled. value investors just want them to execute. i think that's the key to tonight's earnings. >> brian, thank you for being

here. and ceo john chambers will be our special guest tomorrow morning at 8:40 eastern time. >> early. coming up, the tepper taper. what the bond market makes of the hedge fund investor's comments on "squawk box." stay tuned. ♪ it's only half past 12 my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs.

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i think there will be a natural way to do it, because the numbers are not as big as you think they are into the future because deficit's coming down, and the gap held they can take it down, because you're going to take it down with growth naturally, and you'll want, at some point, the fed will want the interest rates to go up so you won't have overheating. >> that's david tepper in a "squawk box" exclusive yesterday. joining us now, cliff corso of cutwater asset management. a lot of the attention is on

what tepper does when he talks about equities, but he also talked a lot about the fed in relation to equities. but i don't know. i can remember analysts that covered the steel industry back in the '80s and it was like, why don't you cover something else? you're a bond guy? why don't you do something else? >> it's a pretty interesting place. >> you say you're not bullish on yields, but you're bullish on spreads. what can you get now? >> depends what part of the bond market you're talking about. >> you go high yield, you have to worry about rates going up and a credit risk for the company. >> depends how high you think rates are going to go. >> what's the most you can get right now? >> well, if you're in the high yield market, about 5% in the high yield market. >> wow. >> it's sort of an oxymoron, right? high yield when you're getting 5%? >> you won't get rich on it. >> right, high yield. >> we expected an 8% return this year. we got about a 5% total return in the bag already. if one thinks rates are going to head up moderately, which is our view, maybe 50 basis points, there's a negative correlation

for moderate rate moves to spreads in high yield. >> why would it only go up 50 basis points? >> well, look at the reasons why rates are so low. there are three reasons and let's talk about those quickly. >> okay. >> one is the economy is not really on fire, although we think it's recovering. it's still below any level that would heat up inflation, for instance. >> right. >> the second is the fed. and mr. tepper talked a lot about tapering purchases. but you know, i think the fed will probably lag on that. we know how to stop deflation, not inflation, so i think that will be put on that. and the third is how high can rates go before the economy begins to stumble again, right? so, i think this is sort of a natural cap on how high rates can go this year, 50 basis points is a good estimate in our minds. >> they can't really go down 50, though. i guess they could, but it would portend some -- >> we wouldn't want them to. we see from this point forward a 1.90 ten-year -- >> so, if you're not smart and you've had a 25-year bull market that started at 22% interest

rates and it's now 0, doesn't it seem like it's not -- you know, you might want to maybe not have the normal asset allocation where you include bonds to any great extent? >> yeah, i think the question is you need to separate the bond market between rates and spreads and structure, because -- and you're right, to be able to navigate this bond market over the next few years, it's going to take a lot of scale. the big risk we are all aware of is the low-rate environment, but that's really a risk-free rate environment engineered partly by the fed and the other reasons that i talked about. so, there are other structures in the bond market you need to begin to think about. a little bit of credit. i think that's a good place to be right now, but also structures that exhibit positive correlation to rising rates, things like owning rate notes. we talked a lot about them over the weeks and months. >> even apple had two tranches in the bond offering at at floating rate which i think a lot of people were surprised by. >> yes, you'll see a lot more of that because it's a natural hedge against rising rates. as rates rise -- >> why are companies doing that?

>> they're getting an efficient cost-to-financing. i think a lot of companies are swapping that back to fixed rate because i think more treasurers and corporations it's today, all the math is incenting us to borrow like never before. and frankly, you should think about it that way because you've got, you know, to your point, the secular low in bond yields, why wouldn't you want to be a long-dated issuer? you know, like the u.s. treasury should be. >> thank you. cliff, who do i think you are? >> the governor of delaware. >> you're not currently. >> no. i only play him on tv. >> that happened once. he was governcoming up, and cli down, we were like, governor! >> coming up, the story of aig and its road to recovery. it's next. [ male announcer ] i've seen incredible things.

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in the latest installment of our series on "comeback companies," we look at a firm that was once the poster child for the financial crisis, aig. the stock is up 30% this year. mary thompson joins us with that story. mary? >> hey, there, kayla. some say a new era started at aig in august of 2009, when bob ben moesht took over as ceo. since then, the stock has doubled, the company has slimmed down and is now focused on two core businesses, its global property casual business and its domestic life insurance business sun america. here's deutsche bank analyst joshua shanker. >> aig is absolutely thriving with insurance businesses. they're out of the credit

default swap-writing businesses for the most part, and in a few years, they'll be completely at zero for the business and there will be no impact whatsoever. >> those credit default swaps aig wrote, almost taking the company down in 2008. enter the government with a $182 billion bailout aig fully repaid last year. aig selling 27 businesses to repay the loans, the government selling its 92% stake in the firm and netting an almost $23 billion profit. investors netting a 46% profit over the last 12 months. the government exiting improving results of the core casualty business pushing the stock higher. the pnc business is key to aig's future success. aig is improving its underwriting in the unit while being helped by higher rates and its decision to exit certain lines of businesses, including workers compensation. cost cuts also part of the ongoing transformation. but those less bullish on aig say there is still a lot to be done to improve the profitability of the p&c business, which has lagged its

peers. they say right now stocks look rich as the stock declined on the government's withdrawal and any further gains depend on profits in the p&c business and whether they use the capital to pay or buy back a dividend stock. all that will only come after it's officially named a systemically important firm under the federal reserve's auspices or authority, that the fed of course would have to sign off on any dividends and buybacks that aig pushes through. joe, back to you. >> okay, mary thompson. thank you. coming up, interested in traveling to fariaway places but don't want to give up the luxury of the developed world? our next guest has the solution. stay tuned. ♪ ♪

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from thailand -- the small luxury hotel industry is extending its reach to almost every exotic locale you can think of. and the ceo of small luxury hotels of the world. great to see you. >> thank you for having me. >> a segment like this, we need to eventually talk about business and financials, but i don't want to. i want to talk about exotic places where you operate and neat stories. how many different countries? >> about 75 countries. >> 75 different countries, how many properties? >> 520. it depends. every day there's more properties being added throughout the year.

>> none of them are dives where you'd regret going, right? how do you make sure when you're going to countries where the entire country you kind of perceive it as underdeveloped and not a dive, necessarily. >> no, i was going to say, you don't get dives in countries. >> you've got to make sure the quality is consistent, right? you may not get the four seasons, but do you try to make it a four seasons? >> no, they're not cookie cutter type hotels. these are all independently owned by the, you know, the owners that got huge passion with the property. and to make sure we visit them before they come in, we have a whole team of development directors around the world. they go and visit the hotels to see whether they're okay on a 24-hour type inspection. and throughout the years, every 18 months, there's a whole

inspection process. it isn't professional, it's actually customers. it's actually club members, it's people who are actually members of our loyalty program and they travel the world, it's a great job to have. they pay their own airfare and everything. >> there's been a huge sea chge with the wealthy, at least in america, it's no longer about status, it's about memory and moments and travel and experiences. and they want to go places where no one else has gone before. what are the weirdest countries, most unlikely countries you're seeing luxury hotels open in right now? >> well, out of mongolia. >> mongolia? >> we've got a hotel there. >> i didn't think you could get there from here. >> what? from america. >> no, that's an -- >> that's the farthest reaches of the earth. >> the other day i was -- which is a great location, which has been opened up before.

but it's burma or myanmar. >> no kidding? >> yeah. >> a lot of people wouldn't go there for years. >> the only problem is the rivers drying up so you can't go down the river and great cruise into -- >> and you can get good food there? all the services that people in a luxury -- >> well, i think there's a lot of dipping and in and out of luxury. people like to have the, you know, sort of half the rough and tumble. >> for a day. >> well, for a couple of hours, and then they want to get back into their luxurious life. and that's the sort of thing that we really offer. >> what about corporate clientele? it sounds like a catering mainly to a tourist or a luxury traveler who is doing a lot of research, finding an obscure place to go. do you get the business elite going there too? >> of course. what we have, for example, 13

hotels in paris. there's a lot of business people going to paris, hotels in london. all the city centers are catered for. in new york, we just got the refinery joining along with the hotel in irving place. lovely little 14-bedroom hotel. so we have -- we do cater to the corporate club. but interestingly enough, they don't book corporate rates. they still book the leisure rates and they come along and they enjoy themselves. it's all about having a great service all the time. >> and where is the growth coming, though? is it coming from china? the u.s.? >> of the -- >> no, of the customers. >> of the customers, we have 225,000 club members in our organization. >> you've got to come back and i want to talk about your background too. you're the perfect guy for this job. you look like you could be in a

safari outfit. thank you. we appreciate you coming in today. i'm on expert on softball. and tea parties. i'll have more awkward conversations than i'm equipped for, because i'm raising two girls on my own. i'll worry about the economy more than a few times before they're grown. but it's for them, so i've found a way. who matters most to you says the most about you. at massmutual we're owned by our policyowners, and they matter most to us. ready to plan for your future? we'll help you get there.

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are you still bullish? >> sure. yeah. i'm definitely bullish. >> reaction to yesterday's rally sparked right here on "squawk box." >> they better have a shovel to get themselves out of the grave. plus, reinventing the arena. real estate developer and businessman bruce rattner joins us to talk about his plans to give long island's oldest venue a facelift. plus, we talk google's new radio business. >> and the business of art as the second hour of "squawk box" begins right now.

welcome back to "squawk box" on cnbc, i'm kayla tausche along with joe kernan and robert frank. becky and andrew are both on assignment. the futures right now are indicated slightly higher right now. the s&p at an implied open of just shy of one point. the dow would open shy of eight points. and here your morning headlines on this wednesday morning. attorney general eric holder has a date with congress today. he'll appear before the house judiciary committee and will face a question from the monitoring of a.p. phone records to the targeting of conservative groups by the irs, to the government's handling of information related to the boston marathon bombings. google holds the conference in san francisco today, it's expected to unveil a variety of new products and services, more on google and a possible new radio service in just a few minutes.

and boeing senior vice president says the president is planning to fix batteries on all the 787 dreamliners by the end of the month. certainly the latest in the saga over the dreamliner there. and global market news, the bank of japan is offering to pump a massive amount of cash into the tokyo money market. the goal -- >> just going to ad lib. >> okay. the ten-year japanese government bond yield has spiked to the highest level in more than a year. more than three times the size usually offered in a single day. and hedge fund titan david teper sparked a market rally yesterday on "squawk box," he remains very bullish as you saw. >> are you still bullish? >> sure. yeah, i'm definitely bullish. the economy's getting better. autos are better, housing's

better. they can't find enough people to work in housing is the only thing holding it back right now. we have over $500 billion we're going to buy over the next six months and now we have a deficit less than 100 over the next six months. that means we've got $400 billion that has to be made up. so basically, think about this, so that's being taken out of the market, taken out of the bond market, and that $400 billion is now in your hands, my hands and other folks hands. if there's a true taper, there better be a true take. and so guys that are short, they better have a shovel to get themselves out of the grave. >> is this the place to be in the world? >> i think every place is the place to be in the stock market world. you've taken out the risk, the disaster case. >> joining us onset now as our guest host for the hour fortress investment group principal and

director. out of all the things, and you saw yesterday. >> i saw mr. tepper. >> you watch the show because it's incumbent upon you as an investment professional to watch the show. >> it's a great show. >> excellent. >> what did you agree with, what did you disagree with? >> well, i liked his haircut to start. >> it works. >> i think dave's right. the central banks are flooding the markets with liquidity. inflation continues to fall, which leaves the fed feeling fat, dumb and happy. they are not nervous. all right. all your inflation going down, growth going up. it's a perfect storm for them. and so, yeah, they'll talk about tapering and i think they'd like to, but it's not any rush. and so you've got lots of liquidity, decent growth and stock markets going up. >> and it's doable when they need to do it. to go from $800 billion to $5 trillion is doable? >> the moment the fed starts moving, the stock market's going to go down.

>> how much? >> i don't know. a decent bit. the rally's going to end. >> the rally will end and we'll get a correction or a bear market? >> you'll get a correction. >> 10%? >> 15%, 10%. >> 10% or 15%? >> a lot of people will get squeezed in between now and then. it's been a wall of worry market. people haven't bought in yet. that's why the market doesn't go down. >> right. >> once everybody buys in and the fed moves, everyone will sell. if you've been long the whole way and you're making lots of money, it's probably a good time to take your chips off the table. >> now you mean? >> no, once the fed starts moving. >> you've got to handcuff yourself -- >> that's why someone gets a rumor that they're writing a story that tapering might be something that could happen at some point and the market sells off. >> and if we get one piece of light data, we've got industrial production that comes out today, if that's light fixed income, people are going to say, hey,

we're anywhere vnirvana. >> then there was talk of tapering, not tapering, but -- >> reverse. people talking about the reverse of adding more. that's kind of where we're at. >> that was so amazing, wasn't it? >> as long as the inflation indicators are pointing down, the fed is sitting back with a cigar in one hand and bourbon in the other. >> they haven't hit the target on either. >> if you're anticipating a correction, what happens after that? >> well, from where, though? >> from where? >> the market could go a lot higher between now and then. if you look at the european stock markets, the charts are breaking out today. people are going to get squeezed into the markets. there's a lot of cash on the sidelines. >> what's your reaction to the gdp numbers? >> you know, i woke up a little late. >> italy and france in recession, germany, just slightly below. >> as expected. listen, europe's got a growth issue. the ecb is working on it. people think they're behind the curve. i'm not positive. spanish bond yields come down

every day. i think they were 150 points higher than they were today. italian bond yields come down. in a lot of ways, doing what they can do. europe's got a strategy, which is time. time healed the u.s. banks and time will in time heal europe. and i think that's their strategy. and so i don't think they're in a big rush to do anything different. >> you talked a lot about the markets and didn't once mention earnings or what's happening in corporate profits. does that matter? and what is the outlook for things going forward? >> you know, revenue's continuing to go lower and earnings continue to stay okay. i think that's the story here. this is a multiple story, not an earnings story. >> it's been an earnings story. >> you look at the stock market today versus where it was in 2007, right? earnings are higher and there's no alternative investments. >> they haven't gotten any multiple expansion. for four years we thought rates were going to go up. well, rates are headed up and they never did go up. but i still think that's why

we're at 15 and not 20. they're discounting rates going up. you think 50 basis points is all they go up this year? >> i think we'll be in a range the entire year. i do not think ten years could take out 230 this year. >> a time machine go back ten years and say -- i mean you wouldn't believe it. >> no. >> i think rates can go up to what? 230. not 530, not 730, not eight. >> look at what the japanese did last night. their rates which were stunningly low. now they're nervous it's at 30. you know, they came in and did four times the amount of buying they normally do. there's financial market repression going on in every major government bond market. the fed is buying and not just the fed. the chinese took in $250 billion of reserves in the first quarter, 75% of those goes into treasuries. that's like qe-4, you know. everybody's buying treasuries. and so you're holding government bond yields down to try to

generate inflation and, you know, that's the plan. >> but tepper yesterday said he believes when the fed takes the jelly donut away, this is the new metaphor for the punch bowl. he says everyone knows you can survive without the jelly donut. you don't think it'll sustain a huge shock when the fed starts stepping away. what do you think the bond market will look like with regard to treasuries? >> i think, listen, the fed buying certainly has driven treasury yields a lot lower than they would be. you're going to see some selloff. if they're taking the, you know, they're tapering because we've got strong growth and inflation is coming back, yields will be a lot higher. you know, are they 200 basis points higher? no, they're not because i don't see us shockingly coming from an era of deflation into inflation. >> all this new money, who is buying it? and why do you buy new money being issued if it's only set to go down in value later this year? >> the fed is buying it.

the foreign central banks are buying it. and, you know, different insurance companies will buy long and from an asset liability match. >> if you could only buy japan equities or u.s. equities, what would you buy? >> japan. >> you would? >> how sustainable is this nikkei rally? >> we have 13 years of malaise in japan where no one believed in it, no one invested in it. you know, you've got dollar/yen on the move, nikkei on the move. people way underinvested. i was just in japan two, three weeks ago, and the japanese banks were selling equities not buying. they haven't been buying dollar/yen and rarely do the japanese get it right. as a group of investors, you wouldn't say, oh, these guys are going to be the guys that call the top. >> andrew's story yesterday. and it wasn't the sony story with loeb. and it wasn't in japan it wasn't like what you think you're doing, it was like thank you almost. we need this, we need activism,

we need wall street influence. >> i like he hand delivered the letter. >> yeah. >> you can see the cultural influence of doing business in japan. >> hotels are -- >> they might do some structural stuff that we don't here as much as we should, probably. >> i think one of the interesting stories there is that part of the obama administration second trade, it's going to allow the japanese to say, yes, we're going to open our markets. it's not our decision -- >> that sounds like pro business. why would the obama administration do that? >> we're hearing that's going to be one of their thrusts. >> by mistake? >> when you talk about japanese stocks, we had kyle bass on cnbc earlier this year and he said buying the nikkei and buying japanese stocks is basically like picking up dimes in front of a bulldozer. do you agree with that? >> no, i don't.

>> japan's the second largest market cap collector, the third largest economy. they've got a demographic problem, no doubt. but lots of great companies. they've got companies that aren't expensive at this point. it was a wildly depressed market for a long period of time. and they've got a central bank that is trying a quantitative easing program four times the size of ours. and if you look at the playbook of u.s. quantitative easing and move it to the japanese story, dividend stocks are going to do well there. the exporters with dollar/yen moving from now 102, by the end of the year, 115, 120. >> given we have -- you talked about the exports doing well there. you've got weakness in china which is affecting commodity prices and exports, weakness in europe, germany now suffering along with france and some of the peripherals, isn't that an export problem for japan? >> well, it certainly is, but it's a relative gain in japan. listen, i think if -- to me the

biggest worries are the bricks, right? they're going to be a crumby story for a while. and it might be a five-year, you know, developed markets over emerging markets. >> is there any emerging market you like? brazil? >> i hate brazil. >> you hate brazil? >> they've got stagflation, all kinds of problems. it's gotten way too expensive to do business in brazil. they've got labor market inflation, tight labor market, don't have enough supply. >> there's not one you like? >> india a little bit. >> okay. >> just because it had done so poorly for so long and making some marginal progress as the price of gold goes down and the price of oil goes down, you know, helps their current situation. >> all right. i don't know about the wrestling thing between you two. i don't know. >> he actually knows how to wrestle. >> but you're the man of steel. >> got the moves.

>> didn't bring any cryptonite. >> good job, stay away. up next, google jumping into the internet radio business. a company looking to offer a music service that would compete with spodify and pandora. and oil back below $94 after a report suggests production will help meet the growth of global demand. we're watching the shares of deere this morning, a company that posted better than expected earnings and revenue. positive conditions in a global farm economy. le announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge.

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check out deere, which the current quarter wasn't the problem. it wasn't this half. it was the upcoming half that is giving you that $10 selloff in the stock that maybe we didn't mention the second half. despite second quarter equipment sales, second quarter topping the growth forecast. the company cut its growth forecast to 5% from an increase of 6% for the year. because of a stronger dollar and lingering economic concerns in many parts of the world. it also anticipates just a 3% sales gain, which is below expectations, as well. so the second quarter was okay,

but cautious comments about the second half definitely throwing. i'm looking at my screen, 9201 to 92.90. i'm confounded by what's happening with deere. i wonder if it really -- when you see something like that, what is it? what do you think? i mean, did it trade down ten if it's now 92? is it really anxious seller? >> sometimes it's a fat finger mistake that gets corrected later or sometimes someone that panics. >> we'll be watching. we're going to be watching. you know how you. i do that to you sometimes. >> you don't trust me. >> after the comment the market backed off a little and immediately tweeting about my crappy call. and it's up 35. >> i'm never going to live that

down. >> invests will be waiting to hear from cisco today after the bell. the company will report quarterly results with investors paying close attention to what ceo john chambers has to say about business and the economy. many have reported weak results after a pullback in government spending. john will be joining us to discuss the results at 8:40 eastern. he's iconic. >> he's a great interview. >> iconic. >> totally. >> been there from the beginning and how many acquisitions? i'd say 500, maybe, in his tenure. >> i don't know the exact number, but a lot and always has great perspective on the economy, where things are going, technology, it would be a great interview. >> you'll be watching? >> of course. i'll be here watching.

if she was in l.a., you wouldn't catch her. >> yeah, right. >> oh, in l.a., i'd be watching too. >> you would. >> google discussing a new streaming service. the service would compete with spodify. we know it has been in talks with the music labels and is looking to launch the. looking to improve the entertainment offers and step up competition with apple. so this move would make sense for google. apple doesn't yet offer a streaming music service, but it is working on one similar to pando pandora. its negotiations have been ongoing for months and months now, but still no launch date set yet. streaming music is a fast-growing category. private spodify was name one of cnbc's disrupter 50, and it has

18 million users of the free ad supported service and 6 billion paying a monthly fee. pandora has more than 200 million registered users. amazon and microsoft are looking for a piece of the music business. a subscription service similar to spodify. now, the reason all these companies are jumping on the music bandwagon is not because of the revenue from individual song downloads but rather the potential for mobile ad revenue, which is a fast-growing market and to certain extent, the app people use to listen to their music owns their phone's home screen for a good number of hours per day. that's valuable real estate. >> one question i have, i'll use pandora and notice all the songs i used to like, they're gone.

is that because of a licensing agreement or expiration dates? >> i don't know of any changes in the licensing agreements. i do know that spodify is about 20 million plus songs, so many songs you shouldn't run out of stuff to listen to. >> unless you like obscure jazz stuff like myself. >> i'll tell you my beef with pandora, i was listening to it on the way in this morning, it was playing the songs i already had in my itunes library. and i thought, suspect there a way you can see what i already own and play stuff that's different than that? because the reason i'm going not to my own library but to pandora is to listen to new stuff i don't already own. >> they're good at predicting stuff you like if they're bringing back the songs. >> true. >> i think that would be a great functionality. they haven't figured that out yet. they are trying to figure out songs similar to what you choose, the channels you like and hopefully you're listening to their ads. >> why doesn't someone just buy spodify? >> no one has made a purchase

yet. >> why don't you talk about your art thing. you're not going to do it now? >> we can do it later. and you're going to be amazed at this picture. >> did you see that? >> yeah. the pastry chef. >> my favorite. it's incredible. >> that was a great shot. >> bizarre stuff, chicken and -- >> yeah. >> so cool. >> he was cool. he was punked before it was cool to be punked. still to come this morning, minority owner of the brooklyn nets, bruce rattner, see if we can get front row seats when he comes in. ar. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪

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welcome back to "squawk box" on this wednesday morning. i want to show you market boards. first thing we'll look at is gold. 1,410, 1% into the red. the dollar also is moving pretty steadily in the premarket. you'll see u.s. versus the yen up .33%, 102.66, the euro dollar down very slightly, just .5%. we'll hear what traders are saying about gold and currencies, your tools of the trade coming up next. [ male announcer ] here at optionsxpress, our clients really seem

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welcome back to "squawk box," shy of 7:30 on this wednesday morning. it's a busy day for economic data. we're an hour away from the

april consumer price index. that would equal the drop registered in march. we'll also get industrial production and home builder sentiment today. and actavis has reportedly rejected a $14 billion takeover bid. offering $120 per share for actavis, but was rebuffed. they'd been discussing itself for more than $13 billion, but those talks, too, have since ended. and get set for another round of power ball fever, the jackpot now up to $360. that would be the third largest power ball payout on record. the drawing set for tonight. we're also watching currencies this morning. $1 hitting another multi-year high, gold prices down for the fifth straight day, just above $1,400 an ounce. mark chandler at brown brothers, and money news ultimate wealth report. thanks so much for being with

us. shawn, i'll start with you. where do you think the dollar can go versus the yen right here? it seems the yen is driving this, especially with the news out on the government bond buying program this morning. >> yeah, i think the dollar/yen can continue to rise. the latest g7 meeting gave the green light for the yen to be, you know, further devalued. also the dollar index is breaking near term resistance. could go from the 83s to the 84s, possibly the 85 where it would reach long-term resistance. i think dollar/yen could go higher. the dollar broadly, as well, which also could be a bit bearish for metals like gold and silver. >> and mark, what are the technical levels you're watching there? >> i was watching on the dollar, i was thinking the dollar/yen could go up to 105. everybody knows the yen's been weakening as and the g7 gave us the blessings. i think the euro is interesting, as well. even though they seem to be getting their act together in

terms of moving back on austerity, we see the euro weakening. and looking like we could break down pretty sharply. we have a 120 for the year end target and i'm afraid that might be on the conservative side. >> so what might be a less conservative estimate there? especially with the news out this morning about the recession in france and italy and germany seeing weakness here. could we see a bigger slide in the euro? >> well, i think we could go down towards -- i'm looking for 120 by the end of the year, but i think we could see 115 on an overshoot. i think the fundamentals are weaker than they are in the u.s. and later this week, when we get the weekly initial jobless claims, also, one of the big knocks on the u.s. has been the large budget deficit and that is falling faster than most people expected. i think that the fundamentals in the u.s. make the u.s. look best out of the bad bunch. >> shawn, you mentioned golderier. we see it still hovering above the 1,400 mark. a lot of people have been piling into gold especially with the uncertainty over the deficit. now we've gotten some of those

numbers out shrinking as a percentage of gdp. do you think that gold will stay above those levels? do you think it starts declining from here? >> i think the long-term prospects for gold are good, but near term, i do see downside pressure still happening in gold. gold had broken a year and a half long rectangle pattern. the price target there takes that down to about $1,200 to $1,250 an ounce. i do see further downside. from there, though, i think we will start to rebuild and see gold approach the $1,400, $1,500 level. which is closer to where the average break even prices are for production. >> i think this really shows us too is that gold is not what many people claim it to be, some kind of great protection. gold is well off the peak not only in nominal terms, but inflation adjusted terms. not often sold as by many people. >> i personally think gold is toast.

when you think about it, if you were a gold bull and you got quantitative easing and qe-7 -- nothing did it. we peaked out at 1900. >> that's why it was at 1900, the anticipation of all of this. >> if you run the gold chart over the nasdaq chart over the nikkei chart, once bubbles pop, they go all the way down. >> you say there could be some resistance at 1,250, when do you think we get there? >> support. >> yeah, i think there could be support around those levels. those are minimum price targets, they can go down further than that. the reason i think it'll bounce back is if you're a gold miner, you're not a charity, you're not going to dig this stuff out of the ground for free or for an extended period of loss. if you see gold's going to be down for any length of realtime, you're going to slow down production, possibly halt production until prices come back up. this happened with natural gas, other commodities and it could happen with gold.

>> gold wasn't up just on supply and demand. >> it was up on -- >> the story of -- it was such a compelling story. all the gold ever mined. a 30-meter cube and no one had it. bubbles come around spectacular good stories that are believable. once everybody believes it, there was no one else to buy. >> and the miners didn't follow. >> the stock market told you something that the etf market, you know, the gold etf volume just kept picking up and now it's on the reverse. and so it wouldn't shock me to see gold back at 500. >> thanks, guys, both for being with us. >> thank you. >> art is next. >> what's your e-mail? you know what happens when you tell these people that own gold it's going to 500. what's your e-mail? >> they can use my g-mail. >> they'll find it. bruce rattner on his plans to reinvent the nassau coliseum on long island.

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the team that built barclay center in brooklyn, wants to give an aging arena a facelift. bruce rattner, the man that delivered the barclay's center. founder and executive chairman rattner companies, a new york-based real estate development company. he's also a minority owner of the brooklyn nets. you know, it's -- talk about things coming together. and being at the right place at the right time. i'm from new jersey and there's a little bit of with the nets leaving. but brooklyn needed a team and

barclay's center as a venue. it's really exciting. >> it's very exciting. >> yeah. >> more exciting than i thought it would be. i knew it would be great, never thought it would be this great. become an icon over night. it's amazing. >> amazing. >> it has to do with everything, the team, the architecture, brooklyn, it all really did come together in the kind of way that i think was almost unexpected by most people. i knew it would be special, this special i didn't expect. >> love him or hate him, spike, he's like a lightning rod. and i can't believe -- i guess it'll never change because he's been a long-time knicks fan. but it makes for the beginnings of what could be a great inner city rivalry. >> it's going to be a great rivalry. >> there's plenty of people in new york to support both sides. it's almost like the subway series. >> it is. it goes back to the dodgers, yankees, giants. there's a whole history in new york of sports rivalry. and we haven't had it. you had the mets and yankees, but not the kind of rivalry that you have with a brooklyn name in

front of you. >> the other team has a chance of winning. >> also the value of competition. madison square garden, you walk in there, it's like walking back to 1978, when i was a little kid. it hasn't changed. and you drive by and go in the barclay's center, it's like a new era, isn't it important we have competition in this market for big events in new york city? >> this is an area that's 16 million people, the tri-state area. you have to have competition. and if you think about it, having basically one arena can't serve everybody. and that's what this created. and, of course, the brand is critical. the brooklyn brand, the idea of an arena, which is iconic looking, that's important too. everything is new and up to date on our arena and that's what makes a difference. >> it's remarkable looking at the success of live events. the ongoing success despite all this competition for people's time. are you surprised by the fact that live supporting events and concerts continue to draw such premium prices?

>> no, i'm not at all surprised. and i realized that for a long time. it is all about content. content, content, content. whether it be sports or content or concerts and live is critical. so i realize that and having an arena is a very special thing because i use the word fortress. it's fortress real estate in a way. meaning it is something that can't be duplicated easily. in almost half a century, only the second arena after msg in an area this large. your point about content is absolutely correct, and live content. >> staples center and all this, that whole premise, you were selling a company, sounded like it was steven ross was interested. why didn't that succeed? >> i think the major issue is price. i think it is a tremendous asset and the ownership aspect of it. i don't think so much the management.

the concept of all types of entertainment around the arena as a central focus. it's a quality company, quality assets. it's just a price issue. >> what's it really worth to you? >> i didn't see that offering, so i can't tell you. i will say arenas today because they are in some sense franchises and live content. my guess is that they sell in the reit category. they're like reits almost. >> so tell us about, are you going to win this thing in nassau? >> we don't do stuff unless we try to win. that's a word that's a very important word. >> why do you want to win? the veterans memorial coliseum. in uniondale, right? needs how much work? >> a lot of work. and the question is, why do we want it? what we've been talking about. live content. you have nassau and suffolk county, 3 million people. and some of the richest counties in the country. >> amazing. >> the wealth is large. but even so, you've got 3 million people and you can't duplicate an arena location. so now you have an arena that's

old and tired and you've got to change it. you've got to make it look spectacular on the outside and the inside. >> i bet there's a lot of believers out there. >> sorry? >> a lot of believers. >> justin bieber. >> that was -- >> that didn't come out. that was me that tackled him. >> i thought you were talking about a religious convention. a lot of justin bieber, a lot of everything. everything from lacrosse to hockey to basketball. boxing, whatever it is. and in a way what we're doing out there and plan to do is really critical. it's going to be the center of really the live content. >> will they see what you've done and say let's let rattner do it? >> i don't think -- it's going to be to some extent money because the county has seen better days in terms of money. but rechanging the branding. just the whole way it looks, the

content. we have as our partners, live nation. >> you rebranded brooklyn. >> we rebranded brooklyn. >> my brother moved to brooklyn. we were all manhattan people, now he's in brooklyn. >> we've been helpful, i think, but that borough is a great borough for really so many years. we just help bring it back. among a lot of people. >> you brought jay-z to your final bid submission. do you think he'll give you an edge? >> well, jay-z has been my partner in the basketball team and the arena since the day we started, that's been ten years. jay-z is from brooklyn and when i took him out to where the arena would be ten years ago, he stuck out his hand and i stuck out my hand in less than an hour we made a partnership. he's a good thinker about marketing and branding and he's part of this team. and it's really very exciting. not only live nation, finance ing and you have jay-z.

i call it the dream team. >> you know jay-z? >> i do, yes. >> why did beyonce cancel that concert? >> i don't know. i'm not sure why. >> he knows. >> come on. >> i don't know. >> huh? >> that kind of stuff, that detail i don't know, you know. i know the people, you know, the people are great people. >> how much money is it going to cost to refit that stadium? >> well, the whole thing is about $230 million. >> wow. >> that's the inside, the outside, and it also includes doing restaurants, doing amphitheat amphitheater, those uses going well with an arena. and it's pretty special to have. and i look at it as an asset class, not just as an arena in the traditional way. we look at it completely differently than i think people have looked at it before. >> you could bring jay-z on if you came back? >> absolutely. >> bring him here? >> that's up to him. >> you said absolutely.

>> no, absolutely at the arena again. >> why couldn't you bring him here on the ultimate financial show? he's worth hundreds of millions of dollars. >> we'd have to ask him, i don't know. >> will you ask him for us? >> i will do that. >> you can come back either way. >> you sure either way? >> especially now. >> we'll ask him and see what he says. >> thank you, bruce, and good luck. >> thank you, thank you. >> do you find out in june or july? >> i'll see you soon at nassau and barclays center. >> you've got some of those floor seats at barclays? >> they're very cheap, joe, somewhere like $3,000 for the front row. no problem, right? >> you own the place. >> well, you could use them now and then. i'm a guy from ohio, you know. >> if i did this, it wouldn't be on the air. >> they couldn't miss you, though. they'd recognize you. all right. sales at the contemporary auction sotheby's last night.

totaled $293 million, that's part of more than $1 billion that the wealthy are going to spend on art over the past two weeks. the sale was led by the one mont six which sold for $43 million. it's basically a big canvas of blue with a white line in the middle. there it is. look at that. takes a lot of talent to do that. >> i like that -- rothco mixed his colors. five bidders competed for this piece. the winner was an italian bidder over the phone. it might have been prada or someone else from italy bidding there. the second place with -- >> what are you alex trebek? what was it? >> i spent way too much time. >> sold for $37 million. that was a record for any living

artist. richter very hot among the hedge fund guys. also selling was a sculpture by eve klein. i think more than $20 million. and i think what's also interesting here are the sellers. this barnette newman used to be own by paul allen. now a seller in this market. >> you going to pronounce this one? >> i don't see it on the prompter anymore. and then, by the way, that richter owned by the family that bought that for $3 million in 1998 just sold for more than $30 million. so they were good sellers. >> correct. >> that painting used to hang in the chicago hyatt, now somebody bought it for $37 million. final thoughts from our guest host this hour, and in the next hour, david tepper sparking a rally in the markets right here on "squawk box" saying investors shouldn't fear the fed and the tapering of the asset purchase program. we hear from the director of

economic policy studies at the american enterprise institute on the tepper theory and how the fed's pullback may play out. ♪ ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh ♪ [ male announcer ] the parking lot helps

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welcome back to "squawk box." off camera during that segment, you were talking about the art, and you think that's a bubble. so you called gold a previous bubble. you think art is a bubble. >> art is 100% a bubble. it has all the markings of a

bubble. but the new doubled in price. prices have gone parabolic. it's now $80,000 and the expensive art has gotten crazy. one of the marks of a bubble, you look at the internet. that can't be worth $3 billion or some of the, you know, the crazy internet start-ups that have the wild valuations. now you can kind of think the same thing. okay,ky buy that painting or build a hospital. you know. >> and it's really about the supply of money, right? it's not about whether it's a better artist, where is the money coming from for the art market? >> the fed has this policy of trickle down. it's a trickle down monetary policy, helping the rich get richer and the rich are getting tremendously richer because asset prices are going up around the world. what the hope there is as the wealth effect kicks in and you spend more money and it generates growth of the economy. we haven't seen that part in a dramatic sense yet. so the middle class is still

suffering, the working class is really suffering, but the wealthy are getting wealthy. and art has been the tip of that spear. >> and all the wealth from china and russia. >> you also have the illegal money or the dirty money, the money landerin erinlaundering. and that's what's really giving this turbo charge to the art market. all bubbles pop, and they come down a lot further than people think. these $90 million paintings, they might be worth $8 million some day. >> you don't have -- >> you've got a big negative cash flow. and what happens in bubbles, as long as the price keeps going up, people love it. as soon as price starts going down, people start saying, oh, god, because it's negative cash flow, right, you've got to pay insurance, storage costs. and, you know, some of this is bought on leverage. and when prices go down, they go down fast. >> and there's so little transparency in the market

either. you never know who is self-dealing. who has a lot of inventory. shouldn't this be a better regulated market? >> you want to regulate everything, don't you? >> no, we want to protect rich people. >> you said you would short the market if you could, but you can't if you have art to sell. >> you don't try to pick the top of bubbles, but once it cracks, when you see the real cracks in it, then you can sell. and i think when inflation comes back, when we have inflation, these inflation hedges like gold's already showed you the way. >> and you think the gold bubble, it's burst. >> gold bubble's burst. it will go lower. and so, i kind of think the same will happen with art at one point. i'm not short now, i don't think you want to try to -- when things are selling for $43 million for an artist i never heard of.

that shows my knowledge of art. >> no, look, his main claim to fame is he influenced other artists. you're digging deep there. >> unfortunately, we're now seeing these types of price tags associated with him. >> right. >> well, it was great to have you. wrestling back in the olympics yet? >> today, live on msnbc at 3:30. we've got the iranians versus the u.s. team and the russians versus the u.s. also at 6:00. >> do they bring in the mud for this? >> jell-o? >> after boston, we've had our jell-o and mud scanned and -- >> this is not the wrestling where they throw chairs and have the big gold belts. >> no, we'll have a few of the guys in the audience for effect. >> you're making a good push to keep wrestling in the olympics. >> we're working hard on it. >> countries wouldn't have anyone to send if it wasn't for wrestling. what would bulgaria do?

it exists in 173 countries right now. there's 173 countries in the international federation. >> we've got to go. thank you. >> thank you, guys. coming up, we'll welcome the thoughts on david tepper comments and much more. the futures right now, quick look, are indicated lower. we'll be right back. [ penélope ] i found the best cafe in the world. nespresso. where there is an espresso to match my every mood. ♪ where just one touch creates the perfect coffee. where every cappuccino and latte is made at home. and where i can have exactly what i desire.

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hedge fund heavy weight making a bullish kau isish call market saying don't fear what happens when the fed starts tapering. >> there better be a true taper, or else you're back in the last half of '99. and so guys that are short, they better have a shovel to get themselves out of the grave. >> should investors take notice? >> we'll ask robert wolf and aei economist. >> game changers in the financial services industry, our disruptor 50 series starting with lower fees. a windfall from the death tax. several states collected millions more from estate taxes than they expected. the third hour of "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with kayla, julia boorstin and robert frank, man of steel, becky quick and aaron ross sorkin are off today. the dow coming off a record 18 straight gain on a tuesday. the industrials, the transports, the s&p 500, and russell 2000 all closing record highs. i think it has something to do with mondays. you know. >> no one likes mondays. >> right. >> you could probably start recycling these scripts, though, the s&p, the dow, the russell 2000. >> leaving it in the master rundown. >> that's right. >> that you can use every day. >> you're welcome, whoever's listening.

a number of key releases at 8:30 eastern, the april price index. headline ppi seen falling by .6%, the core component expected to rise by .1%. and later in the morning, with get capacity utilization and national association of home builders survey all today on the calendar. and france sliding into recession, contracting by .2% in the first quarter. continuing the downturn that began in the fourth quarter of last year. germany avoiding recession after a sharp contraction in the fourth quarter of last year. the german economy grew by .1% in europe's first quarter. the third largest economy, italy, that is reported the seventh consecutive quarter of decline. european equities at this hour were slightly mixed and they still are. the ftse up about nine points, that's .1%. the cac in france up by about four points and dax in germany down slightly by about two points. german investors no the liking

what they see. in earnings news today, we've been watching shares of deere, the company posting better than expected earnings and revenues. among the catalyst, the ceo cites positive conditions in the economy. we have joe digging around investigative journalism on what exactly that fat finger trade was. >> yeah. i don't know why it was down ten, but it is now down, close of 9377, and that is a true market. 90.25 to 90.40. >> macy's shares, the retailer earning 55 cents a share, that's a 2-cent beat. revenues in line with expectation. in the premarket up by about 1.33%. yesterday on "squawk box," david tepper made the case for being bullish about the markets and the economy. >> so overwhelming. i mean, the economy's getting better, autos are better, housing's better, it's a continuous improvement. they can't find enough people to

work in housing is the only thing holding it back right now. because of budget cuts, growth in the economy and also because of fannie mae paying back money to the government and freddie mac soon to pay back money to the government. the deficit over the next six months is shrinking massively. very similar to an early stage economy. we don't have inflation, overcapacity utilization is low so you have room there. labor and unemployment's high, you have room there. there's no inflation on the horizon. we have a little bit of room to run. >> i'm sorry, robert. but here now to weigh in, you look good. you've lost -- right? >> i've lost and then i gained, but i appreciate you saying that. >> yeah. >> you've got to have a lot of big jackets. >> guest host robert wolf, former ubs, america's chairman, 32 advisers. also director of the economic policy studies at the american enterprise institute. i could start this with kevin here in so many different political ways, robert, as the

president's favorite banker, former banker, i guess. are you a banker anymore? >> sure, i still have my license. you have a deal for me, you bring it to me. >> tepper made $2.2 billion last year. >> i've known david for decades, he's the best. >> the whole fairness thing, if you've made a certain amount of money, i think you should stop. >> he's the president, so he's your guy too. >> i don't play golf with him. i don't -- do you agree with what he said? >> first of all, other than being a patriot, i try to agree with him as much as i can. i agree that we should start tapering the fed's easing monetary policy and start doing that sooner rather than later. i also agree that i think the stock market will continue to run at least for the second quarter. >> really? >> because i think that gdp in the second quarter will be very good. housing's good, you've got

manufacturing retail sales. >> good compared to where it's been. >> correct. >> 3%? >> i think you could see 3%. i think it's going to more to the ups than the downs and decent employment and the tax thing's a little behind us. the second half of the year, i'm a little more nervous because usually with the good stock market, you see good m&a activity. we've seen little m&a activity and not a big pipeline. organic growth is a little slow. so a lot of the run has been one mutual funds have had huge inflows. and the fed has forced your hand into the risk trade. >> what's the office being audited by the irs. do you not pay any taxes? do they just send you? >> thank you note. >> refund, refund. >> kevin, how many times have you been on? i'm surprised you're out -- >> you remember i was at ubs, right? i don't talk about -- >> that's right. >> the irs. >> you've got that lot of tax

loss carryover. >> i'm not saying anything. >> you're at the american enterprise institute. let's do it that way. do we deserve the market we're seeing right now, kevin? >> yeah, i think that basically there's been a hippopotamus on the economy for a few years. there's a lot of positive momentum and positive reinforcement going on. the economy gets better, market celebrates, the economy gets better again and deficits go down. tepper was right to point out that deficits will go down more from here. the history of deficit is they tend to understate it. if you forecast it up three, up three, up three, then if you jack your forecast down to minus one then you look like a total goon. what the cbo will say is up three, up three, up three, they tend to understate their revisions, what we saw yesterday was probably about half of the revision that they really would've made if they went all in and did the fully rational

forecast. probably throughout the rest of the year, you're going to see bigger reductions in the deficits about three months from now. and that's going to have a good effect on markets, it's going to help the fed have some space to ease up on quantitative easing and so on. >> do you share robert's concerns about the impact of the sequester and second half of the year? >> no, i do not. we're losing about 1.5% of gdp growth. about 1% is the tax hike at the end of the year and half of that is the sequester. so far, we've overpowered that with the wealth effect and the absence of the hippopotamus, and i think that'll continue. >> we talk about the wealth effect. and a lot of the reason the d f deficit is coming down, the income from the wealth wealthy. they stacked so much income into last year to avoid the tax hikes in 2013, that may not be repeated. if government thinks those revenues are going to be repeated next year, they're going to be in for a big

downside surprise. isn't that a risk? >> yeah, it's not only a risk, it's something we know is going to happen. it happened last time we had a big change in rates. couple of things. one, people realized income last year in the lower rate. this year, now they're going to defer a lot more whenever they can. that's going to affect the numbers next year in the tax season next year maybe around march or april of next year. between now and then, sure there'll be some stuff with withholding and so on. i expect you're going to continue to see reduced deficits through the end of the year. >> kevin, it's interesting to see the deficit referred to as gdp when the gdp is going up. do you think that's a misleading number? how do you interpret that? >> no, because it's really you want to know how much you've got to pay your monthly bill as compared to how much income you have. i think it's right to put it against gdp, you're right, it can give you a weird look at the trend, you could do nothing, but then if gdp goes up, the deficit goes down.

i think all in if we run the forecast out, you're looking at deficits to gdp getting darn close to the historical average. i think the other thing is that means congress is probably not going to act of anything much this year. and that's good news for markets too, right? >> yeah. depends on where you're sitting. liesman had a good quote. where you stand depends on where you sit, what side of the aisle. >> the markets would love to have corporate tax reform. >> that's true. >> and have a real discussion on repatriation, and if we have a deaf sigs on pace to be on 3% of gdp the next two years, then there's no real fight to be had that's necessary. >> and speaking of tax reform, i understand you want to abolish the estate tax? >> i would like to abolish the estate tax. we've been paying 50% plus every year for -- >> saying i'm willing to pay more income taxes, but get rid of the estate tax. what's your argument? >> my only argument is hopefully it's many years from today, but

when i pass away, i'd like to be able to give it to my family and fiphilanthropy and all the thin we want to do. >> doesn't that create dynasties? >> i'd like to think the wealthy are giving back and continuing philanthropically. and i think when we pass away, we should be able to pass it on. >> and, being at the aei. >> did you say you want to agree with me? >> you were agreeing with me on this one. >> you heard that on cnbc live. >> yeah, you're over on my side. >> i just -- >> you think the president agrees with you on this? >> i don't think. >> you're lucky you're not a banker. next year you will be audited. kevin, what was i going to say. yeah, when you think about property rights, and if you've paid taxes on it once and then the idea that you're only sort of renting your property while you're alive and then it like remits back to, you know, takes

a village or something as if it's a zero sum game and there's only so much in the world that's there. so you've used yours. now, none of that stuff can you consistently plan. there's a reason that property rights are -- do so well in terms of protecting for us. and because we all know about the tragedy of the commons. the minute you don't own something, you don't take care of it. don't they think this doesn't make sense? >> right, and it's safer for me to talk about this because i was never president obama's favorite anything. and we're both already getting audited too, i think. so i think on the estate tax. the bottom line is if you want to redistribute, you should do it through the income tax by putting a big fine on wealth. >> just tell them what you're going to do and do it. it's okay. >> and the best thing, i think, is if we move toward having a tax on consumption instead of a tax on income. suppose we finance with a value added tax.

that's a big tax on wealth. it's only useful if you go buy something. >> there's no estate tax, but you get the money because wherever people eat something, you get a vat from the money they spend. we get a vat on the yacht. >> there's no country that has over 70% of the gdp by consumption. so it would be -- that would be very interesting. >> you don't want to do both income and -- >> no. >> kevin, thank you. >> thank you, joe. >> we need you, that's what i said last time you were on. i'm glad you're back around and you answered your phone. robert wolf will be with us for the rest of the hour. coming up, looking for the next big innovations in tech. what's in the pipeline for apple and facebook? and later, tech innovation turns to the financial services industry. we'll unveil the top game changers in banking as we continue our disrupter 50 series. don't miss "squawk box" tomorrow. john chambers will be our special guest following the company's earnings. n a for a fi.

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welcome back. yesterday on "squawk box," david

tepper made comments about apple. >> we sold our position in apple. we bought a little bit, you know, below 400 just a little bit. i along with everybody else is waiting to hear what they have to say as far as do they have something revolutionary on the horizon? revolutionary? yeah, or do they have something evolutionary? if you don't have steve jobs around to do the revolutionary thing, do the evolutionary thing. if they don't do either, we've got a problem. >> it's also big week as we are just days away from the anniversary of the facebook ipo. apple, facebook, and a lot more, is kevin landis, the cio of the firsthand funds. thanks for joining me today. >> thanks for having me. >> what are your expectations? >> well, the thing to remind yourself, this has been a great story now for almost ten years, right? three products. ipod, iphone, ipad.

they don't have to pull a rabbit out of the hat every week to satisfy us. the two things in the works are sort of a watch, wearable technology type of thing. not really a watch, it'll probably go on your wrist and apple tv. so if either one of those is a big hit, then, great. >> is there any indication any of these are in the pipeline for the near term? >> well, we've been talking about them and anticipating for a long time. it's hard to have a world-changing product like that. and i think mr. tepper's point was right, you don't have to change the world with every new product to be successful. who would you rather be right now than apple? even if they never have another great ipad, that's fine. >> looking at the trend in apple stock, what do you think? >> i like apple here. i think it's come off, you know, it's peaked by north of 20%, and i think it seems that a lot of smart investors are getting in at the 400-ish range. they have a lot of cash onhand.

you know, i think they will continue to kind of be the rainmaker in the tech space. >> you want to see more, bigger clearer screens. do you think they need to launch a game changer? the next ipad? >> i'm not a tech savvy guy, but i love going in and using their product. >> he said to make a cheap phone and expand to everyone. some people are not sure that's the way to do it. >> you know, it's a big planet out there, right. $7 billion people, close to 2 billion cell phones shipped every year. it's about making the right move. the best thing jobs said to tim cook in his late days was don't ask what i would do, ask what you ought to do. which means if tim cook wants to change his strategy a little bit, that's perfectly fine. >> but doing a low-priced phone would be counter to apple's strategy so far. >> yes, but, remember, go way back in history when the mac was expensive and the pc started to take all the market share, the big mistake was sticking with the high-priced product. and i don't think anyone there has forgotten that. >> you don't need a low-priced

phone here in the developed world where you already have huge market saturation with the iphone. i was down in argentina a month ago, and a whole lot of the petty crime concerned people who were mugging people with iphones that had come from other places. there's a black market for iphones in afghanistan among all places. i think you could probably -- you could probably find a market for a cheaper phone. >> right. >> and, you know, places farther afield, do you think they would consider a strategy like that? >> let's remind ourselves of something, the ipad, that's a cheaper pc. think about this, the hottest product category before the ipad came out were these netbooks and they were just little -- >> never hear about netbooks anymore. >> yeah. gone, right? and the ipad's fundamentally much cheaper than that. yeah, you can make a lot of money, you've got to hit it right. >> i have to tell you, rfk foundation just auctioned off tim cook for over $600,000 for a 30-minute coffee. i want to thank --

>> that was 30 to 60 minutes. >> the first winning bid, as i understand, was reported to be traced to a fraudulent credit card use, is that correct? >> i don't know. maybe someone stole a credit card just to have coffee, right. >> ethel made the call and you don't say no to ethel kennedy. >> switching gears over to facebook, coming up, one year-anniversary of the ipo, what will it take to get above the ipo price? >> forget about the ipo price, the price is $31.50, that's the price that matters, that's our cost. >> that's your cost. >> it's all in how you frame these things. so if you're the winklevoss twins and sold out in the settlement a few years ago, looks high-priced already. what matters is they've got 1 billion users, now it's will they get up from their desk and still using it on mobile, that's fine. they're trying to build the next great tech franchise. >> does twitter pose a big

threat to facebook in terms of mobile advertising? >> it is true a year ago when we were talking about what facebook needs to do, you found yourself describing twitter. and i think the two companies can both thrive and, you know, those are our number one and number two positions, we're happy with both of them. >> everyone's trying to put a price on subscribers and what that data's worth. and i don't think we've put one on that. everyone's trying to look at the same thing. obviously kevin's in the vc. we look at the vc and start-ups and everyone's saying we can sell it for "x." it seems like everyone's chasing the same thing. >> sounds like you're bullish on "x." >> yes. >> whatever that "x" is. >> look, when i look at google versus facebook, what would you rather know? what someone's searching for? or everything else about them? i think that's pretty valuable. >> well, i met you a year ago right before the facebook ipo. you were lucky enough to buy these companies on the private

market before they actually go public. a lot of people haven't been so lucky. how do you think people who haven't been as lucky as you to buy a price of $31.50 to be in this money here, what are they thinking a year later? >> they're thinking come on, already, it's been a while. but, you know, i would say this is like any other investments like any stock. forget what you paid for it. what is it worth now? and what is it worth going forward? >> kevin landis, thanks so much for joining us. we're going to continue to watch that facebook stock. >> thank you. coming up, breaking inflation data, we'll get april producer prices. would you say ppi? >> ppi. >> i-c-u-p. >> i-cup. i won't say that and i won't say ppi, consumer price index. and the top disruptors in the

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coming up, breaking inflation data. minutes away from consumer price index for april. take a look at u.s. equity futures. the dow would open 15 points to the downside. "squawk" will be right back. [ penélope ] i found the best cafe in the world.

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welcome back to "squawk box." we're less than 30 seconds away from the producer price index

data for april. rick santelli is standing by at the cme at his post as he always does. and steve liesman, steve liesman has joined us onset. you back to the old tie knot, whatever. any i way, he's in studio with us. it depends on the tie. >> it does. it does. >> rick, the numbers, please. >> all right. survey says, producer prices down .7%, darn close to expectations. strip out the all important food and energy and it's up .1%, also managing expectations. let's take a way back look. year-over-year up .6% on headline. that's .2% light, and if you look at food and energy, 1.7%, spot on with expectations, matching our last look. but we have another number out, may empire index. and this is important. it was down 1.43. coming from a non-revised 305. minus 1.43 is the weakest level

going back to our january read at minus 7.78. we have a lot more data to go. but let's run through how the markets have responded. a 194 yield we shaved one basis point off. preopening dow futures, well, they're about five worse at minus 17. and the dollar index is off on a beach with a beautiful umbrella enjoying the weather. and that weather, of course, is the bad weather in europe. their expansion is slowing, their data is not looking very good. whether it's the euro or the pound or the yen, it seems as to everything seems to be lining up for the dollar these days. back to you. >> summer's coming. 115 would be nice, i think for the year row. i don't understand. why would the empire state? >> i don't know, i was looking at that, joe, but every single category that matters in the

entire state was down at least a little bit. new orders were down, shipments down, inventories down. i mean, we have not had tremendous news out of the manufacturing sector. there's been some anticipation of a rebound that you had, mostly it was a kind of weather-related swoon. this is not good news. we don't make national calls off of this. we add it to the other fed regional surveys and kind of get a picture to see what they say. but on the ppi, again, almost every major category is a negative. energy is down, heating oil is down, and when you look up the chain of prices, what you find is that there's deflation coming down the chain. we look at intermediate goods, a stage of processing and crude goods and less processed. and there are negative numbers in all of those and negative numbers in the core of all of those. i think there's a great discussion to be had about

inflation. i think the big story here is going to be the effect on the federal reserve. but also, don't forget profit margins. when costs -- input costs come down, everybody has been skeptical. many people have been skeptical about the ability of companies to maintain these lofty profit margins. and if prices keep going down, it's going to be helpful. and i want to get to commentary, i've gotten a lot of commentary about the tepper comments yesterday, the cbo comments. disbelief in the projections of the cbo. a lot of talk about what exactly robert frank just said, the one time payments by the wealthy in 2012 showing up, the other thing, i don't know if you spoke about this, which is the fannie payment and the expectation of a freddie payment and whether or not that transpires. people really don't believe this incredibly shrinking deficit is going to be incredibly shrinking for quite as long as predicted.

>> history's pretty clear on that, steve. and we can go back to many other occasions. this isn't like we need to do a lot of experiments to see what the outcome is going to be. >> both ways, i would point out, rick. i think the economists are worse at projecting the deficit than they are the employment report if that were possible. so i think that's important to put to the side. when things move in one way, rick, they tend to move a lot in one way. and that's, by the way, what he's on. you have no idea here it's moving and moving faster and by the way, i want to point out, he called me in the later afternoon after the cbo report to gloat about how this new cbo report of a smaller deficit was right in line with what he was saying and he gave me some additional numbers. okay. but at the other side of this, we've got the full screen from credit suisse. it changes the outlook for the fed. the newly released deficit projection begins to raise questions about the sustainability of the fed treasury repurchase base. we still look for tapering by

september, a small cut, say $10 billion come sooner. so this is a bit contradictory from the general notion maybe it's temporary. but if it keeps coming down like this, bottom line, is the tepper concept, there'll be less paper to buy. and i don't know, i know they follow this because whatever you believe about -- on the markets, supply and demand is something everybody believes in. less supply of paper with huge demands from the fed creates issues in the market. is that right? >> yeah, i'll tell you what, tepper and your math subsequently do show a very small snapshot in time where the one-time adjustments not only of the wealthy of everybody. i hate when we have to quantify everything. okay. tax policy unlike warren buffett said, people make big adjustments to. the real issue is it does exaggerate the notion that, you know, i'd personally think the buybacks, the promo.

if it's ever used it, it's outlived it. so on that, we agree. >> it could be powerful. >> steve, either way, the idea that we're talking about under 3% of gdp and the next coming years, okay, something we would've not spoken about the last five years that we would've gone this quickly. >> right. >> to that type of number, which has been the goal of the secretary, okay. when you listen to geithner before he left, he said our goal was under 3% of gdp. >> sure. >> and we're getting there. and i think everyone would've argued never would've happened. >> i think there's definitely a change of p sentiment. and when i look at the ability of washington to talk about irs scandals and other things that are not on the economy, i think -- i don't think -- i don't want to diminish the seriousness of those issues, but it has been my experience when washington has time to talk about other things, it means the economy may be getting better. and those issues are serious. >> which is good because if it were just a little bit higher

than 3%, maybe still in a more troublesome area and they still have these scandals and were turning a blind eye. >> i want to bring up something else. we were talking about how the wealthy stacked all this income into 2012, we thought they couldn't do that with the estate tax. turns out they had. there was amazing news out of connecticut shows that connecticut was expecting around $150 million from the estate tax, they collected more than $428 million. that's three times what they projected. one connecticut legislator said, well, more people died than we expected. it's unprecedented. this could be the ultimate tax avoidance, the wealthy were dying last year, but i think it had a lot to do with the gift tax. robert, how much of this -- >> can we threaten the tax every year? wouldn't that create a surge? >> more wealthy people -- >> not do it, just threaten to forward pay the taxes. >> what do you make of this? >> well, i mean, i think it's a bit morbid that we're

celebrating these -- >> i'm not celebrating -- >> we're calling it the ultimate tax experience. >> what happened? and what do you think should happen with the estate tax? >> i think the estate tax is too high and, you know, i think in 2010 it was, you know, what 35% at that point? >> at one point it was zero. >> i'd like it to continue to come down, you know. joe said i'm great. we heard that. there are certain things -- >> i want to lower corporate taxes and i want the estate tax to go away. joe agrees with it. oh, you agree with me on this. >> of course. >> there are other stuff we don't agree. >> listen, you've had four years to hammer me on that but you had your vote. >> shows how artificial a lot of these numbers are coming out from the revenue side. in california, it's interesting. california's already said, you know what, these revenues are not repeatable and our budget outlook for next year is bad. we're going to have to cut. they actually understand what's happening on the revenue side.

the rest of the country does not. >> i think it tells us how tough it is for state and local budgets to really even each year, which is what they need to do from a regulatory perspective. they need to have a flat budget -- >> is it because they're so reliant on 40% of the income. >> and now as you said estate. >> that's the most volatile group in our economy. so they're going to have these huge swings and they haven't been good at projecting what can happen. >> but 428 million versus 150 million the year prior, that's -- >> that's a big swing. >> seriously -- i think the point robert's making is probably worth emphasizing is that just because we're having a little reprieve in the deficit numbers both on the state and local and federal level doesn't mean we should stop the debate about getting to a more rational -- >> doesn't mean we should, but we will. >> that's the other side of what i'm saying, they will. they're not going to talk about the sequester.

>> we might not talk about entitlements because of this. >> probably true. >> well, you may not need to use the debt ceiling in the third quarter. >> they won't. >> the pageant music coming on. >> and they won't talk about a sequester anymore. that will remain in place. for some people is a good thing. >> this is just a suggested break. it's not -- >> you're taking it way too seriously. >> i'm trying to get invited back. trying to play by the rules. >> there's only one person to kiss up to. >> steve, thank you. >> you can do it without kissing up to him. trust me. >> we'll see about that. >> and that's the of steve liesman, as well. >> our series continues with innovators who want to shake up the financial services industry. a ceo of a company that offers the same services as the big private banks but at a fraction of the cost. stay tuned. ♪

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welcome back to "squawk box." all this week right here on "squawk box" and "fast money," we're revealing the cnbc disruptor 50, our exclusive list of companies shaking up their sectors, challenging established market leaders. we've revealed in retail, media, manufacturing and enterprise software. up next, financial services.

>> cnbc's financial services disruptors are upending the status quo in finance. through peer-to-peer lending and online money management. lending clubs online matchmaking tool disrupts consumer and institutional finance generating $1.7 billion in loans. cutting out the middle man secures borrowers lower rates. and the company says investors seek higher annual returns. lending club got its own big investment this month. $125 million led by google. the venture model also faces disruption from new methods of capital raising. crowd-funding platforms kick start and circle-up connect ideas with investors. on kickstarter, anyone can invest, but the return is unconventional. instead of profits, it's early access to the product or behind the scenes access to a film investors helped fund. of the nearly 100,000 projects

launched on kickstarter, half have met the tlehreshold to go into development. crowd funding platform is only open to accredited investors. focused on consumer product companies, circleup has helped a dozen small businesses raise more than $10 million. while new regulation should boost its numbers. when investors spend, they're increasingly likely to do so via square. its mobile payment is shaking up investors. along with visa and citi's venture capital arm. it's even pushing traditional register maker ncr into the mobile game. square handles billions of dollars of transactions per month putting banks and credit card companies on guard. >> there's one more financial disruptor on the list. an estimated $29 trillion prize. it has already brought in $240 million in assets under management.

the innovative service is disrupting the traditional brokerage model. joining us now live from palo alto very early in the morning is andy, president and ceo of the financial planning site. thanks so much for joining us today. tell us, how does your business work? how do you get to bring your cost down so low? >> well, unlike a physical financial adviser, you can open an account online, fund it online and we trade it all electronically. so our marginal cost of opening an account is zero that way we can bring down our minimums and our fees. >> do people miss having that relationship with a broker? >> you know, it's funny, people in their 50s, 60s, and 70s are unlikely, i think, to use a service like ours because they're used to having their hands held. but 20 to 30-year-olds actually prefer not talking to someone. some of our clients say we would pay you not to talk to us. >> andy, there was actually an article yesterday that said that young people who want to become brokers, they can't do it because the cold call is -- is

passe and that going door to door is something you don't do anymore. but do you worry that the broker class that there will be a darth of people who actually have this expertise because people aren't getting the expertise the traditional way? >> well, the expertise doesn't come from brokers, it comes from finance professors and economists. for example, our chief investment officer is a world renowned economist who wrote the famous book "a random walk down wall street" which led to the index fund revolution. you don't need very many experts to inform the engineers what software they need to build. >> and andy, i've been covering the wealth space for over ten years. and i've seen so many of these firms starting with jim clark with my cfo, you know, the idea seems so obvious, let's make wealth management a virtual business. it has not worked. what's so different about your company?

>> well, you know, change creates opportunity. and the big change that we've been able to take advantage of is a couple of years ago the brokerage, a few brokerage firms opened up electronic interfaces that allowed people like us to -- to open accounts, fund accounts and trade accounts electronically, number one, and number two, etfs emerged as a security as a passive security that you could trade. and prior to those two changes, a service like ours just wasn't possible. finally, we're just doing investment management. we're not doing financial planning or some of those other things that i think the previous entrance. >> what's your average account size? >> well, it's funny, it starts at about $30,000. and after about 20 weeks, gets up to about $115,000 and still growing. >> very -- >> we're serving the people who

the traditional private wealth managers turn away because there's sub the minimum they want for the accounts. >> who's your main competitor? >> do nothing. most of the people who work with us typically just have the money either in the stock of their company because our initial focus was young people who work in tech or the moneys in the bank that they're scared to invest it. >> very interesting stuff. thank you very much to andy rachleff. we have another coming up on "fast money" today at 5:00 p.m. then we'll be talking about the transportation disruptors including one company literally out of this world. and after that, you can go one on one with a cnbc disruptor with the ceo of circleup, one of the financial services disrupters we just revealed. tonight at 6:00 p.m. eastern at facebook.com/cnbc. and coming up, stocks on the move ahead of the opening bell,

we'll check in with jim cramer at the new york stock exchange for an always colorful conversation. jobless claims, consumer price numbers and housing starts all hit the tape at 8:30 a.m. eastern. don't miss squawk box tomorrow for an instant analysis of the numbers that move the markets. [ male announcer ] this store knows how to handle a saturday crowd. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing.

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welcome back. let's get down to the new york stock exchange with jim cramer. you talk about deere a lot. >> that's deere's way. they always disappoint in the conference call and disappoint on the release and the conference call people say they were too negative. they're okay. they do have this big international business where there are a lot of countries that aren't doing that well, we know that. they have the forestry construction business, but in the end deere gets hit and

people think it's a bargain. very much like caterpillar. >> it's like caterpillar. the guys -- did you see the guy from fortress? >> gold goes where? >> it could go back to 500. >> okay. thank you. >> who said that, mike? >> yeah. >> keep running tepper. tepper came on and you know what he said, joe? he said things are good. i know that's a radical proposition and i know he'll get in a lot of trouble for it so he has 2 billion so he can handle the pressure that comes from saying things are good. >> if you're a guy making a living and keeping their job on wall street and you always have to hedge everything and he can come out and sea what he thinks. >> how risky. does he have bodyguards? he just came right out and said things are good. can you imagine the heat on him? he's a 600 degree griddle. >> gold's going go down and he'll need bodyguard, too. >> fortress.

fort apache in the bronx. easy come, easy go, my friend. >> we'll see you in a few minutes. >> fort apache of the bronx. wow! can't make that up. coming up our guest host this hour has been robert wolf of 32 advisers and we'll give him the last word and don't miss tomorrow, john chambers will be our guest at 8:30 eastern. changing the world is exhausting business. with the innovating and the transforming and the revolutionizing. it's enough to make you forget that you're flying five hundred miles an hour on a chair that just became a bed. you see, we're doing some changing of our own. ah, we can talk about it later. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving.

the ocean gets warmer. the peruvian anchovy harvest suffers. it raises the price of fishmeal, cattle feed and beef. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world. bny mellon.

welcome back. kate kelly joins us now with interesting news. kate? >> sally crawcheck at bank of america and citigroup is buying a goldman sachs alumni run and founded women's network called 85 broad. this is founded in 1997 by janet hanson, a goldman sachs alumni herself and it's a 30,000 member professional organization that does networking and mentoring among other things around the world. crawcheck to my understanding hopes to grow and invest in the network. as it stands now she'll be an owner and not have an operating role. down the road it sounds like there is a possibility of them creating an investment arm that will bring capital to some of the female entrepreneurs who are part of the network. an interesting move for crawcheck and there's been a lot of speculation of what she will do next having left in the fall

of 2011. so we have at least part of an answer at this point. >> it's a paid membership community, but what's the business here for her? >> the business is -- i think essentially, i don't think i want to call it a passive investment, but she'll put some capital into it and put strategic membership and positively go in the direction of women members who want to start business, and whether that's through crowd funding, crowd sourcing or third-party investments sort of remains to be seen, but i think we could see her wearing other hats as well. we all saw reports about her being considered potentially to have run the sec, obviously, that didn't happen and she's been spending time in washington and on wall street. so i wouldn't rule out her landing somewhere else in addition to doing that. >> thank you. not the name you might pick. >> it was 85 broad street.

>> i rather have 85 than 32. jimmy brown, o.j. simpson. my wife's going to love that i said o.j. >> thank you for coming in. >> thank you. >> you agreed with a lot of the stuff. we have four seconds. thanks for coming in. thank you to kayla, robert and julia. make sure you join us tomorrow. i don't know who will be here. "squawk on the street" is next. good wednesday morning. welcome to "squawk on the street." we are live at the new york stock exchange. the agenda is jam-packed today. economic data, tech conferences, earnings, some high-level downgrades. take a look at futures off 14 points and europe, meantime, a bit higher despite gdp numbers. officially the longest r