good morning. and welcome to "squawk box" here on cnbc. i'm michelle caruso yeah brar ra along with joe kernen and steve liesman. steve and i are spending the morning with joe because becky and andrew are on assignment today. the acting irs commissioner is out following a scandal on the agency. president obama said the conduct that targeted conservative groups for extra tax scrutiny was, quote, inexcusable. >> i will not toll race this kind of behavior in any agency, but especially in the irs given the power that it has and the reach that it has in all of our lives. >> more on this unfolding story from john harwood and politico's ben white in just a knew minutes pb but fist, cisco posting better-than-expected earnings on current quarter revenue. ceo john chamber says his company is seeing good signs in the united states and other parts of the world are, quote, encouraging. shares rising sharply on the

results and comments. we'll speak to an analyst who covers the company in just a few minutes. 8:40 a.m. eastern time, don't miss john chambers himself in a first on cnbc interview on "squawk box" itself. ge and boeing warning of a problem on the engines on 777 jets. an engine shut down mid flight twice this year. the twin engine aircraft is able to continue flying with the remaining engine. the companies are telling airlines to inspect or replace transfer gearboxes introduced between december and march. phil lebeau will join us with more on the story in the next hour. i'm personally very excited, and maybe you should be, too. 8:40 eastern, we'll get weekly jobless claims, the cpi and housing starts. then at 10:00, philly fed survey.

analysts say likely still rising to that low level of 30,000. headline cpi seen falling by 0.3% while the core component increases by 0.2%. housing starts forecast is expected to decline by 6.4%. meantime, building permits seen rising by 2.4%. let's check on the markets this morning. what do we have here? s&p, the implied open would be down. everything would be down 23 points on the dow. 1 is.72 on the nasdaq. let's look at oil, which has been right around that 94, 95 area, now it's 93.56. brent crude, a little always a little higher. gasoline, 2.84 on the way down. treasury webs 1.934, hovering now at that new level, about 20 dips higher or 10 dips higher than it had been. the dollar, stronger against the yen and the euro. and the pound, 1 is.52. one more thing we're looking the a, which is gold, wow, you kind

of boink on this thing. >> not really. >> no? 24 bucks. >> it was down 25 yesterday. we had a guy from fortress that said it's over. it could go back to 500. when there's no buyers and he likened it to almost a -- you know, like a story stock that goes up to -- >> a krispy kreme? >> worse. like when you are on a plane and there was a sky mall that went to unbelievable levels and it never really should have. there are a lot of them. iomega had some cartridges and the iomegans were crazy. yesterday, i yelled at someone, steve -- or the day before, it said another, is this the -- is the rally running out of steam? and i said, why do you automatically say that.

why don't you say is the rally ready to get another leg up? >> does the rally keep going? >> this morning, i saw is gold oversold. so apple on the way down from 800 to 400. every day, i saw someone saying, is this the apple bottom? is this the apple bottom? and people have a way of looking at it, you can almost measure sentiment and know what is going to keep happening. if we keep putting is gold oversold? it's going to keep -- >> keep falling. >> yes. >> we'll see. i don't know fp. what ranted up the 1900s you would think is what we have seen the last couple of years. >> i am always interested in the macro signal being sent by gold. one theory is that it's just describing the story stock. the second is it was an inflation story. >> if it's an inflation story, i'm worried.

>> i can tell you the angry and the vitriol are -- >> i personally never like talking about gold because of my e-mail. i was always skeptical about the inflation story. >> yesterday, i gave him e-mail out from fortress. don't send it to me. >> i applaud commitment and energy anywhere it is. when my kids are interested in something. and these guys are really into gold, and i think that's a really cool thing. >> but tepper the other day didn't say, it could be a 5% pullback at any time and i didn't wait -- he just said we're in a bull market. it's definitely going higher. but you know what? he's not a sell side guy trying to keep his job. he's a guy to made $2.2 million last year. >> he can say whatever he wants. >> he can say anything he wleefs.

>> is there anything that's more reliant on the commodity than it gives you something back and -- >> i can tell you something more reliant on that. a piece of blue paper with a white line down the center. $43 million. >> really. >> i don't know if i agree with that because it's got his name on it, right? >> i guess it's the name. >> one aspect of it. >> can it you one story about art as an asset class? i interviewed a ceo once and he said, no, the billionaires come to us. there is no other asset class in the world that can suck up $43 million in under four feet. you can't do it with jewelry. >> pottery. >> maybe. but there isn't that much that you can pay 42 million for. okay? you can't buy a house, you can't buy a boat. >> you put those things in the center and your kid squirts -- they can't tell the difference. an art collector couldn't tell

the different between that and a roscoe. >> yeah. but you're sort of saying it's in the same class. >> yeah. but do you think people look at some of those and see something different than what we see? if you're smart, you might see this incredible -- you might see something from st. mark's square in venice. >> i used to collect, when i was in russia, cheap folk art that was on the street. and i never paid more than five bucks for it. it was great. >> harwood is a guy i think that would have an eye. and ben white, you look at his glasses and they're a work of art, basically. back to the story that everyone is talking about this morning, the unfoaling irs targeting scandal. president obama announcing the agency's commissioner, acting commissioner, is out.

>> the misconduct that uncovered is inexcusable. it's inexcusable and americans are right to be angry about it and i am angry about it. i will not tolerate this kind of behavior in any agency, but especially by the irs, given the power that it has and the reach that it has in all of our lives. as i said earlier, it should not matter what political stripe you're from, the fact of the matter is that the irs has to operate with absolute integrity. >> let's talk more about this with our chief washington correspondent john harwood and chief economic correspondent -- >> i'm not an economist per se. i'm a correspondent. >> neither are any of them. >> economist if joe says you're an economist. >> dude, you're a reporter. >> chief economic reporter. >> okay.

>> that will be like saying harwood is the chief politician. >> wow. >> not much of a stretch. man behind morning -- how are you doing, john? this guy was only there for four months. what did he do? >> joe, i know you have a question and i want to get to do. but parenthetically, i think pretty much everyone looks at the same things and sees things differently than you see. >> that's a safe bet. you say that like -- >> and he comes out swinging. that's pretty good. >> you know what? that haircut works for me. that's all i'm going to say to start with you. but so wasn't he only there four months, john? >> yes. and look, i think if you're steve miller, you've got to say, hey -- >> take the money and run? >> no, i don't think there's much money involved in that. look, the guy for whom the buck stopped when this happens is gone.

he was appointed by a different president. he served for five years and now he's gone. he cannot be fired. so the guy who was a career employee, who was elevated to political status, which is becoming the acting commissioner which makes him vulnerable to being fired got fired. and the reason is because he was there and it did happen under him and under a lot of other people. he was not, in the inspector general's report implicated himself. i think you can say there were denials from his former boss doug schulmann that this had happened. they didn't correct those until last friday. >> but in a general manner -- >> do they make up words like pompadence. ? >> steve miller is right. the administration needed to get out ahead of this story.

they were way behind. they needed to do something major in the headlines and getting rid of miller was the move. which is not to say that it wasn't aren't and involved in some degree to this targeting and it's not legitimate that he should be removed. does it end the story? absolutely not. he's going to testify this week on friday. they're going to have multiple hearings this week. does it ever get tied closer to the white house? >> i just wish we could cut out all the tough we have to go through the next six months, i just wish we could go automatically to the very most senior person that first decided this might be a good idea, wherever it stops. i wish we could do that. >> i think it was in your hometown, joe. >> yeah? >> cincinnati.

>> not just in cincinnati. where is started. >> let me talk about what happened yet. it was a significant moment. the white house for the last several days has been seeing fastballs coming from their head from every different angle, whether it's ap phone records, benghazi, whether it is the irs and they decided to wait until one moment where they believe they found a pitch they could hit and swing very hard. so on all three fronts, you know, yesterday they came out and said, well, we are going to support the reporter shield log that chum schumer pushed in 2009. we had problems with it then. it didn't make it. we are going to push on it now. they were trying to respond on that front while holder was testifying and couldn't say all that much. with benghazi, they flooded those e-mails out and tried to respond to the incoming that they've been taking over the

editing of those talking points and the back and forth between state and cia and all that. and then the third thing was to fire this guy, steve miller, and try to have something demonstratable to the american people that was a response. for 24, 48 hours before then, people like jordan, allies of the administration saying he needs to stop talking, he need to fire somebody. that's what happened. >> can i ask you on points one and three, i read somewhere that the shield law promoted by the white house would not have protected ap. >> that's right. >> is that right? that's one. and three, they fired a guy that had nothing to do with the skabl. wh scandal. so what you're saying is two of the three, 66%, are optics only. >> i would say they're optics significantly. i don't know if they're optics only. but that's a good point, steve.

whatever law you shaurt on shield, you still have on the public record that you've approved a subpoena that looks now what we know is pretty broad and is of great concern to civil liberties communities and something that somebody can come back and say, look, that's chilling for the job that people are trying to do to cover the administration. they will at some point say more about it, but that was a response. miller is a response. >> i hear what you're saying. >> back to the whole -- well, speaking of the irs situation, even if we don't see it go that high, how about the power that bureaucrats start to feel? is it a surprise that somebody who works for the irs would want to target groups that don't want the irs to have as much power, that want the government to be smaller? if you work for the government, you have an interest in maintaining its size and getting bigger. this is the power of bureaucracy

that works. and that is what makes bureaucrats so frightening to people all over the world. >> i don't know how frightening they are. >> they are frightening. >> but i do think, michelle, that if there is a political edge to this, and i'm not saying there is, the inspector general didn't find one, but if there is, it is because of the nature of people who work for government and their relation to people outside the government that don't like the government. >> bureaucrats and the soviet union. >> amazing. you hold your breath when you pass a police officer because he could pull you over for a bribe. >> it's a big jump from the soviet union to the united states to -- >> no, no, we're not -- >> i want to get to ben. but i make a distinction right now, reservedly because i don't know all the facts between the ap story and the irs story. ap to me is directly from the top. yes. >> they have been as tough as anything i've ever seen in my 2 1/2 decades of a career on

journalist and it's frightening and troubling. >> yeah. >> to this point, i do not see the irs as directed as policy from the top up to this point. yeah. we actually don't know if that was directed from the top at the irs. all we know is it started with some people in cincinnati who wanted to figure out a way to organize these applications from conservative groups and address them. that's what we know. i'm not saying that is what we're going to wind up with. >> it's absolutely right. execution was -- it was an enormous data dump from the ap. if you're going to add the exemption to it, this wouldn't be -- >> are there other things that cob sevenives would point to that says a the irs is part of a piece of the campaign against groups being used by the administration and the bureaucratic authority? >> i think what they would say is the obama administration is interested across the board in a

broader role for government getting involved in your life and maybe there were views on high that there was a culture of going after conservative groups and there was a desire to expand the regional government. >> they didn't think they would get in trouble. why didn't they think -- exactly. >> but just to be clear, before, like, the imagery gets too far, these are people who work there from one president to the next president, right? so it is not really susceptible to what happens -- which is my point. >> yes. but i would -- >> they're helping to elect the one that they wanted to get -- let me just -- >> exactly. >> hold on, hold on. everybody stop. listen, huffington post. i like the huffington post. my daughter writes for them. peter goodman is the executive business editor. lost in the political scandal is a simple fact. the internal revenue service was acting in the public interest when it opted to train its --

and tea party and affiliated groups. portraying taxation is a form of tyranny. the tea party is no less of a mass celebration than the invasion of the american people 37. >> joe, there's a fundamental mistake in that. they were not training auditoring power. these are groups applying for a government benefit. >> but that's not the point. what you actually see in print is that there was nothing -- and i heard you say something that maybe they thought they were doing the right thing because these nasty tea party people need to be stopped. >> i just think that's more spin on the ball. >> even brian williams, i was watching last night, and there is something -- even brian williams -- >> do you think that it is a to go the soviet union's way, the idea that the irs could be used as a -- i mean, they can control

your life. they can put you in jail. you have no recourse. they own you. and it's a frightening thing to most americans. and that's why i don't think it's that much of a stretch and why the high beshly -- >> but that's not what happened. >> okay, john. i know. >> but that's not what happened. if you had tea party in your title, you were pulled aside. absolutely. >> others went straight through two days later. >> i don't think anybody is arguing, michelle, yes, that happened and that was wrong. that's not the argument. but it was not -- they were not audited. they didn't -- >> they were just asked ridiculous -- anybody in their group would ever run for office in the future. >> we're talking about people --

michelle, we're talking about people who knocked on -- >> your thoughts. >> we're talking about people who knocked on the door of the government and said i would like the benefit of tax exempt status. >> right. >> they also said in general, we're going to be doing some political activity while we have that tax exempt status. that's what the reviews are about. >> from there, john -- >> that's what the review res about. so in some ways, they're supposed to scrutinize them. the problem was they scrutinized some people -- >> no, that's what was wrong. i'm agreeing with you. >> steve cohen said -- and believe me, at the correspondence dinner, i was not hard on obama at all. in fact, he probably got a little medal because he was hard on everyone else. but he even said maybe i'm going to get audits now. >> that's a joke that everybody tells. >> i know it's a joke. >> it's an old joke. >> but it happens and it can

happen. >> thanks so you, skaun, hopefully um be right, but we'll see. thanks, john and ben. more on the irs scandal throughout the morning. we are going to hammer this. it's nice to have the left a little bit engaged. in the next hour, former chief economist and vice president joe biden is expressing some outrage, sort of. and then tony frato who served in the treasury department and in the white house for george bush. and then at 8:00, a congressman from louisiana will be our washington newsmaker of the hour. glad you're here, michelle. >> coming up, kicisco last nigh. but first, christy's contemporary art auction set a record, $495 million. only four failed to find buyers.

the top price of the night went to a painting. number 19. >> there you go. this one, joe, got 53. -- $58.3 million when you include the commission. meantime, from 1982, dustheads, $48.8 million. it had been estimated to sell for $25 million to $35 million. . 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.

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a judge ordered dow chemical to pay $1el 2 billion in a price fixing case. dow was one of several companies to named in a 2005 class action lawsuit, but it was the only defendant not to settle. show them. dow plans to appeal yesterday's verdict. attention road warriors. >> look at that. >> whoa. >> we've all been there. >> that is an open -- >> a bad day on the road, a rough out of town meeting. need to unwind a bit on your business trip? the suri hotel offers an in-room cocktail program where guests can take the edge off until the comfort of their own rooms. a mixology gist will mix it up in your room and leave the rest for you to shake or stir.

choose your menu of pills, memory foam, water filled -- i guess those are the types of pills you can get. the benjamin even offered a work down call to tell you to turn off the blackberry and go to bed. i need that. for more on business, go to r d roadwarri roadwarrior.cnbc.com. i didn't know we had this. i spend a lot of time on the road. i'll check it out. >> absolutely. >> am i supposed to read this? >> we're going to produce this. we're going to produce it. >> do you know what that means? >> ooh. >> cisco reporting stronger than expected results after the bell. the technology giant earning 51 cents a share, two cents ahead of estimates. revenues topped estimates coming in at 12.2 billion. bryant white from topeka capital

markets, good to see pup. >> good to see you. >> tumbled 9% in after hours. is that justified? >> definitely justified. >> why? >> you know, going into this quarter, we looked at the tech world. they had very challenged marked quarter -- >> i was going to say, ibm started it off. it's a lot better from there. >> networking preannouncements. so cisco really going into this, i think, expectations were lower and what they did is they executed. and that's what the valued investor wants to see here. this is a cheap stocks, nice dividend yield. they executed on margins and that's enough to bring it higher i think in the coming months. >> talk broader for one second and say regionally speaking, joufr performance in nearly every part of the world, does that tell us anything about the technology and economy at this point? am i right about that? >> where they highlighted really in the u.s. was the strongest area. >> definitely. but better than expected in a lot of places in the world, right? >> yeah. i would see europe improve, southern europe was down where europe improved, china grew,

india was on fire. it was really more of a u.s. story and seeing improvement in europe. >> i was surprised at the margins when i see for example they outperformed when it came to getting federal government contracts. so ibm shot that revenue down. cisco was up by like 20%. and i wondered, were they the low bidders? were they really good at slashing prices in order to get there? no. >> so if you look at their federal business overall was down, but the public business was flat. so they -- you know, you have to look at the different areas. state and local in the u.s. was up year over year nicely. 13%. >> cutting back a little bit, michelle. >> my understanding is they outperform compared to, say, ibm. >> i would say that's fair. so the public grew 1%, but federal was actually down in the u.s. >> can you tell us what we can learn from looking at cisco's earnings about the overall level of tech spending on the part of u.s. corporations?

>> i would say john chambers sounded a little bit more optimistic, but that optimism isn't really shared by the rest of the tech world. so i would say this. cisco is working from a networking player to a much broader i.t. player. they have a -- they're number three now in the world. >> what's a blade server? >> it's kind of a lower end data server center that's profitable. they entered five years ago. they're emerging as more of a global i.t. company than just a global networking vend so i think they're gaining share. i think they've done a lot for supply chain to improve. they've got kind of a different world i think they're looking at than a lot of other companies. >> but don't make the mistake looking at cisco's earnings and say all is healthy on the world of cap ex and parting corporations. >> i would say in the u.s. there's some healing going on. .service provider did very well,

very well. >> when you say the rest of tech isn't as optimistic, maybe as john is going to be on, the rest isn't as optimistic about cisco or about their own situation? are you saying that people doubt what chambers is saying about cisco or they're not -- it's not monolithic in the industry that things are getting better for other companies? >> it's not monolithic. >> chambers, i've seen him in the past, some negatives, you believe him. and when he says something positive, you believe that it happens because he usually doesn't sugar coat stuff. >> he does not. their outlook, to be clear, their outlook on sales was a little light as we expected. but the eps was in line. that's all you need. >> what's the cross for the markets? the companies were executing by controlling costs and, you know, feeling that they can on the revenue side, but when they beef, the supplies are almost never an outperformance in individual operation.

exactly. exactly. so i think people were very pleased that expectations are very low going in. it's rated seven times cash, 3.2% dividend yields, price to tangible is the bottom of the downturn in '09. so that's attractive. >> thanks for coming on. >> thank you. all right. john chambers in a first on cnbc interview at 8:40 a.m. eastern time. coming up, jpmorgan has questions and legal requests after financial data and news company for answers. details, next. but first, as we hit the break, a look at yesterday's winners and losers. thank you orville and wilbur...

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welcome back. jpmorgan sending a formal legal request to bloomberg asking about what information bloomberg news reporters had been able to see. the bank is seeking confirmation of controls that bloomberg has put in place to stop future breaches. billionaire investor john paulson betting heavily on mortgage insurance during the first quarter. the investment suggests that paulson's hedge fund expects the housing recover to grow stronger in the months ahead. in the quarter, paulson took a new position of ngic investment

corp. he raised the stakes in other insurers. while tripling his ratings in groups and genworth financial. usually what happens in vegas stays in vegas. "squawk box" should stay in "squawk box." but mark grant, who we talk about a lot was in and he saw me blow dry my hair. and he immediately sent out a note and somehow it made it all the way to the "wall street journal." >> that's amazing. you were in the paper. you're famous. >> heard on the street, and it's about -- and i hope this finally lays all the rumor toes rest about a toupee. but what is more important is about whether my hair is dyed. he looked closely, but he's -- >> i'm not only the hair clut club president. i'm also a client. >> but the sad thing is that my hair, at this point, is finally

thinning and i've got problems. i've got two spots here and over here -- >> and you hide them well. >> problems? it's not like you have a prostate problem. a colon problem? >> we don't have much time. let me finish. there was a time when it was real and it was good. week terry hatcher, when she said and they are spectacular. now it's thinning. now we prove that your thinning hair is real. that's not a real victory. have you ever looked at -- but you are the side effects. i looked it up. did you know this? itching, redness, irritation, unwanted hair growth elsewhere on the body, severe reactions, hives, difficulty breathing, swelling of the tongue, tachycardia, then it says paradoxically hair loss is a common side effect and it manufacturer does not guarantee that hair loss will be replaced with hair growth.

another sigh effect, dry skin, dark circles under the eyes, skin redness and highly toxic to cats and may cause death. if your cat gets near your freaking menoxidil. so it's just -- life is paradoxical and it finally becomes clear when it actually need menoxidil and -- you know what i thought? i thought menoxidil was -- >> i heard about that, too. imagine you're me and you come in and the a.m. radio tells new every other advertisement that you have a medical problem because you need to cure your baldness. every morning, i need to cure my baldness. i don't feel like i have a problem with my baldness. i don't wake up and it doesn't hurt. i don't -- >> that's because you're already married. >> you don't go to those meetings? >> i think there's an anti-bald guy thing out there and i think

you exude a little bit of it. i'm a little snaulted. >> i feel superior to short, bald people. >> i'm not insecure. let's get rid of that. >> except when they're my boss. luckily mark hoffman is like 6'6" and has hair. >> i think your hair looks good. >> currently. our current boss. >> joe, did you meet our new vice president? this guy, he has hair. big data is quickly become ago big business, but the numbers don't come without risk when he is you're talking about investing. this is a big story about monitoring the market. our next guest will explain, so stay tuned. [ male announcer ] my client gloria

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trnzs the world's market are early movers in the cyber world of big data. our guest this morning, steven cohen from the enforcement division of the s.e.c. they're using the tools of big data to ensure the fairness of the markets and nab insider trading. let me ask you this, tell me about -- this seems like the government is trying to -- or the enforcers are trying to use the same tools that the guys who are making -- using the crimes are using now. >> yeah, absolutely. they're pretty much start to go analyze data at a much faster pace. big data in general is kind of like what we call the four vs for us. you mentioned about the transactions per day. on tuesday, actually, 21.8 billion transactions, just u.s. markets alone. we talk about the variety of the data. there's all different flavors in

data coming in different forms and different structures. that's very complex to analyze. we talk about the velocity of high frequently trading. to keep up with the market and being able to monitor is very important. lastly, the volatility is important in terms of being elastic, in order to manage the market fluctuation that you see. >> and what is big data, b-i-g data? what is it? >> about those four things i just mentioned. it's about the massive bond, shield complexity in managing and do i go processing it and doing analytics. >> is it a series of servers, a computer, a team of people? >> it's basically in the world of data, architecturally, it's a bunch of different servers that cooperate together as one large server that actually breaks the problem into little pieces and reconstructs it and being able to solve that problem, that nasty problem. >> steven cohen, is this an effort to break through and

monitor and prosecute the insider trading? >> absolutely. i think over the last few years, we've seen a golden age for the securities and exchange commission's use of data. we're now able to harness this data and use it in all kinds of investigations in from insider trading and market structure investigations, financial fraud, asset management, so all across, we're using this data. >> steven, i've got to ask you this. it wasn't in my notes, so i don't know the answer to this question. every time government tries to do a big thing with computers, you end up with these stories like they've been trying to do this for eight years and there's $9 billion of cost overruns. is that the story here? if not, how did you avoid doing that? >> well, we don't have the budget luxury to have billion dollar cost overrun pes.we're a small agency with a big mandate. just to give you an example, i think it's being smart and targeted. over the last few years, we've brought in a lot of skill sets, quantitative analysts, market structure experts, and from our

use of technology, i think we're being very thoughtful about how we use it. so just to give you an example, in the asset management space over the last few years, we've done what we call an aberrational turns ishtive where we've analyzed and found suspicious trading by hedge funds. that's led to great results. >> can you give us an example of how this big data has led to wrongdoing in the market? >> yeah. in all the data, it's hard now to hide. it used to be easy to hide. now it's not so easy. we do a really good job with basically taking the information and building the correlations ahead of time. so that way we can actually put it into an environment that can be analyzed. before, it was very difficult. you know, time would go by. you know, you would lose a lot of valuable information because the data couldn't be stored. and once on the platform, the data couldn't be integrated the way it needs to be.

so big data solutions allow us to build an infrastructure that brings all the information together, integrates and aggregates it to do that. >> does any of this help us determine what caused the flash crash? >> the flash crash is something that is about synchronization of the markets, it's about being able to -- >> but this helped or it didn't? >> i would say big data helping, preventing problems like that, situations of the major market fluctuations obviously are going to continue to happen. but in order for us to be able to turn on circuit breakerses much more quickly, big data has been able to do that. >> i'd like to ask you a question about the road ahead here. have we seen the capabilities of this in the recent prosecutions or is there more to come in terms of your just learning now to harness thinks new tools and it's going to intensify? i would say both. i would say in recent years we've been harnessing it. to give you an example in the insider trading days, roger rg

name huge in trading and instant messages. today we can harness big data to analyze huge quantities of information very quickly. now as to the road ahead, last year the commission passed a consolidated rule which & this will be a complete game changer. for the first time, the industry is developing a system that will allow us to track trades across all markets throughout the entire life cycle of a trade and that will provide enormous information for us to oversee the market. >> thank you so much for the story and definitely worth monitoring. coming up, former jpmorgan board member larry bossidy speaks out. plus, jane wells visits a tasty story this morning. jane.

>> hey, michelle. we just saw an aston martin go through the 24-hour drive through here. must have an early call on the set. krispy kreme hot was hot, hot, hot and then not, not, not. are values rising again? we take a trip back after the break. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪

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we are talking about the

comeback kids on cnbc all this week. jane wells is making an early doughnut run in burbank this morning. jane? >> michelle, quote, krispy kreme doughnuts strong results should continue. still plenty of dough in doughnuts. krispy kreme was one of the hottest ipos. >> some analysts are still shocked. it is pretty priceyy for a doughnut. >> wow. nice hair. too pricey. it grew too fast. it was accused of channel stuffing. it all nearly went down the doughnut hole. stock fell to a dollar. now the company just reported its 17th straight quarter of same store sales growth. it matches dunkin'.

the ceo tells us they will go from 540 to over 900 stores by january 2017. >> we're a 76-year-old company. but the truth is this group, the team gave a new start. they turned it around remarkably. now we're pretty doggone excited about the growth. i think sometimes they think it's just a doughnut. it's not just a doughnut. >> you can see shares. chris terry owns a half million shares. >> the risk here i think that the new units don't generate the types of sales and profits that the franchisees expect. >> at some point, and we may see this -- i don't know what their

plans are -- different products at different day parks. they would not diminish the core item, the traditional doughnut. >> what about coffee? only 5% of revenues. 60% at dunkin'. >> dunkin', the doughnut is merely a delivery vehicle for the coffee. i don't know about the stock price. >> that really is the difference in strategy. you go to dunkin'for coffee and krispy kreme for the doughnut. >> i can assume margins are higher in coffee than doughnuts in. >> yeah. >> jane, i know you're nearly beverly hills. you have to come clean. you look younger now.

what have you had done. how is it that you look younger. >> oh, my god. no. here's the difference. the makeup artist, she's just off camera. oh, no. she's going to run away. she's the difference. she got out here at freaking 3:15 to do this. >> how far is beverly hills from burbank? let me see behind your ears. that's what i've been told. apparently there's cutting involved. elective surgery is -- i don't know. >> jane, i would like to disassociate myself with this entire line of questioning. >> i have to say when i did see the video i thought i looked like kayla's ugly older sister.

>> steve recommended a head transplant. >> because of my baldness. former jpmorgan board member tells us what he thinks about the calls. [ penélope ] i found the best cafe in the world. nespresso.

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the irs is in folk us. >> i will not tolerate this in any agency, but especially the irs. >> the latest in a series of scandals sweeping through washington. scrutiny grows over this administration. >> plus, the bloomberg breach and regulation. commissioner bart chilton is

here. and the climate change controversy. we speak to a princeton professor about his studies. he said carbon monoxide may not be such a bad thing after all as the second hour of of "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. becky and andrew are off today. let's show you what's going on with the futures. a flat open for the s&p, dow and nasdaq. here are your morning headlines. technology sisco third quarter profit of 51 cents per share, two cents above estimates. sisco was able to improve in hardware despite a sluggish environment. >> did we mention --

>> walmart? don schaeffer at 8:30. >> he is. 1:14 versus expectations of a 1.15. >> a penny light. >> 1% rise. but below the 116.29 billion that analysts were looking for. second quarter shares seeing 1.22 to 1.27. and the street is currently 1.29. first quarter comp sales without fuel at sam's club, a lot of metrics coming out here. but if you really need the key info here, it's a penny light. revenue just slightly below. and guidance also below. so i don't know what the wall street factored in. i have 78.75. >> i have a headline here, the

international group, 2.9. >> yeah. >> so if the rest of it -- if the total was up one, it means they fell domestically. do you see that number at all? >> yeah. what was that? >> international was up 2.9%. so if total sales was up one, it makes me think -- >> e-commerce 30%. walmart, fuel, expecting second quarter between flat and 2%. >> cfo saying be second quarter will be challenging. >> 1.50 where we are right now. you can see 1.11 right now. >> we would like to see the outcome of the investigation. >> i didn't think a person like

you would bring it up. >> it's my job to bring it up. >> nothing going on. >> they are still investigating. i know it hasn't moved the stock at all. >> walmart being hit by the payroll tax increase, the walmart shopper -- >> they're going to have a bigger decline? they haven't had domestic growth off the charts anyway. >> if i said to you walmart is going to report tomorrow, what do you say we need to look for? payroll tax effect. >> i don't know if there's anything here. but they were at 1.29 for next quarter. they said 1.22 to 1.27. >> can we just say, $114 billion of revenue in a quarter. i mean, it is breathtaking.

>> slim margins. >> but still an enormous amount of money. >> it is. you look at netflix. i saw recently. i was just blown away. i'll think about it. anyway, look who is here. niece guys never argue. they are totally opposite. frado and bernstein. >> i like jared. >> president obama trying to put out the fire caused by the irs targeting scan tal. >> yesterday i directed secretary lew to follow up on the ig audit to see how it happened and who was responsible and to make sure we understand all the facts. today secretary lew took the first step by requesting and accepting the resignation of the acting commissioner of the irs. >> all right.

here they are. tony frado. nice to be legendary, both you guys. i didn't even need to intro you. jared bernstein and larry bossity. former chair of honeywell. jpmorgan's board. legendary, author and everything else. we want to talk chairman and ceo. but let me get to these guys first. like i said, you're very good at this. you give us -- >> very big deal. you get that out there. like the guy at the huffington post thought this was a great idea. and these guys need to be closely scrutinized. they're anti-american. you don't say that. >> no, i don't believe that. i think if the only. this is a very bad scandal.

we are right no scrutinize it the way we have been. eric holder right to do what he's doing. if the only thing we take from this there were rogue actors in the irs we are missing something important, which is the terrible ambiguity in this part of the tax code that ought to be clarified. basically congress offshored this part of campaign finance reform to the irs in a way that is completely impossible. spending 49.9%. 50.1%. because that's what the law -- >> jared, if some of these employees said they were only doing -- it's been reported they say we are doing what our bosses told us, where do you in your heart of hearts feel this ends in terms of the chain of

command? >> it doesn't get into the administration and the doesn't reach the president in the following sense. ever since president nixon targeted some of his enemies through the irs, individual people, there has been a firewall between the president and the irs. i remember when i worked at the white house and the commissioner came into the oval to talk to the president. there was an extensive briefing beforehand in terms of what you can even talk to him about. this is the commissioner. the president does not have any contact with anyone below the level of commissioner. i don't think it's going to get to him. >> tony, the other day -- i'm a little gratified. the press has woken up sort of it. i was running on a treadmill. all these tv sets. i looked up. five different channels. i said why are they showing pictures of nixon.

>> i think they realize they're not going to give a little bit of the benefit of the doubt. i think they really were shocked. even if they understand it was legal. associated press, the doj did with securing the e-mails really was breathtaking to a lot in the media. and i think it was a "game change" er. >> no one else cares, tony. >> they keep saying that too, right? >> yeah. they keep saying that. that really gets them. it finally hit home, i guess. i guess they have never been audited, half of them. >> but the irs is chilling. >> they can put you in jail. they can garnish your wages. they can ruin your life. >> it is the single most intrusive arm of government. it effects every business and every individual in the country, right?

so that's a lot of power. it's a lot the of window into everyone. so that's chilling. and they have to take it seriously. we're going to deal with this for a long time. there's a very long road ahead. >> i agree with a lot of what you just said. but the thing we're asking the irs to do involves close scrutiny -- >> jared, to your point -- hold on. now, these are the same people who will be in charge of health care reform. come on. this is a signal how bad that is. >> it may be hard. the only thing we ask if it is hard, at least apply it evenly. >> that's right. unquestionably. see, that's what i was about to say. the violation here was the targeting. it's not that it's hard.

it's impossible. too opaque. listen, i think that takes you to michelle's critique will. i'm not as worried as you are about the affordable care act. the guidelines are much less gray. what the irs is supposed to do, they have cleared out. if you have this many employees, this applies to you. if you have that many employees, that does. >> one of the things you find in these situations is absence of leadership. and the fact that it hasn't had a permanent leader for a long time is an indication that things aren't well. in other words, you have to have strong leadership. in the absence of that, it's disturbing. >> granularly, let's talk about what that means. a strong leader might have sniffed out early on that something like this was going on and shut it down. but the absence of a confirmed commissioner and someone really

paying attention to the stuff on the ground you may be right. >> they were told once to stop doing this. they stopped. and then they started again independently. >> i'll be honest, on this case it takes the certification of a high school civics class to understand this is not the way the irs ought to be doing it. we understand that there were a number of people who should have known better and shared that information. there was a lot of discussion about these groups, members of congress writing letters, complaints coming up through media that there was pressure -- or they were being delayed. so it was an issue. they should have been looking at it critically. >> that's where holder is. >> that's where they are most vulnerable. not just holder. and even inside the

administration. it was not -- it was public that these complaints were out there. >> right. >> and it's something that any level should have taken seriously. it's not going to be enough just to say that we didn't get a memo in this regard. >> you're suggesting tax acceptance. >> i thought in the last hour was the difference between the ap story and the irs story was the ap story is clearly administration policy. but if it's going to be shown, i think it will be pretty obvious given the point that tony just made. hey, this is out there. >> and silencing the administration meant acceptance. >> what did janet reno do? it seems like she was out for much less. when does the administration decide this is more of a liability for us than an asset. >> there have been a whole series of issues with eric holder. i've always felt if the ag -- if

you see the ag on television, that's bad. you never want your ag on television talking. like you don't want to see him. success is when you never know the ag's name. we saw that in administrations, there have been issues with ags. they are dealing with really complicated issues. you have them at arm's length from the white house. and they are tone deaf on the political environment sometimes. they're not good at dealing with these things. is it really necessary with political organizations, even the ones that are social welfare organizations to have tax-exempt status in the first place? what does the country gain by having to go through this scrutiny. they never should have been targeted. it should have been more balanced. what does the country gain by exempting political organizations from the tax code like this, particularly -- you know, the 527s are not but 401c

are, citizen united gets into the mix. this creates impossible complications. >> tax reform of the entire tax code. >> i said nothing about the entire tax code. >> let's just keep the personal income tax and make everyone tax exempt. >> i want one person on this panel, including joe of the funny hair, i want one person to explain to me why 501c4, why it's good for the country to have tax-exempt status. >> it was good for your guy that they were going right through and the others were not. i mean, it was very good. >> i think it's also fair the to say regardless whether they should be exempt for not exempt, they should be administered

uniformly. >> hey, it's giving the fox a tax break. >> did you see steny hoyer? >> i did. >> do you with everything? can we just mention tony? >> no, no, no. >> i've been steny's guy. he's mentioned me on the floor of the house of representatives. >> i love that. you have democratic clients, don't you? you have toned it down a little. you're a nice guy now. >> we're nonpartisan. >> i know. >> i can tell. >> good for you, not good for tv. you are still good. anyway, thanks, tony and jared. >> comments or questions, e-mail us or follow us on twitter. still to come, why splitting

the chairman role is a bad idea.

jpmorgan will be holding its annual shareholders meeting.

a vote to split jamie dimon's positions. larry served on the board from 1998 to 2006. he was also chair map of the bank's risk policy committee. we divided it into two discussions all along. you're here to talk about both of them. jamie dimon specifically about whether it makes sense with him. and then just talk about whether that's the right thing to do. like all these shareholder advocate groups. it always make that. first in the case of jamie dimon. >> i can't help but think it is misguided, misdirected. he navigated through the 2008 financial collapse without any problems. they didn't have a loss quarter. they didn't even need t.a.r.p. thereafter, three record years of earnings. return on equity better than most at 17% in the last quarter.

so i think the guy has done everything asked of him. even though they had the london wales escape he took action overcome it. if anybody deserves both jobs, i think it's him. he's the best leader they have. you wonder if this was retribution because he was the primary wall street spokesman talking about some of these regulatory proposals in washington. while he was balanced with that respect he didn't agree with them all. i wonder whether his candid response pushed him to this kind of situation, which i think is totally uncalled for. >> even though you said he navigated through the criminal crisis. it's still fresh in peep's mind he was was implicated at that point. they see the whale, $6 billion, it's minute muss to jpmorgan,

they immediately say, look, now here we are again with the taxpayers or even depositors being at risk. that's where all the ire comes from. >> it does. he didn't want the t.a.r.p. funds. he took them to be a team player. >> the capital of the bank had versus what was -- >> not even close. >> do you think a chairman would have prevented the wail. >> having spent so much time in europe where they split chairman and ceo, they love to talk about, evidence shows. how much evidence do you know about having a split chairman at european bank prevented nothing. they're all undercapitalized. they all bought too much junk. >> they all moved too slowly. there's room for a chairman and

ceo. in terms of changeover at the beginning or ending of a tenure. it's nonsensical. >> whatever happened to if you don't like it don't buy the stock. >> that's a fair place to be. >> the debate becomes is jamie the right guy. >> his performance has been wonderful. i remember when he came to the bank and i was still on the board. he took every one of the divisions and compared themselves with best in class in the business and said that's your target. he made significant technology investments to accelerate responses to customers on the consumer side. i think he has done a nag tpheuf sent job. having them held up this way is

nonsensical. >> they did work well together on the whole. >> they worked well on the whole scale, right? >> picking out the color of the seats in the jets. they agreed on a lot of things. >> the relationship between the two wasn't great. >> so lead director. is that what people are basically asking for? because you don't want a board of guys that play golf with the ceo. the chairman and the -- he's the same guy. they are all kind of lacking. there's no way of getting rid of him if it's too cozy. >> i think lead director is a pretty good concept. they can administer board functions and talk about new and old. so i think there's a role for that. and i don't think that by fur

indicates having a lead director. that makes sense. we didn't have it for years and years and that functioned okay. but that's acceptable now. >> the way we run the country, the president is the guy. if he decides something, that is the guy who decides it. there have been co-councils -- i wasn't there but someone said that. in rome. that didn't work very well. i can't think of too many times where there were equal leaders. i remember read stkphrg that didn't work well at all. >> but if two people have equal -- and who decides come way -- >> it's confusing to the organization as well as to who in fact, is the leader. >> i think what you said earlier about the european banks not moving fast was probably the most important thing. especially when it comes to

quick decisions purchase in a crisis it's critical. the american banks moved faster. by the way, the american leadership of the entire banking system compared with the disparate leadership created better results. >> you have to wonder given evidence. as michelle said, no studies have proven -- even in the united states -- that the separation of the two have anything to prove. in other words, there's no data. >> we had someone else that was -- there are some people who think maybe it makes sense. but we'll have more. >> don't buy the stock. don't buy the stock if you don't like it. >> more from larry. and you have heard the saying deer caught in headlights. what about a deer caught on a bus. you probably saw this piece in the wall street journal a week or so ago. one physics professor explained

why co2 is good for many things and it has been demonized. and bart chilton. does he look more like the guy from coach or someone else? >> like a super hero. the act of soaring across an ocean in a three-hundred-ton rocket doesn't raise as much as an eyebrow for these veterans of the sky. however, seeing this little beauty over international waters is enough to bring a traveler to tears. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving.

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welcome back to "squawk box". in the headlines, walmart reported first quarter profit. 1.14 a share. estimates were for 1.15. revenue in its current forecast were short of consensus. u.s. same store sayles excluding fuel fell 1.2% in the first quarter. stock is indicated a little bit lower. as a dow component, that factors into where the dow futures are. we are an hour away from three key economic reports out. when i got in they were -- you were like sort of excited. >> yeah. >> this is a big day.

we'll get the labor department. weekly jobless claims, housing starts, consumer price index. and no one won last night's $360 million tax on the stupid. the powerball. that means saturday's drawing is $475 million. >> somebody has to win. >> if you round it down, it's zero. current levels would be the second biggest jackpot in powerball history. general electric and boeing alerting airlines about the long range jumbo jet. 118 planes, which is not very much. phil lebeau will fill us in. this is about 100 of them,

right? >> we're talking 70 planes all together. immediate inspection for 26. you know it's not good. g.e. and boeing. this affects the g.e. 90-115b engines. they are calling for immediately inspection. primarily what they're looking for is the gear box within the engines. there is the potential for engine failure. not saying they definitely will, but there is the potential there if there's gear separation. it affects 26 different 777-300 extended range. these are the 777 they do on long-haul flights across the ocean. you want to check them in two engines. it could be gear separation. they were made between september and march. shares of g.e. up 10% year to date. they are starting to come back with the rest of the market. two incidents have been

reported. 777 engines had problems. should be completed in a matter of days. american airlines is the only one operating the 777 ers. particularly within the last six months. it is now up a staggering 38% over the last three years. but really the last six months, guys, stocks fading. maybe they get up around 107, 108 mark, which is the all-time high. not in con receivable the way the stock has been moving the last half of the year. >> did they say what the fix is? >> did they say what the fix is? >> yeah. >> no. they said they will know fairly quickly when you look at the gear box and whether the potential for gear box

separation is there. there was a malfunction in terms of the manufacturing processes. and they will be able to pick it out almost immediately. >> you cover tesla as well. they have a department of energy loan? >> $465 million was the original deal loan. you heard people saying this might be one reason to steer clear of tesla. they're going to pay it back with a new stock offering. 2.7 million shares. they expect to raise $830 million. a good chunk to paying back the loans. the rest they will bank. you have to do that when you have a hot stock, guys. >> i notice that now. i say, what is that, jaguar? beautiful. >> it is beautiful. consumer reports, not the highest electric car but the highest quality ranking ever. and i have decided i think apple should buy tesla.

i thought it was ridiculous before. they have that in the couch cushion. >> google should buy it. then they should be buying teslas. >> who is to say he doesn't want to stick around. >> this is for real. you know what i mean. if they get the -- how far does it go now? it's a maximum. >> 265 miles on a full charge. that's what you're looking with with the highest range battery. that's enough o. an extended trip. we did our trip between d.c. and boston. >> and we used you to fit into that car. you were comfortable, right? >> and you're tall, phil. >> i drove the little one. it is fast. the only thing is you can't hear it. it's weird. you drove the big one, and it was nice inside? >> absolutely.

and it has the appointments you want in a luxury automobile. it is a car that's very comfortable. >> it's a annoying to me. china, you watch their growing pains in the car market. you think it's crap. and i saw tesla. they have all the machines. it is possible from scratch and make a high quality car. why did it take 20 years for g.m. to do that? >> isn't it great to see somebody reinvent a business that you thought could not be reinvented? >> $800 million is not enough money to be in the car business. >> he has gotten farther than anybody else. >> they got a good start. >> larry is right. >> don't declare victory? >> really? >> no. >> how many times the the last three years have we heard people say, yes, but.

>> if you were at honeywell, would you buy them? >> not even touch them. >> really? >> no. >> roll the dice. >> not going to happen, boys. >> would you guy an electric car? >> i don't like the value/cost relationship right now. but over time i think it will happen. >> i'm right about this. i only have one word for it. delorean. you would buy an electric golf cart? >> yes, tomorrow morning. >> phil, thank you. >> you bet. you have to see this to believe it. a deer decided he didn't feel like walking, so he busted through a bus window. he hopped around frantically near the driver before jumping on empty seats and running through circles in the aisle. the driver stopped the bus, opened the door and the deer got off. it did not pay for his fair,

f.-a-i-r. if you haven't seen tommy boy, i guess this is new video for you. tommy boy, they think it's dead. it busts out of a convertible. >> i'm surprised it survived. >> it probably didn't. >> you're putting a damper everything. >> bambi. >> cftc bart chilton on the possibility of a bloomberg investigation. what's next for the irs and the obama administration?

will coming up, princeton professor of physics defends his view and explains wii co2 is not a pollutant.

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earlier this week bart chilton talked about an open meeting where they will bring up this topic. he joins us now. you know, michelle always said you like to regulate. here you are again. you're everywhere. now you want to protect free speech or something. >> regulate the irs. try that. department of homeland security seized a big account earlier in the week.

there is some regulatory action. i don't want to regulate everything. again, years ago, really i was the guy out there against betting on movie futures. i thought it was sort of like a casino. >> before you joined the administration, right, bart? >> no, no. >> you didn't want movie futures to exist? >> no. i think they're just a gambling venue. >> so regulate them away, out of existence. >> they don't exist and i didn't want to regulate them. i didn't want to put the government stamp of approval. >> what are the key things about the bloomberg preach as we're calling it here? we have a graphic made up and everything. >> we should be able to look at them if it has an impact -- or if the trading arm may have an

impact on the news part. so when there's a permeable membrane between the trading arm of bloomberg and they do trillions of dollars in trading every year and what we're doing today is we're going to regulate these electronic platforms and presumably bloomberg won't throw away their business. they'll register with us. they will come under our authority we will look at things like the news part if there's a correlation that might impact prices or be involved in fraud, manipulation, et cetera. this isn't looking back at the stuff that's happened so far. but it makes sense i think. there's a real difficult balance between news with regard to a.p. they see national security. >> can't the market regulate? in other words, won't customers

be the ones to say i'm not doing business with a company that does x, y. >> well, yes. maybe, steve. it didn't work out so hot in 2008 and 2009 to let the free market work out. back in 2000 they said let the free market rolls. >> they're hardly same situations. >> fannie and freddie all along. bart, are you protecting -- see, i worry about it too. who is protecting the investment banks from bloomberg being able to see how they do things and sort of compete with them. >> i'm probably the last regulator that would want to say i'm the guy protecting the large banks. but that said, they do need some protection from news organizations if they are going in and mining data that is inappropriate and using it in an

irresponsible fashion. that's for every trader. of course we have a role if they're impacting the the markets. >> viewers say you look like the guy from "die hard". >> joe, you're the one that gets the shoutout in the wall street journal. >> steve looks good either way. better to look good than to feel good. >> coming up, defending carbon dioxide. it helps the atmosphere, not hurt it like everybody believes. [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪

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former honeywell chairman. larry, immigration. a lot of technology companies are pushing for immigration reform because they need more low-cost engineers. >> yes. >> your thoughts? >> i'm very interested. i think it's good for our country. here's 344-page document in its initial state.

and there are 700 proposed amendments. we have always tried to attract the best and the brightest. so we had exemptions for those kind of people. and we only had 60,000 or 20,000 exemptions with a college degree. good news, up to 180,000 permissible, as well as 25,000 exemptions. but if you're to get an h1-b1, they have to advertise for 30 days that there is not an equivalent for a u.s.person. >> there's a handicap. >> on the l1 used for transfers, the transferee has to acknowledge no one will be

displaced for 90 days if this person came on their site. >> all kinds of brattic stuff on the way. >> trying to attack the best and the brightest. >> why do we have quotas at all? everybody can get on board. why is that? >> there's an organization called the afl-cio. people in the senate make sure that doesn't happen. >> immigration quotas in this country long before there was in government. >> senator dick durbin you know well and he often has been

aligned with the afl-cio. i think it's fine they go through certain tests to be citizens. we are going to have border security much better this time. i think i'm okay with that. good stuff. steve? >> coming. are you ir-ate over the irs? calling for an investigation saying the response is too little too late. we choose to charles boustany in just a bit. still to come, cisco ceo, the future of tech, quarterly results and his view of the economy at 8:40 a.m. eastern time right here on "squawk box". ♪

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coming up, more on the markets. a ton of data still ahead, including jobless claims. plus, irs under fire. congressman charles boustany. and john chambers to discuss earnings and tech. that is an interview you cannot afford to miss. "squawk box" will be right back.

tomorrow, facebook one year later. where the company stands after 12 months as a publicly traded company. and what investors should be focused on at the social media giant. business insider ceo henry blogett. and steve bertoni joins us as "squawk box" looks at the issues that matter most to your money. share "squawk box" with a friend and profit from it. everyone's retirement dream is different;

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our squawk news maker. cisoc's chairman and ceo. red tape from doctors hospitals and insurancers putting patients in an uncomfortable position. >>. ♪ moon river >> the top disruptors in health care trying to increase efficient you seu and save you money. a flood of economy data. >> not a moment too soon. >> housing starts, consumer price, and weekly jobless claims 8:30 a.m. eastern.

the numbers that can move the markets as the third hour of "squawk box" begins right now. ♪ i've got a bad case of loving you ♪ welcome back to "squawk box" here on cnbc. along with michelle caruso-cabrera and steve liesman. former chairman and ceo of honeywell. first, michelle has your headlines. walmart report 1.14 per share, a penny below evidence. u.s. same store sales fell in the quarter. lower by 2 2/3.

the network equipment maker offering upbeat guidance on current quarter revenue. john chambers said they are seeing good signs in the united states. that stock is higher in the premarket. john chambers will joan us 8:40 a.m. eastern time in a first on cnbc. a potential problem with engines on the 777 jumbo jet. an an shut down mid flight this year. it is able to remain flying with the remaining engine. they will replace gear boxes produced between march and september. walmart might be slightly lower. the dow is lower six points. nasdaq a little bit higher by

nearly seven. >> the irs -- i'm not going to call it a targeting scandal. i'll call it a targeting situation. don't you think you should? >> they will subpoena your records and audit you. >> president obama made the announcement yesterday evening. >> yes, sir i directed secretary lou to follow up on the audit to see how it happened, who was responsible and to make sure we understood all the facts. today secretary lou took the first step by requesting and accepting the resignation of the acting commissioner of the irs. >> congressman charles boustany will be part of the hearing. chairman of the ways and means subcommittee on oversight, which has been investigating the targeting complaints.

and our guest house larry boustany is here. congressman, great to see you. one thing i read -- one of your peers. i can't remember which one in the house or senate -- said so far you're running up against resistance trying to find out exactly what went on. do you believe that all the paperwork still exists that will allow us to go to exactly where this started to find out? i mean, it's hard for us to believe it would be a nice way to col collate a lot of data. >> two years ago we began investigating these allegations. there were individual tax payers being targeted for audits. there were organizations applying for tax-exempt status being treated in a very abusive

fashion. can we get that paper trail now that's what we will start with with this hearing on friday. we have had nothing but stonewalling, evasion, and misleading statements from the irs, from the acting commissioner and others. and this is just completely ridiculous. we're going to get to the bottom of it. we're not going to stop until we do. >> if you were to take irs employees and hold them about their political leanings, it's overwhelmingly democratic. i guess it is possible if you had your druthers and you were a low level employee you might decide i don't like those tea party guys. i might do that. impossible, isn't it? >> it's possible. that would signify internal oversight and management at the

irs. i want to root out the rock there. the irs is the most powerful organization basically in our federal government. let me just say if a taxpayer is misleading or lies in its interactions with the irs, there's severe penalties. well, it goes both ways. we will hold these individuals accountab accountable. stonewalling and evasion has ended. we're going to get to the bottom of it. >> congressman, is your investigation going to be aided or impeded if there is a special council announced? how would you intend to work with such a person. >> the president said he was going to cooperate fully with congress. i'll take him at his word at this point in time. we have the responsibility to do oversight.

house ways and means has the stkurgz over the oversight, and tax code for that matter. no secret we're working on tax reform. we have a complex, unfair tax code. higher level officials at the irs knew about this. they were not forthcoming. they knew we were asking questions both in writing and in the context of formal hearings. >> can you follow up on that? how early, how public and what forum did existing complaints take before this just erupted? >> well, we knew that the director of exempt organizations knew about this back in 2011. in fact, when i asked commissioner schumman in 2012, he category denied.

we know the acting commissioner was aware of this. and a political appointee was aware of what was going on. lawyers knew about this. they were involved in meetings. >> should the administration have known? >> yes, they should have known. they answer to the treasure serbgts of treasury, and the president. they should have known what was going on. >> this is an organization that will get a whole new set of powers when it comes to health care reform. are you concerned about how that intersection is going to work? >> absolutely. this is something i've been deeply concerned about for quite some time. we have explored some of this in hearings previously. you already have a very powerful organization that interface

witness stand every taxpayer. now they are given expanded power to dig into other information. this is deeply troubling. we have to have checks and balances. we're not going to let up. >> certain people in this country that the only -- for the tea party -- this is to fall into their laps. this is about the only organization made for certain people to feel sorry for the tea party. >> i'm not even convinced. >> you get the ap. people are scared of the irs. we understand the amount of power they can holdover you. no matter who you are. this is a bipartisan outrage and it should be.

>> it is bipartisan. as a matter of fact, since all this broke, i'm getting letters from various individuals who have been affected by this who were afraid to come forward because of consequences from the irs or somebody else in federal government. i think we will start to see a whole plethora of tax payers coming forward with additional information. this is only just getting started. it's a big deal. >> there are some -- i've seen some articles written about corporate leaders that one of the reasons they never criticize certain things that the government has done is because they are worried it could affect the way their business is treated. and that's not a huge leap of faith from doing it to one group to doing it to another group. when you have that -- that's another aspect we haven't even talked about. they won't talk because they're afraid of what might happen to them. >> we're tpweg to reign in this

culture of abuse. we have been working on this. it's been difficult because the irs has not been cooperative. but i think it will add significant pressure to the irs, as well as the investigation that we in house and the senate are launching. we are not going to let up because this is too serious. the irs has repeatedly come to our committee and asked for more resources. why give more resources engaged in this type of abuse, so poorly managed from the top down. and the fact that the it was out of the loop or ignorant of what was happening, i don't buy it. we're going to get to the bottom of it. >> i know this is not going to go away. and i was thinking about it.

aren't e-mails shredder proof? e stands for evidence. 19-minute gap, that was erased. but this is probably somewhere. there is some kind of trail. >> we'll find a trail. i'm confident of that. i know we will talk to some of these lower level employees at the irs. and we'll take it all the way to the top. >> i know steve miller is now gone. >> i started buying audit insurance after my book came out. >> you can do that? >> yeah. >> oh, after your book. >> i've been searching what might have been written about this back in 2011, 2010. i don't see anything yet. but i think your comment earlier but this is a bureaucracy trying

to preserve itself, there's a lot of tax. irs was a huge focus of the tea party in their ire. you attack me, i'm going to audit you. >> did you hear what did they do to him? and i said he doesn't even file anymore. they just send him a refund. the irs loves him for his work for democrats. >> right. what tax division are you in? what town, joe? coming up, "game change"ers in the health care industry. disruptor 50 series continues with companies looking to increase efficiency and sufficiency when you need medical care. >> news maker of the hour. john chambers. he's going to join us at 8:40 a.m.

right now -- that's eastern. right now, look at the u.s. equities. a little bit stronger this morning. and mixed. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone

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today we're looking at the health care business. $3 trillion. that's how much the u.s. spends on health care each year. new invasionovationinnovations, opportunities to slash rising costs. cnbc health care disruptors comparison tools. to empower consumers.

it is trying to nate billions in waste by giving the ability to compare their options and customize their health care coverage, allowing them to make informed pricing decisions up front. applying the models like in travel and credit cards. it has banked $181 million in funding, more than any other current health care start-up. zocdoc believes it will make money for investors and cut health care costs. gingerio in collaboration with each other with a platform built for the device that people always have handy, the smartphone. it uses real-time data analytics to change behavior. saving lives and cutting costs. and the latest in dna analysis to create personalized genome

maps. they deliver customized data on their chances of contracting certain disease, enabling them to make decisions and reducing the risk and cost of fatal diseases. >> u.s. government expects it to reach 34% of gdp by 2040. cigna and cardinal health. board includes former apple ceo and top individuals from aetna and cigna. joining us is grant, thanks srofp for talking to us. in a business built around charging people when they're sick, how do you make money for preventive care. >> it's a great question.

thanks for having me. if we can find ways to engage people earlier, everybody can go with that. the employer might offer insurance. and all can win. our model is focused on getting the tools in the hands faster. take a piece of that so we're all aligned and incentives are quickly aligned. >> who pays you and how do you make money? >> our business model is really focused on really the stakeholders in health care. our primary business partners are the insurance companies. you mentioned cigna. and also employers and some provider groups. we have a subscription model where we will roll out to a business or employer. we get paid per member, per

month. who are you threatening? >> ironically, i'm threatening in some cases the same people we're working with. if you think how healing care has been built today, trailerly by the health services businesses around that tractional model. for us we think that makes no sense. we want to focus on the consumer. if they're healthy and that provider that's working with us, cigna, will make more money because they are able to lower costs and be more differentiated. well, i'll lower the cost. what can you do for me? >> are you going to go public? are you going to be bought by one of the insurance companies? >> i know health care is such a big deal. for me there has to be a company that can go public, can be a trusted third party.

i think especially if you think about the privacy and the value of private, secure data. you can't have private secure data and at the same time say you're going to get bought by one of the stakeholders. i'm a firm believer in hopefully a public exit down the road. >> what's your revenue going to be next year? >> we hope to be profitable next year. we're growing like wildfire right now. especially with health care reform. we have seen an incredible amount of momentum. it's the first time insurance and reform and government reform has driven value in the auntal space. >> grant, certainly an interesting space to watch. thanks for joining us. he's a health care disruptor from our disruptor 50 list. follow us on twitter and the full list at disruptors.cnbc.com. two more big disruptor reveals

coming up tonight on "fast money" at 5:00, the travel&leisure companies shaking things up. tomorrow, right here on "squawk box", the telecom sector. >> you're not here today. you had to go back to the farm after you saw paris. you're on for a little while today but it's not the same sitting here. >> it's not the same. joe, i wish i could be sitting next to you. >> larry is really smiling like a cheshire cat. a flood of economic data. closely watched weekly jobless claims. housing starts. building permits. wow, no wonder couldn't sleep last night. [ male announcer ] this store knows how to handle a saturday crowd.

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[ static warbles ] making headlines. jpmorgan sending a formal legal request to bloomberg asking the company to provide details what

viewers have been able to see. the bank seeking confirmation of controls to stop future breaches. john poulsen's hedge fund expects the housing recovery to grow stronger. he took a new position of 17 million shares in mgic and raised his stakes in two other mortgage insurers, tripling in radiant group and raising holds in genoweth. david? >> thanks very much, michelle. we have been following of course the fight over hess and the board between elliott and hess itself which has been going on for months. it appears the two sides are coming to a deal of sorts in which elliott will succeed in three of its nominees. it nominated five. seeking three of its nominees

while also hess itself will replace five existing directors with a new slate it had put up for this annual meeting taking place in houston today. there are the three directors from hess that are expected, again, according to sources, to be taking their place at the board of directors. in addition, the five new nominees. john will be the nonexecutive -- excuse me, chairman of hess. myers, quigley, william sprader, frederick reynolds. all of this adding up to a board that will be 13 people. three directors taou up. 15 stepping down. replaced by the three elliott names i just gave you. so a new board really at hess. nine new directors on a board of 14. a brutal fight that has taken place over months.

it is informperformance. the last 17 years under the direction of its ceo, john hess. seems to be very close, if not resolved with this deal between the two sides. getting three seated but 9 of 14 will be held by new directors and perhaps a new direction for that company. >> larry bostany probably knows a lot of these individuals. >> it's a great idea to have john as new chairman. i know him well. and i think that's a nice move by the hess board. i'm sure he will acquit himself very well in the days ahead. >> i wonder when you get that many new faces on a board, what is the dynamic like? particularly when you have a ceo been there 17 years. >> they have to be brought up to speed on the issues of the

company and what's going to be ahead of them. some training, indulgence in order to let these people be assimilated in a way that's productive. >> experience tells me that everybody kind of calms down pretty quickly. is that true? >> yes, it is true. these people are on a way to help the company. no reason they can't work harmoniously. >> berkshire hathaway, standard and poors went from a, to aa plus on the counterparty credit rating on big berkshire. they reaffirmed the a plus -- aa plus on some of the other

operations. that's just hitting. no word on the hess truck. >> i think that's going to stay with us. i believe so. though they are actually eliminating the gas station. not eliminating them as part of a sale plan. >> we have to go get this data. you can stay with us, if you want. >> no. you will see me from 9:00 to 12:00. that's more than enough. >> food and energy up 0.1%. year-over-year headline, up 1.1. core up 1.7. initial jobless claims, 360,000. that's 32 jump from 328,000.

970. we end up with 853,000 units. slightly revised 1.021 million, the best level. first time over a million since mid-'08. there is a bit of good news. according to my notes here, because we couldn't fit it in, over a million by permits. 1.017. so what we lost on the starts we have gotten on the backside on the permits. in terms of inflation, no surprises after yesterday's ppi. i have always said initial claims going the wrong way is a bigger story than them going the right way. they moved into negative territo territory. 195 to 191. now 192. >> steve, other stuff that you see there?

>> i'm looking first at the inflation numbers, one of the more curious developments of late. and i'm not, as i have never been, interested in the ups and downs of oil, gas, food. not that it's not important. but looking at policy. what i see is this issue of medical care being unchanged. education communications down 0.2. these are things that have held up. and the question becomes are we seeing less inflation because we are seeing less economic activity or some other interesting dynamic going on. the point i have made is higher results, they have been wrong. it's some concern.

and 360. wash out for it. i would be concerned. i want to read the story as to whether there's an issue here. housing has been a puzzle. we started off gang busters. housing has not been as good as you think they should be given what happened within. still tight credit conditions. >> i try not to be this way but i'm day to day. i was all set for softer. a bunch of data came in that was better. here we are back at softer. you have to step back and take a look and say, okay, it's hard to make an instantaneous long-term

call. you watch the bond market where yields dipped a little bit. prices rose. that's like saying, okay, i'm back. 170, 180, 190 the past five or six days. >> yes. . we were 163 a couple of weeks ago. we had the fed meeting. but the real issue that sparked it, was the labor report. very much after we had the taper story in the wall street journal, don't dismiss the fact that it made some nervous and swayed some investor opinion on whether there is going to be a taper. you see the polls. economists believe and they are believing the taper is coming. whether they're right or wrong, i can't say. >> thank you, rick. many come up, cisco

chairman. as we head to break, look at u.s. equity futures. they're now lower by 17 points. when we made our commitment to the gulf, bp had two big goals: help the gulf recover, and learn from what happened so we could be a better, safer energy company. i've been with bp for 24 years. i was part of the team that helped deliver on our commitments to the gulf - and i can tell you, safety is at the heart of everything we do. we've added cutting-edge safety equipment and technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all our drilling activity, twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. safety is a vital part of bp's commitment to america - and to the nearly 250,000 people who work with us here. we invest more in the u.s. than anywhere else in the world. over fifty-five billion dollars here in the last five years - making bp america's largest energy investor.

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welcome back to "squawk box". consumers in venezuela are used to shortages at the grocery store. but the company is now taking action to handle a lack of toilet paper. this isn't the first time venezuela has been caught with its pants down. who wrote this? tp shortages have been chronic for years now. they plan to import 50 million rolls to boost supplies. this is not a laughing matter. they run out of milk, food for babies. it's terrible down there. coming up, news maker of the hour, cisco beating on the bottom line. john chambers will join us next. , easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub.

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welcome back to "squawk box" the the futures a little weaker in the wake of the economic data. friends from panteon saying don't worry. it lead. he is miss missing that. i'll see what the economists think. obviously claims numbers were weak. >> cisco earned 51 cents a share, two cents above estimates.

$12.2 billion. it's not like being in a foxhole. we have done it. we have seen what each other can happen to us. we've laughed. we've cried. we'll always have pebble is what i'll say. >> joe, we absolutely did. for those of you who have seen my golf game, you should buy. >> i don't know what you set your alarm clock for, but thanks so much. at least you got good stuff to talk about. we have already talked about it this morning. tech is not mono lithic is it? this is more than a tech story i think. >> well, i think it speaks to cisco moving from a communications company to i.t., trying to be number one. it's our ninth consecutive

record quarter in terms of revenues and sixth record quarter in terms of profits growing faster than revenues. good balance across the board. u.s. is actually looking pretty solid in terms of growth. that's a good signal for the economy. but also the emerging markets did very, very well for us. so i think we're doing well. >> china was on a scale of 1 to 10, above five? >> i would read china about four. emerging markets, 13%. they're 20% of our business. it was pretty good across the board. russia grew 14. china 8. mexico 4. and the next 15 emerging countries grew at 13%. so we saw very good growth in the u.s. and emerging markets.

>> john, this is larry. nice to see stkphru it's a pleasure. we have been friends a number of years. >> we have. a couple years ago you weren't happy with your cost base. you put a program to reverse that trend. it seems it has worked. margins have continued to expand. do you want to talk a little bit about that? >> sure, larry. if you watch it is changing more rapidly than any time you and i have been in business. sisco we tend to respond to change and excel at it. we have lots of weaknesses but that's not one of them. if you're an i.t. company, you transform their business and pull away from competitors. that's what we have done. we continuously reinvent cisco

where appropriate and stay the court where appropriate. i think we are doing very well against our peers. >> when it comes to mood and confidence, are american companies in a spending move when it comes to the stuff you're sell? >> when it comes to the areas we're selling, yes. when you see our data center and cloud grow 77% we are outperforming the market. the global marketplace that were pretty tough we grew 27%. video, 30%. our role with them is changing. we had two board of directors on monday and tuesday. one global financial institution, one global major service provider. they were talking about us moving from a component supplier to number one i.p. player. we have a good shop becoming the

number one i.p. in the world. >> can you give us a read for the outlook of the u.s. economy. >> well, joe, i think you hit the area that is right. talking to the ceos, i talked to most all the business leaders and government leaders. but the order book is what was fascinating. if you were to bear with me for just a second, our enterprise business, top 750 accounts, about six quarters we were growing 15%. they then dropped all the way down to zero over year growth. it's been 5, 9, and then 10% growth. small, medium business commercial dropped all the way to 4 or 5%. high single digits grew 13%. our service provider grew at 8%. if you look nds, grew at 10%. public sector even grew 5. the numbers normally correlate to economic results two to four quarters out.

we saw this in august 2007 with when we said there was a problem with the financial markets and two years ago. >> so it's coming back. >> it feels good. >> >> it goes down where it is manifested. you are always straight shooting. normally don't see a 10% move. that's what we're seeing in your stock today. i don't want to get too political, but what are we going to do with re-paet kwraeugz? you said there's nothing i can do but build factories outside the united states. that got some people's attention. but here we are. >> well, joe, we are missing an opportunity. it's very easy to do that in the uk. it's very easy to do it in russia, china or india or canada, our neighbor to the

north. i prefer to have them here in america. we will grow dramatically fastener terms of job placement. this has huge eupl indications on our economy. it has factored in. >> i heard people come on and say if we do the holiday then people just do it again and that we can't change it because corporations don't pay the -- i'm not sure what the rationale is to leave trillions of dollars. >> what about doing an apple? borrow money to give it back to shareholders? >> first of all, we returned a great deal to our shareholders this quarter. 50% free cash flow to shareholders and we stkaoed kpaoeded that. we had 3.1 billion. we gave 1.8 back.

half on share buybacks. second part of the issue, we will make the right decisions long term. we are excited about what the stock is doing. >> so you're not ruling it out? >> well, i think this is something our country has to fix, joe. if you watch, we're the only that doesn't bring back. if we're competing against asia. and i think we can. we innovate faster than anywhere else in the world. we have to get a tax policy. we need to fix that. >> john, i hope to see you again. and i know it's early, but, you know, we love having you today. that was a great quarter. and i'll go along with you if you want me to that your golf game is not that good. but it is pretty good. it doesn't mean you're not a great ceo. don't sell yourself short. for as long as you've played you play a good game of golf. >> it's a pleasure.

coming up, several stocks on the move ahead of the opening bell. jim cramer at the new york stock exchange coming up. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: scottrade- proud to be ranked "best overall client experience."

welcome back.

watching cisco. it's up. cramer's here. jim, that was really detailed in terms of where the orders were, where they went and where they are now. and i don't know whether we can extrapolate the other tech companies but didn't that sound pretty good? >> it was actual levitt y on th conference call. it was great to hear. u.s. is really strong, emerging markets very, very strong. the fact he used the term "bottomed-out" about southern europe. i think this is one of those calls which just says, you know what? this stock was very undervalued. i have a couple of pieces of research in my hand that says they'll miss the quarter big. another reason the stock is up. just a great job by john and his team. >> my knowledge about what cisco does, like what colors the servers came in, whether i could get like a nice blue one. at this point -- i know less now than i think i used to know.

it's in the clouds now. >> can you imagine the time to run this company and move it into the right area? to me this has been an information technology kind of story. i think that's where gross margins are coming. no longer just a switching story. one statistic might be interesting for dell. state and local business was actually better in had this country. that's a very big important business for dell. there is a lot of take-aways from this conference call but cisco is back. i thought this conference call said cisco's distanced itself from every other player in that particular industry. juniper really feels like road kill after this quarter. >> there's some competition and some important parts of cisco's business. this industry is littered with companies large and small that have gone up against us in sale. i have no doubt we'll see this again. >> nortel.

the science from the north. >> littered with big-company carcasses, wreaking, stinking, rotting carcasses. service provider very good. enterprise, very good. dig in your heels is a really bad call when you have people like me reading your -- >> anything quick on walmart? >> i want to point out the other side. they did say may started off very strong. i believe them when they say weather. there were a couple divisions they were unhappy with sales. "may is off to a good start with positive comps. we continue to feel good about the underlying business." if you sell walmart here too hard i think you're making a mistake. larry bosley solved immigration, jpmorgan, we'll give you the last word when "squawk box" returns. [ penélope ] i found the best cafe in the world.

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get back to our guest here, larry bosley. we're going to talk to the climate guy and he's going to be in tomorrow. he wrote that piece. i have no evidence that al gore physically blocked his car from coming in to the parking lot. >> you have no doubt.

>> he could have blocked -- >> the guy's made a nice disclosure in that column that he's written. as we get down to -- as this year unfolds, we got these three issues that we're going to explore in-depth. the irs, as well as benghazi and the american people deserve we explore them fully and we get a good conclusion but i hope that's not how we spend the rest of the year. we need immigration reform, tax code overhaul and frankly we need some enabling legislation to help us take advantage of the natural gas resources we have in this country to help us serve energy independence. i hope it doesn't take congress the rest of the year at the expense of everyone else. >> they did say they were -- there are people that believe we won't get some of the other

stuff. >> thi think we're better off tn most. i think we're going to have a softer second quarter, second half the of the year will be better. we grew 2%, 2.5% this year, that's okay. >> larry, thank you. "squawk on the street" is next. good morning and welcome to "squawk on the street." i'm david faber with jaime cramer an brian sullivan live from the new york stock exchange. carl quintanilla is on assignment. futures mixed one day after the dow and s&p hit new record highs. let's look at housing starts. they were down 16.5% although building permits jumped to levels we haven't seen in almost five years. let's