board. it's wednesday, may 20th 2015. and squawk box begins right now. ♪ >> live from new york where business never sleeps this is squawk box. >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick with joe kernen and andrew ross sorkin. our guest host today has a new book out today about america's role in the world. we do have a lot to talk to him about in a few minutes. thank you for being here. a developing story out of california today. environmental clean up crews responding to an oil spill in santa barbara county. coating rocks and sand along a portion of the beach. officials say about 21,000 gallons of crude oil left an oil slick about four miles wide. that came from a ruptured

pipeline on shore and hasn't stopped at this point. crews are trying to contain the mess. right now let's get to the market business of the morning. you can see this morning the futures are missed. up by 5.5 and nasdaq down by 0.5. >> they say the country will not be able to make an imf payment due without it's international lenders. the euro hitting a two week low on renewed concerns about athen's debt and in corporate news the justice department expected to announce a settlement with five of the world's biggest banks. they're accused of rigging the currency market. fines are seen topping $5 billion. the first out of the gate. the swiss bank says it will

plead guilty and pay $545 million to u.s. authorities. a possible change in u.s. tax regulations would effect the spin off in alibaba. it's working toward the plan spin off in the fourth quarter and ads it understood the irs statement was not specific to the company. it was a statement made yesterday about shifts in how they were going to be approach approaching spin offs and whether that effects this and also depending on what happens to yahoo! japan. >> these were the ones already in the works. >> correct.

>> and then whether they think they'll get it done in the fourth quarter. >> the meeting at 2:00 p.m. eastern we'll get to see just how dovish these people are at this point. wouldn't be surprised to see some dovishness. they get scared of their own shadow at times. >> among the companies reporting quarterly results before the bell target staples, hormel and lowe's. just hitting the tape and fell short of estimates even though home depot was pretty good he's fighting to reduce bail condition and it will determine whether he'll be expedited to the u.s. it was looking at an article i

saw yesterday by one of our competitors that was tracking at&t versus apple. it's already doing better. >> and they call it the dow jinx and we'll see how long it lasts and it just also happens. apple made a base here and it looks like it wants to take on 800 billion and then who knows, maybe it's a trillion. >> no tv right? did you talk about that yesterday? >> no tv. >> i thought they said that

later in the day. >> we said it here yesterday. >> that was two days ago -- i don't want to say it we were probably a little late to the game yesterday. >> two days ago. >> yeah really. but just to be clear just to the physical they're not going to make a fiscalphysical tv but they're going to make a better box. an awesome crazy box. >> i thought it was going to be an ultrahigh def. >> i don't think you want to get into the hardware business. >> then all of a sudden what is apple -- only going to be one company left in the united states? start making breakfast cereal? they don't need to do everything do they? >> i would not make a tv. >> the way they do style and the way things work but who knows if apple can make a tv.

>> when you look at all the competitors in that phase they're getting out of that the thing that worries me the most is apple's data is much more secure and the data is more and more important and valuable. the most important market to them is one more problematic for them that is a fundamental challenge. apple's plan over the long-term, i don't think they have one. >> in terms of controlling that market. >> absolutely. they want to be a global company. >> china has been a good market for them. >> they've been a great market for them.

>> we pay that price every day. >> i thought you were going to say, wow, i wish i hadn't done ultrahigh def. wow, it ruined that. but this is worse than high def porn the way we look on certain days. >> a little hot in here this morning. >> is it? >> yeah. >> the lightning? >> do you think if you make public your concerns. >> i don't think anything will work at this point. i'm giving up. >> but you continue to drink and smoke every night. >> that's what it looks like. the lighting here is a little harsh. >> some of your vices are. >> coming out. we can't cover things up anymore with the make up room. let's get to today's stocks to watch. shares of etsy is under pressure. the online seller of crafts and other items posting a wider than expected loss.

it will increase the pace of hiring and spend more on hiring. check out pep boys shares jumping on being approached by a takeover. they approached the topic of purchasing a retailer. it's up by 7%. united technologies is reportedly talking to possible buyers for its aircraft business. one issue, a $3 billion tax bill is said to be holding back interest of big companies. >> let's check on the markets this morning. take a look at what's going on. off by about a point and nasdaq up about a point and a half. let's take a look at what's going on across the bond there. you see that's a mixed picture there as well with the dax and cac off marginally.

let's go over to asia and see what's happening there now. it's a mixed picture across the board. the nikkei is up not bad. close to a better% and hang seng is off and let's do oil. crude, 5862. i want to talk to ian about crude in a moment. let's take a quick look at the ten year. >> finally should we do the dollar or the gold? >> we have a mixed picture in the currency world. do you want to talk markets? >> sure. let's talk about it. check out gold prices by about $1.20. joining us to talk broadly on the markets is the u.s. equity and derivative strategist at ubs. thank you for being here today. looking at the markets it's been

surprising to see the markets hitting new highs. you have people talking about how stock could be overvalued at this point i wonder what you think is driving things here. >> the market is acting as a discounted mechanism here. looking through all of the worries. whether it's the economy, earnings flows, valuation, et cetera, geo politics obviously, looking through and the message is the global economy is going to get better in the second half and into 2016. >> so discounting all of these things there aren't many alternatives when you're looking at the fed reluctant to raise rates. >> we flipped the play book from last year. u.s. stocks rising. oil moved back up. the dollar has been falling

recently. maybe a bottom but the dollar falling and will look past to better earnings growth for the second half of the year and better economic growth as well. >> a lot of that is noise. if you look at the moves we've seen in the dollar. you're probably thinking that's noise and you want to figure out what's happening with the economy and what do you expect for the rest of the year. >> we should see an economic rebound in the second half of this year. we expect the dollar to resume it's strengthening trend but at a much slower pace than last year. we saw massive strengthening of the dollar and 26% and the market was moving around there. but tapering was tightening and

12 plus months into the cycle so the rate hike itself isn't going to set markets off on the down side or on the side for another tightening move by the fed within the bigger cycle. >> do you think the bigger issue is that the consumer is hanging in there? or all of the weak numbers is that because people are still spooked by what happened in 2008? they're not ready to take the savings they have seen and put it back into the economy? >> there's definitely an element to that. the memory of 2008 does linger but it is our expectation that as we continue to see the jobs numbers remain reasonable and we continue to see gasoline being reasonable at some point the consumer will rebound and in the past this is usually happened sort of 9 to 12 months after the oil price first starts to fall and we're right at that sweet spot just when economists have

more or less given up a lot of hope that it's going to happen. so that's a potential upside surprise for markets. >> also savers have been getting nothing. the implication is that 25 turns into 50, 75 100 and demographics as well, right? we have an aging population. so people that rely heavily on bonds and income also getting nothing finally seeing some light at the end of the tunnel. >> what do you expect to see with the stock market by the end of the year? additional gains? >> we do. we expect a return of around 7 to 8 and 4% earnings growth. >> geopolitical. the dollar and the united states looks more stable. how much of that do you think is already baked into the price. >> it is remarkable the resilience and the threats to

europe are such that the european markets can have performed as strongly as they have. it's essentially a look through and realization that rates are as low as they are so stocks look good in general. >> i want to thank you both for coming in today. >> thank you. >> and our guest host this morning as we said earlier is the president and founder of the group also editor at large time magazine and foreign affair columnist for that magazine. ian has a new book out. stood the big day? >> we're out. >> officially launch day. it's called super power. three choices for america's role in the world. congratulations on the book. what number book are we on now. >> 9. >> 9 books. >> but most of them were academic and you would not have picked them up. we certainly wouldn't have launched them here on squawk. >> anyway the subtitle is three choices for america's role in the world. so the obvious question is what are the three choices for

america's role in the world. >> i think the response is to start we do have choices. despite that american foreign policy is in decline the united states is not going to only do one thing and i think we'll see that in the 2016 elections where foreign policy is a big part of the conversation. very quickly, the three, indepenceable america. the idea that we don want to play a leadership role but no one else is going to and no one else can or wants to and given how bad that means the world is going to turn out, not just the middle east but eurasia and more broadly, what will happen with the allies we have to continue to promote our values and be as much of a leader in alliances and global architecture that we can. second is money ball america which i probably shouldn't use because the oakland as are in the toilet right now. >> the old moneyball. >> the idea it's very unsentimental. it's we're not going to promote democracy when people won't

listen. we're not going to force human rights on countries that are able to say no and the middle east is too much of a disaster. we're going to really focus on the investments that are going to provide not values but value back to the american investor. it's much more looking at the u.s. as a corporation and how will we run it to maximize it. >> and you think washington is going to run this country like a company. >> i would make the argument that when hillary clinton was secretary of state her strategy did not work the reset to russia for example, really try -- libya, only pinpoint and get rid of gadhafi and don't spend money on it and focus on economic state craft. focus on the transpacific partnership. that was the beginnings of that kind of policy. hilary was the one that said how can you criticize your banker on human rights talking about china. that's a very moneyball approach. >> was it the country as a

foundation or clinton foundation as a corporation. i knew you would spin it the other way. >> nonpartisan. >> oh, yeah exactly. so did george. he did his best. with what happened should we care about that? the white house said they're not going to like their -- light their hair on fire and there's people with skin in the game said we took it and cost a lot of american lives and now we lost it but it wasn't isis that had it last time. this was a whole new enemy or do we look at it as the same kind of hard liners. does it matter that it's lost? does it matter that baghdad is 70 miles away? >> it matters for the iraqis a great deal. the question is does it matter for the united states. >> not with moneyball. >> most importantly it doesn't

matter with independent american. the third choice which is a real choice saying let's lead by example. don't demand respect by saying you have to do this. command respect by having people capital, actually come to the united states. we should be too big to fail. so for lots of americans that are agitated but can't find it on a map. >> do you have a deal to co-promote your books? is that how this happened? he's pitching too big to fail and you're pitching -- was this all agreed upon. >> it's a whole royalty scheme pretty much. >> let's go back for a second there's a real question. when you have marco rubio standing up and saying i'm indesensable. lindsey graham is going to get in the race because he knows foreign policy and saying we have not done nearly enough on any of these fronts you still

have to say what exactly are you going to do and why? how much is it going to take? i don't happen to believe after hearing everyone from washington yesterday saying we must destroy isis and the same people saying no boots on the ground i don't think those things actually go together. >> but how about the strategy so far is raepeaping rewards. is that still kind of true that there's success with the way we tackled isis so far. >> i think if you ask in terms of the resources that the americans have actually put toward it and the level of direct risk to the united states one could make that argument. in terms of whether or not iraq and syria are getting worse, the number of refugees the instability that's coming to countries like lebanon and jordan and turkey also going across the mediterranean. >> we put boots on the ground to get their financial guy supposedly and the timing was

interesting that they fell almost at the same time. >> you want them to fall before you did that right? better to have the good news the reveal should be later but of course they got him when they got him but the real point there is the reason you send boots on the ground for that american special forces is because you believe you're going to get a lot of intel out of it. >> it's targeted. obviously we're not going to spend 6,000 boots. we're going to send what was that 40 or 50 boots. >> but the geo political danger in the middle east is great. the saudis doing very badly and the iranians are going to help us on the ground. nobody can think that's going to be a good fit over the medium term right. >> i just i don't know. did he join twitter so that we wouldn't talk. that's what all the networks talked about. >> i didn't talk about that one bit yesterday. >> not you. >> we talked about it. >> such a cute conversation with bill clinton. >> we are going to talk about

ramadi. we have colonel jacobs joining us. >> coming up why shares of lowe's under pressure this morning. but first here's a look back at this date in history. ♪ e announcer ] your love for trading never stops. so open an account with schwab. and when a market move affects, say a cloud computing stock you're holding, we can help you decide what to do. with tools that help you see how market activity is affecting your positions. so when the time comes to decide whether to scale in or scale out... you can make your move wherever you are. and start working on your next big idea. ♪ ♪

lowe's earnings and revenue missing the mark this morning. senior analyst covering retailing and hard lines at jp morgan chase. it's a tale of two cities with lowe's and home depot. we're trying to put our finger on what the difference is. do you know? >> if you look at the gap it's 70% execution and it's 30% location. markets rebounding faster on the housing side. they have very high exposure to california florida, nevada and they have better street level locations. the other 70% is day-to-day you know face to face interaction with the customer having the right products in the right place at the right time. >> they don't know how to do that yet or have tastes shifted? >> i think it they're trying to get there. if you have a good experience at home depot you're likely to go

back there. they not only have to screw up the opening door to lowes but you have to have a good experience to want to go back there. >> five years ago weren't the rolls switched? >> it was more about ten years ago when lowes was doing much better then. >> at home tee po you go in and some people thought it was a sears where you might not see anyone that works there the entire time you're there. >> now he did a great job obviously but the same thing happened to lowes. who took their eye off the ball there. >> like many what i would describe as atrofied growth companies they waited around for the macro while home depot focused on execution. they started to turn the ship back in 2012. they are closing the gap versus home depot. comps trailed by 180 points. that was 2 to 300 basis points

but it takes time and clearly the execution still not up to par. >> do they still get mileage out of being different than home depot in terms of the experience. does that still work or do people just go to the one that's closest. >> i've been in one recently and was put off by -- they didn't have a lot of items in stock. this is a one off experience. i walked in. some stuff i liked. >> you were looking for drill bits. >> no, for stuff for the bathroom to change out a lot of the fixtures and things. this could be a one off experience but chris what's your experience with it? what have you heard? >> if you look at the in stock rate at lowe's it's lower than home depot. it's better than three years ago. they're changing the way they planned the business. changing the way they allocate inventory. tots to the question on the experience in the store, lowe's

does better on bigger ticket projects. they have more kitchen and bath and appliances. the market is coming their way but home depot is not standing still. as they go more toward big ticket home depot is putting a lot of dollars behind that to go after where the consumer is heading. >> actually lowe's stock has done better anyway in the past year but results haven't seemed to -- weren't born out by that. >> all right chris. >> thank you. >> thank you. do you go there and see what's going on all the time? is that your job? you have to do that? >> yes, we donation wide spring store tours. >> come on. >> yes, we do. we have been in d.c. miami, new jersey, san francisco. >> your people. it's not you. your people do that and report back to you, right? >> i do it as well. >> he has to see it with his own eyes. >> you've never stepped foot in either have you? >> home depot i have. >> light bulbs. >> they're right here.

>> light bulbs. >> that's mine. >> important things. >> flash lights. flashlight batteries. i spend more time in the stores than you guys do. >> when we come back this morning, the iraqi military suffering another huge loss. the key city of ramadi the latest taken over by isis. what this means to the united states and the world right after this.

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welcome back to squawk box everyone. the iraqi city of ramadi is

under the control of isis despite months of u.s. air strikes and training of the iraqi army that ran from the fight. the u.s. forces sacrificed so much in that city during the iraq war. richel has more on that. >> for the hundreds of thousands of u.s. troops that fought in the iraq war, the loss of ramadi is painful and personal. >> back in 2004 brian was one of many marines that made ridding ramani of islamic radicals his mission. >> we need the iraqis to cooperate more. >> back then it worked. ramadi was hard fought and won. but today the city is in isis hands and now a business man in new york he's heart broken.

wondering was it worth the sacrifice. >> for us it's a big blow. we fought for that city for a reason. if it was that important for us to fight and die for it should be important to keep. and it's important not just for americans but the iraqis as well. >> with ramadi gone what's to keep isis from baghdad less than 70 miles away? the answer could be these men. ma malitias backed by iran. iraq is imploding and washington is trying to manage it by remote control through groups with competing agendas. a decade ago hundreds of americans gave their lives in the fight for ramadi. >> not just american soldiers and marines lives but civilians and iraqis fighting with us that lost their lives. >> now a sense of accomplishment of those that served in iraq is being chipped away one city at a time. richard engle, nbc news. >> joining us is jack jacobs and our guest host this morning.

colonel, what happened? >> the iraqis who we spent a lot of time training and equipping decided they weren't good at what we taught them to do and ran away. >> it's courage and bravery and willingness to lay your life on the line. >> you have to be serious about the objective and the iraqis like the united states don't really have a strategy. we just have tactics. >> i had read though, tell me if this is correct or not. i read that the americans asked the iraqis not to send in additional troops. they wanted the local troops to be fighting. >> it's a suni area so you need suni people there and they're not up to the task. >> would it be better if it was like korea where we still had guys there. cynics would say there was an election coming.

it was a first time promise that we would get out and we got out too quick. would it have been preferable to leave u.s. troops there. >> you don't know the objective. >> no i'm convinced we don't have an objective. >> what should the objective be? >> in this case? >> what should it have been. >> it should have been not to go for the first place. >> we talked about that a little in the last three weeks. >> if you're intent on holding on to iraq it's going to take at the very beginning of the war in iraq several hundreds of thousands of -- not like korea we've got 27,000 people there. several hundreds of thousands of americans right there for decades. >> will the administration set it's hair on fire there. >> i don't think the administration has any hair to set on fire.

>> nothing at all. the objective of the administration is to leave. it has been for a long time. >> so we'll give baghdad up? >> i think so. i think the administration will give anything up. >> i talked to secretary gates yesterday. he's been critical of complete absence of a foreign policy strategy in the middle east but also has been saying if you just provide sort of a relatively small number of special forces on the ground that he actually believes that that could really turn the tide to both engaged directly and a lot of those people are there and as of yesterday they're saying we're sticking with our strategy. is gates to optimistic? >> yes, terribly optimistic. despite the fact that he was secretary of defense he never spent any time on the ground. you know at the end of the day it always takes more resources to hold on to an objective and you might win a battle or two but if want you want to do is hold on to the objective, whatever it happens to be it

takes many times as many people as you think and just sending some special forces or even special operations forces there, additional equipment which is what he's calling for, more training, mobile training teams and so on not talking about anything that is going to change the ultimate result. it takes a lot of folks on the ground to get it done. >> is there any political figure in the united states of note today running for president or not that's articulating a strategy or the resources that would be required to turn this around, in your view. >> no none is. there's people saying what we need to do is a better job and to say in a larger sense what secretary gates is saying but they have no idea how to operationalize it. it's one thing to say what we really need to do is win in iraq but nobody has any plan to do that and nobody has any

understanding of what the political will is in order to accomplish. >> and we haven't even mentioned syria. >> right? >> no who is on the other side. we're on both sides of the game over here. we're the air force supporting iran in iraq and we're on the other side of the trend in syria. >> things sound awful if you look at the headlines and try to strat apologize where they go what's the best case scenario in any situations? the best case scenario for our situation. >> containment where the islamic state is not able to maintain itself because it runs otolaryngology of money. it's not good at governing the infrastructure and as things continue to get worse other countries in the region recognize for the near term they have to cooperate more. >> you're suggesting -- >> the wars with iran, what were those about? did iran want iraq -- will they finally end up getting iraq

after all is said and done. >> that's why the colonel and i were talking about this before. that's why they were so up in arms. >> you're suggesting the only way we win is the unforced error on the other side. >> if you ask me given what's on the table, given what people are talk about. not we're going to win but people talking about the resources they're going to apply it seems that containment until i.s. implodes is the best reasonable out come. >> we have been talking about the military instrument of power and before here right in this very place i suggested some time agatha our focus on the military instrument of power alone is not a good idea. you can actually achieve any objective and ian just mentioned something really important. focussing on other instruments of policy particularly the economic issue in the policy we

have him. we didn't care about him but we cared a great deal about all the information he had. we know where the cash employeesflows are and who the contributors are. if we keep operating in that environment and trying to use other instruments of policy in order to not alter the situation but contain it we'll, in fact be able to contain it and it requires the instrument of diplomacy too which means putting the squeeze on iran to preclude what you're talking about. >> but when netanyahu was here he said you know isis is bad. iran would be worse. so i would think sooner or later the world will not allow isis to exist. >> i don't know. >> so then iran displaces isis. is that okay or worse than isis. >> hillary clinton when she answered her six questions yesterday the one substantive was on iraq where he said the iraqis are going to have to fix

iraq. that doesn't sound like a solution for destroying isis. that sounds like a not clear that people want this to be our problem and i understand the white house setting it's hair on fire. >> they don't if jack's right. it will take hundreds of thousands of forces for a decade or longer. >> two possible outcomes. one is what you're talking about. iran takes over and they control the whole place. >> they're our friends now anyway. >> correct. we're on their side. >> correct. the second is something that joe biden said. it's going to dissolve into component pieces. sunistan and that's going to generate a long-term regional level. >> i believe that's true. >> wait long enough and even joe is going to be right. >> you have to be as old as i am. even just -- you have to live

long enough to see joe be correct. >> his idea was we don't let it happen. we force it to happen. what we have discovered in the last decade is we can't force anybody to do anything. >> all right. thanks. >> sorry. >> well thank you. coming up a norwegian cruz ship runs a runs aground. plus johnson & johnson ceo. sis coe cisco's new cfo kelly cramer. check out the dollar going the right way in terms of what i'm concerned. stay tuned. we'll be right pack.

welcome back. the latest drama on the high seas with cruise lines. a norwegian ship running aground on a reef after leaving bermuda for boston. small boats, divers and tug boats circled the cruise liner carrying more than 2600 passengers and more than a thousand crew. 4,000 people. the norwegian dawn ran aground. not don. dawn. ran aground after a temporary malfunction and iltst's steering system forced it off course. there's the reef. high tide pushed it off the reef. >> never going on a cruise. >> that's the bermuda triangle. >> it's around there. >> it's exactly there. >> bermuda is a very cool place.

>> a lot of folks happens on the weekend. >> beautiful golf course. >> you have to fly everything in. >> but worse than the caribbean. the food is worse. >> they don't grow any -- the fish is not so bad. >> but it's still close. >> it is close. >> i don't know. >> but it's not warm in the winter. >> like south carolina. >> kind of. for now. >> like it a lot warmer. >> maybe. check out this story, an auto industry writer crashing the new camaro at a launch event. this is a nightmare for anybody that's ever done this. check this out. he approached a hard turn at the racetrack in detroit. >> oh boy. >> oh geez. >> tires screeched. the reporter penned an apology saying he was going too fast on

a track in a car he didn't know. >> who pays to fix that? >> i don't know. poor guy. >> gm. >> thank you. >> poor guy. >> i don't think it's -- >> it was a layup. i walked right into that. >> coming up when we return concerns of possible change in u.s. tax regulations could effect yahoo!'s planned spin off in it's stake in alibaba. we have that story and a lot more when we return. the promise of the cloud is that every organization has unlimited access to information, no matter where they are. the microsoft cloud gives our team the power to instantly

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welcome back to "squawk box." yahoo! stock falling sharply after reports that the irs is considering changing the way it treats tax-free spinoffs. joining us to talk about it victor anthony, managing director at axiom capital management. good morning. >> good morning. >> does this matter? there's a question mark about this. >> there is. i think the irs official's statement was somewhat ambiguous. it wasn't clear whether or not it applied to spinoff submissions yesterday or any future submissions they received. he said they were going to suspend evaluation of any spinoffs. i happen to think this doesn't

apply to yahoo! at all. >> yahoo! put out a statement and says they understand the irs statement is not specific to yahoo!'s plans spinoff and reflects no change in applicable law and does not affect previously filed ruling requests. how do we know that? >> i hadn't seen that but that's essentially what i was thinking. >> how do we know that they're not going to move the goal posts? >> listen i think marissa meyer yesterday said that their spinoff was on track for the fourth quarter. i'd hate to think that she was blindsided by the irs' statement. >> it's not like the government is consulting with marissa meyer before they decide to make statements. >> they have lawyers back and forth that talk. >> but if in fact they're going to change the policy which would be a broad shift in terms of how spinoffs are taxed -- >> correct. >> -- you could imagine they'd try to do this not just on

future deals but choose a date and do it retroactively, no? >> but i think the way he made that statement, i think it applies to any sort of future submissions. based on that that you just read it seems yahoo! has the same opinion. >> that is the view of yahoo!. what does this do in terms of the yahoo! japan piece of the action and what's going to happen to that? >> that could complicate matters in the future because that hasn't really been submitted yet. i think yahoo! has plans in the future to possibly spin that off as well so we'll see how that goes and what potentially happens, but it's a much smaller impact. you're looking at roughly just $4 billion taxes. >> so what would the tax bill be if this was taxed on a normal basis? >> about $16 billion. >> $16 billion? >> right. it's a huge tax bill. right now the stock is pricing in a fully taxed scenario at $40

a share which i think is irrational. >> joe, you haven't piped in with the question is yahoo! patriotic, trying to skip out on the taxes. i thought you would try to give me or ian a hard time about this. >> no. that's what you always bring up. i don't think of taxes in terms of that not paying them you know that. i wasn't really paying much attention to your interview actually, but go ahead. >> that's okay. >> is yahoo! unpatriotic? >> i don't think so. you know i think these are the rules and they play by the rules. these are tax rules. >> i couldn't come up with that question. ask your own questions. >> that is my -- >> i know it is. >> well no but that's one of the -- >> you're channeling it. >> i was trying to channel what i thought you would do to me but that is a real question. >> it's a fair question given the political environment today. but these are the rules and yahoo! is playing by the rules and everyone in the past has played by the same rules. >> what does yahoo! want when

they are exposed as an operational company. >> i have the yahoo! core business worth between $5.5 and $6 billion, so that's what the core business is worth. >> long-term is that an independent company? >> i don't think so. >> so what happens? >> i think when they rid themselves of ali baba shares i think someone comes in and buys yahoo! >> is that a two-year proposition? for some of the tax implication, right? they can't just sell themselves immediately. >> precisely. so you're looking at more than two years from now, correct. >> thank you for coming in, appreciate it. >> sure. coming up a "squawk box" news maker, former treasury secretary larry summers will come by. stay tuned, "squawk box" will be right back.

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u.s. stocks at an all-time high. markets in japan surging. but the euro falling again overnight. former treasury secretary larry summers is set to give us his read on the global economy straight ahead. plus jobs in america created by china. new data on where chinese are investing. and the colonel is back. >> nowadays you've got your international space station, your double-sided tape your cargo pants. you seen these pants? that's too many pockets. >> kfc bringing back the iconic chicken salesman. will it be enough to retake the u.s. chicken crown from chick-fil-a, as the second how were of "squawk box" begins right now.

♪ oh the sun shines bright on my old kentucky home ♪ >> live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box" here on cnbc first in business world wight. i'm joe kernen along with becky quick and andrew ross sorkin. with us izzy ans ian bremer author of "superpower." you know what, people at home are saying i'm not going to work because they only got to two of them so this may be -- >> they're going to take the later train in. >> checking the markets this hour u.s. equity futures after struggling a little bit yesterday are up 19 points or so. it was interesting to watch once again how we dealt with good

news. good news on the housing front. suddenly rates backed up again, the dollar strengthened. we don't know what we want. do we want good bad or just right. it's like the three bears. overseas, japan, the nikkei jumped to a 15-year high on upbeat economic data. and the euro fell to two-week lows overnight, but not 1.10. remember 1.14 i said it's got to go down from there. >> you were right. >> i'm going in a month. and i think 95 would be good -- i'd like to actually be able -- >> you're not getting 95 in a month. >> you don't know we can't. >> i'll bet you $10. >> i would just prefer to go where my dollar is actually worth more than -- would that not be awesome to go and actually be making money? good for you because i might just stay there. >> wow. special planning that's what i like to see. let's tell you about some of the top stories at this hour. an earnings miss for lows and the stock is down sharply.

the home improvement retailer earned 70 cents per share, four cents shy of estimates. also big news the justice department planning to announce resolutions with some of the world's biggest banks. they are accused of rigging the currency market. total fines seen topping $5 billion. and attorney general loretta lynch will hold a news conference at 10:00 a.m. eastern time. also ubs already agreed to play guilty and they paid $545 million to u.s. authorities. we're also watching shares of yahoo! this morning. they're bouncing back right now after getting slammed late yesterday. at issue was concerns we just talked about, a possible change in u.s. tax regulations would affect the company's planned spinoff of its stake in ali ali baba. they say it may not relate or impact this particular decision. of course we don't know where

that stands at the moment and people are taking bets. yesterday dallas mavericks owner and "shank tank" investor mark cuban gave his view of economic growth. >> we feel growth whether it's at the mavs selling tickets, watching the nba ticket sales, all our little companies, it feels like it's growing. having seen the gdp reports before, the 0.2 and having everybody feel like things were going backwards, i didn't see it. >> he's in texas. >> he's in texas. oil prices are starting to pick up a little bit and maybe that's a direct reflection of what he's seeing but let's see what our next guest feels about the economy. larry summers, former treasury secretary, it's a pleasure to have you here today. >> good to be with you, becky. >> what's your broad take on what's happening in the economy right now? >> the u.s. economy is growing. it's growing faster probably than in the first quarter. it's going to probably grow for the four quarters of this year

somewhere in the low, mid-2s. that's not inspiring performance but that's hardly a reversion to a recession. i think there probably were some abhorrent elements in the first quarter, but i think we still have a serious challenge of getting escape velocity and reachieving rapid growth and that along with inequality has to be a central issue for us going forward. >> last night i spoke with mark lazari and he laid out his thesis for why we've been growing at a lower than expected gdp for so many years. he said it's because regulators have cracked down on the banks in such a big way that credit is not available to anybody who actually needs credit. large companies, wealthy people can get credit. middle class people cannot. smaller companies cannot. and that when you're in an easy credit environment, that fuels a booming economy that we are not going to get back to that.

he says it's that simple. do you agree or disagree? >> i think i disagree more that i agree. there's plenty of cash that's not getting spent. plenty of cash that small businesses have. plenty of cash that households have. so i think there are issues of small business credit availability that require attention, but i think that there's a broad phenomenon that there isn't quite enough demand in this economy and it's not growing quite rapidly enough and that's holding back investments by firms. if you've got excess capacity why invest more. so i'd like to address the issues that you described. i think in particular there's a problem for middle class families who are looking to buy houses that the credit standards which were much too easy a few years ago, the pendulum swung too far and they're probably too difficult

right now. but i don't think you can blame all of this or most of this on those kind of phenomena. i think a very important thing, issue for the united states is what's happening in the rest of the global economy. you know everybody wants to export capital. and whether it's because qe is succeeding or because qe is failing, there's downward pressure on the euro. each of the major emerging markets is its own story, but it's a story that ends in attempts to export capital and we end up as the destination for that capital and that hurts the competitiveness of u.s. producers. so i think it's a much richer kind of story. >> just to be fair you also pointed out that there are ghosts of 2008 that are still around, both in terms of what corporations think and in terms

of what consumers think and that it's hard to recover from something like that and that people don't put a lot of faith and necessarily spending money where they would before. part of this is people have long memories with these things. >> i think that's probably right, although if you look at measures of risk aversion they don't look especially high. and if it was dominantly that, you expect measures of risk aversion to look high. i think we need to do more to get this economy going. that's why i've talked about the importance of stimulating both public investment getting us past a crazy low level of infrastructure spending. crazy in a macroeconomic sense because people need to be put back to work. crazy in a microeconomic sense since we can borrow money and we have payoffs more than zero.

equally we've got all kinds of barriers to private infrastructure, whether it's building oil pipelines or replacing coal with healthier fuels or assuring an adequate broadband infrastructure. this is a moment of epically low capital costs, a moment of epically low employment and so there's lots of opportunity to find people to do the work so it's cheaper than it's ever been and we are doing less than it's ever been. it really makes very little sense as a national economic strategy. >> hey larry, could we agree and come to a meeting of the minds on a combination to address income inequality. could we agree that growth would almost work at this point because the labor market is tight enough to where we got better growth you'd probably see some wage growth. so we both want growth and we could do a combination of ways of stimulating growth. not just redistribution not

just necessarily raising the minimum wage but maybe to pro-growth strategies whether it's helping corporations with the tax rate or with the territorial system or something like that? could we do both to narrow the income inequality? >> joe, i hadn't really thought of you as a party to negotiation. >> i'm trying to -- >> on economic strategy. look, i think what you just said is what i've been saying for a long time. >> see, that's what i wanted to hear. i want approval. >> well -- >> and that was it. >> here you go. i think that we need a strategy. it can't just be one thing. public infrastructure, private infrastructure. i agree with you that the right kind of business tax reform would make a positive contribution going from here. i think we need a globally oriented strategy. we've got -- we've got to open markets in the united states. >> and we both want to build keystone. we both want to build keystone.

>> i understand why people are worried about trade. the reality for better or worse is that we've got an immensely open market. given that we've got an immensely open market when you have trade agreements they're mostly about what happens in the other countries and how their markets are getting more open. and that's why the great irony of free trade agreements is that they're great -- >> what do you make of elizabeth warren's argument? >> senator warren has made a number of arguments and i think that on the one hand the kind of concern that she expresses that policy in the trade area has been excessively driven over time by major corporate interests, i think that's a legitimate concern. going back to the clinton

administration, one of the biggest regrets president clinton has expressed was the excessive efforts to protect intellectual property that made aids medicines very very expensive, so i think that's a valid concern. that's why nobody should judge this until they see the actual agreement. on the other hand, you do have to really be willing to see the agreement, look at the agreement -- >> which she's not. >> -- stack up the consequences for workers versus the consequences for businesses and i think when people see the agreement, my best guess is that they're going to think that on balance if you're an american worker, anything -- what you gain from more export opportunities and what you gain from cheaper products is going to be larger than whatever you lose from a greater possibility of displacement but we've got to wait and see on that. i also think if i could just one

other thing looking to ian. whatever you think about what should have been done five years ago, given that the united states has committed itself in a major way to tpp, for this to fail after the united states was embarrassed with respect to the asian infrastructure bank after a whole set of other issues for this to fail now would really be a terrible blow to our country. >> i'm glad you said that larry. the number of economists that i hear whether it's ckrugman or others that are complaining about tpp is very concerning. so you're on record tpp is something we clearly -- we've got too much risk about that to back away. it looks like the obama administration has finally, albeit belatedly, got behind it.

looking at this aibb debacle where all of our allies except japan basically jumped rope and we say you're pandering to china, how much of a loss is this to you, and how should we have addressed it? >> i think it's something that is more symbolic than it is itself going to be a large thing. that bank was going to exist, was going to finance whether we were part of it or whether we weren't part of it. but i think it's the kind of thing that will happen more and more if we don't support the existing international financial institutions. we drove reform at the imf to give emerging markets more choice and more role there. five years ago. and we have not been able to pass it through the congress. what do we expect to happen? you know that -- that's a failure in many directions. i have to say that i think your audience, the kind of people who are your audience the business

community has not leaned into that issue. they have not worked at it the way they could have. i think it would have made a difference. >> real quick, you mentioned inequality and one of the questions i had, politically hillary clinton has said one of the ways to fix inequality is you need to quote unquote, topple the 1%. is she right or wrong? skblp >> >> i think the key is not anyone's income going down but who's is going up. i think we have to have the consequence that the share of income going to the middle class is higher than it's been historically and that can't happen since all the incomes add up to 100% without some other incomes adjusting. but i think the right key has to be to be lifting people up. as a matter of arithmetic if you raise the share of the middle class, you're going to lower the share of somebody else so in that sense i aagree.

but i think the focus has to be on whose income you want to raise, not on cutting anybody's income. >> you just said -- >> if the pie grows, he's talking about a percentage of the grows. >> you want it to be a zero sum game so badly but it's not. >> i don't. i'm trying to understand his view. >> well, it's not that difficult. welcome to my world. >> there is a difference good changing the shares of income and changing the levels of income. and if we successfully raise middle class incomes in this country without changing other people's incomes, as a matter of arithmetic, the share of income going to the middle class will rise and that will mean that the share going to the top will decline. but it will mean that we will be a better country. and that's where our focus ought to be and, yes, as mrs. clinton

and many others have said more progressive taxation looking at corporate governance issues there are a variety of parts of an agenda that will do that but the right focus shouldn't be tearing anybody down it should be lifting people up who haven't seen the kind of progress they should have seen for a long time now. >> secretary summers, thank you very much for joining us. we really appreciate seeing you. >> good to be with you, becky. coming up when we return a platinum portfolio update from martin sass. he says uncertainty is creating opportunity. find out if he's changing his picks. then a squawk master talks mma. this is off to the fastest start in deal making since 2005. and china creating jobs in america. we have more coming up in just a little bit. "squawk" returns in just a moment. the design evolves the engineering advances. but the passion to drive a mercedes-benz is something that is common...

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platinum portfolio outspacing the s&p. up 5.9% year to date compared to the s&p that's up 3.3%. martin sass joins us now and why he's doubling down on his picks this quarter. i thought, marty, we went over

some of the top five yesterday and you were in there. your picks have done pretty well, i think. and we had a guy on yesterday, it's like when you get dealt a hand and you are playing poker, can i have four. it's like that's a -- i almost said it on the air but that's a pretty bad hand. he traded in all three, didn't he and got new ones? it's like never mind. >> i'm hanging in there. >> which one? >> three stocks. activist american airlines and apollo group. >> apollo group is controversial, is it not? >> yes. of the three, activist and american have been great performing stocks for years. apollo is really depressed. this stock is down from 33 at a high a year ago to 21. where i think the opportunity lies. it's out of favor, it's hated, it's depressed. this is $165 billion alternative

investment management firm. >> right. >> as you know more and more money is going into alternative investments. their realizations have declined because they have been in a harvesting phase in their private equity funds, so realizations went down performance fees went down distributions went down. now i think we're at a reflection point. they're going to start deploying capital. they have $28 billion of dry powder for opportunities. they are going to do an ipo, their insurance company athena. the stock will yield 8% this year and i think it's a call on growth in credit and growth in cash flow in a company that i think has a 50% upside just to get to the value of the sum of the parts of apollo. >> you would think that because they're harvesting that it's an environment where it's not a good time to be buying. you think it's a good time to be deploying capital? >> they're going very slowly and very carefully.

>> do they have the expertise to do it globally? >> they have a tremendous global footprint. they're buying cheap assets distressed assets which is their expertise out of banks in europe. so distressed financial institutions have to sell assets. they're there with a lot of dry powder to buy them cheaply. >> okay. for actavis, how much are you up? >> we talked about it at $44 a share when it was watkins pharmaceutical years ago. so it started as watkins. >> now it's 300? >> yes, it's 299. and as crazy as it seems, the stock is still cheap. so actavis has transformed itself massively. it started out as watkins, it baut actavis and most recently closed on allergan. the pipeline of drugs will drive growth organically we think of 10% a year on the top line and

15% on the bottom line. it trades at 13.3 times our estimate of 2016 earnings. large pharma competitors, which grow much more slowly at 16.9 times. so i think it still has yet to get recognized. >> they can pay more for stuff too. >> they have a very low, 8% tax rate. >> andrew did you buy any? you'd be up patriotic to buy some. >> i'm not allowed to buy any. >> no i know. but every week there's another generic deal or something here and actavis is dechblgtfinitely going to be playing. watkins was like a start-up. >> it's just exploded. but i think there's a lot of legs to it. >> and amr, cramer was talking about it doug parker was tweeting about it a great ceo, one of the best in -- i don't want to get andrew started on the monopoly that u.s. airlines

are enjoying right now. it's hard. it's barrier to entry. you've got to buy planes there's routes. >> talk to the emirates. this is the problem. global perspective, right? they're just supporting labor and they can build the airports they want to and they have already crushed the europeans. i just wonder if you think that's coming over here too? >> well, that's the problem. clearly the emirates airlines is being subsidized and it's unfair competition and they are coming here. and american is screaming down in washington. >> i've seen it all, delta i know. >> when you look at the big picture in the airline industry demand is continuing to increase. capacity is being constrained. prices are relatively well controlled. down 1% or so in fares. cash flow is exploding. american has an extra kicker which is the synergies from the merger with --

>> what year is it? >> we're in 2015. >> 1981 merrill lynch, the biggest producer in the office who we all looked up to said i give all my money to m.d. sass. how long is that? i would if i could. but he's -- he's the man. he's the man. anyone at home needs anything from me. >> marty, thank you. we'll see you again soon. when we come back this morning, the colonel is back with a new look. kfc taking on chick-fil-a with a brand makeover. we have that story next. time now for today's aflac trivia question. who received the first call ever made with a portable cell phone? the answer when cnbc's "squawk box" continues. ah! aflac? aflac! i thought you said this guy was the best? oh, he's a horrible stylist.

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we monitor network traffic worldwide, so we can see things others can't. mitigating risks across your business. leaving you free to focus on what matters most. now the answer to today's aflac trivia question. who received the first call ever made with a portable cell phone? the answer joel engel, research chief at at&t's bell laboratories. welcome back to "squawk box." on our watch list today, earnings from target expected around 8:00 a.m. eastern time. then after the closing bell

we'll be getting results from sales force, l brands and williams-sonoma. central bank watchers expect a dovish tone but we may get a better read from the fed's plan from a speech by janet yellen on friday. and spotify is holding an event at 11:00 a.m. eastern time in new york. the tag line we've got some news. john ford has more on what to expect in the 8:00 hour coming up in just a bit. johnson & johnson holding its biannual pharmaceutical analysts meeting today will focus solely on the largest of j & j's three business segments and meg terrell is there. meg? >> good morning, joe. we're here in new brunswick where the pharma event is about to kick off in an hour. some breaking news coming to you right now. j & j saying that it plans ten new drug filings by 2019 each with the potential to exceed a billion dollars in revenue. so potentially ten new drugs

being filed by j & j by 2019. that's the breaking news crossing just now. the company also says its business has been going strong. it's the fastest growing part of j & j's entire business. it's launched 14 new products since 2009 seven of which are on track to bring in more than $1 billion in 2015. some of the new drugs will one for multiple myelopa, a drug for depression resumearthritis and psoriasis psoriasis. based on phase 2 data that it will present in a couple of weeks, there's new news coming out from j & j. as the business has been doing really strong though potential generic competition coming to about a third of the business. just in the next few years. so some challenges potentially down the line but a lot of growth. j & j will detail all of that today and we'll talk with the ceo in the next half hour so a

lot to stay tuned for. back to you guys. >> is that -- let me see, i'm trying to figure out where that ranks in terms of -- is that the biggest -- that might be the biggest. is it bigger than glaxo at this point? yeah, it's well above -- i think it's almost the biggest, is it not? >> j & j is the biggest health care company in the world. its pharmaceutical business is its biggest of the three. pharmaceuticals brings in $32 billion in revenue annually. they also say it's the second fastest-growing pharma company in the world. >> and they have done a lot of acquisitions in the past. nothing that i can recall that recently though. i wonder if -- so their research is probably done with some of the biotech companies, a lot of it by some of the biotech companies they bought in the past? >> absolutely. they have been doing a lot of smaller deals, a lot of licensing deals. just yesterday after the close announced an equity stake in

akiloon to focus on hepatitis c drugs. they're also said to be a bidder for another company so while they're thought to do mostly smaller deals, they clearly may not be afraid to spend more for the right product. >> yeah i wonder where they'd go. we'll does gorsky -- what did you say, 33% goes off patent? >> potentially between 2017 and 2019. >> so they have got to deal with that. all right, meg, we'll see you -- that's at 8:00 right? top of the hour? >> that's right. >> perfect. all right. thanks. mcdonald's moving on another dow component. mcdonald's just brought back the hamburglar. now kfc is bringing back the colonel. he's a different guy, though. >> hi folks, it's me colonel sanders. i've been gone for a while and, boy, howdy, have things changed. >> i kind of recognize that

actor. good gig for him, good gig for him. remember the guy in -- >> who is he? >> i don't know if i like the idea of bringing back a guy who's kind of playing -- that's not the colonel i remember. >> no it's not. >> wendy's was bringing back wendy and now i'm okay with it. >> i just don't like change. >> oh it's darrell hammond. anyway, three new commercials -- >> you didn't know who it was. >> do you know that actor? >> you didn't recognize the face? it was darrell hammond, the snl impressionist. >> he's got a beard on and made to look like the colonel. he's great. i like when he does clinton better than the colonel. anyway, kfc lost the top spot in the u.s. fried chicken market to chick-fil-a, according to 2014 data released by janney capital

markets. that might be good. >> knowing that it's darrell hammond makes me more likely to like him. but i don't like a jokey colonel. i remember the colonel being serious. >> who wants to see an old southern -- >> remember when they made the burger king guy with that weird, very freaky head? the freaky king? >> that scared me. >> chicken needs more substance. purdue is the most recognizable chicken man. they're trying to relate more to the authenticity of historic chicken trends. >> this guy is going to be funny. >> bring back a southern plantation owner, i don't think, unless it was ton in a tongue in cheek way. >> i don't like change. it takes me time to warm up to it. >> you too now? >> yes. i'm reaching that age where change bothers me. >> well you'll never get to my level. coming up squawk market master, scott spurling weighs in on the strongest first quarter for m & a since 2007. we'll be right back.

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global m & a volume. that's the highest level since 2007 and it's up from $732 billion in the first quarter of last year so what will drive the merger mania heading into the summer? join us on set this morning, scott sperling. now newly minted of madison square garden. how many board meetings have you been to? >> a couple. >> and you own this building across the way. >> yeah. >> radio city. >> how many rangers games do you have access to? >> however many i pay for. >> good answer. >> so in terms of m & a -- first of all, i was going to say do we think we'll see a lot more. but do you believe that m & a is a barometer, a forward-looking or backward-looking barometer of where the economy is and where the market is? >> i think it's a forward-looking barometer in the sense that people engage in more

m & a when they have an expectation of stability or better growth going forward. and i think one of the things that you've seen is a level of comfort amongst large strategic players with the stability that they're seeing in the marketplace for the foreseeable future. now, again, we all may be wrong or people may be wrong about that, but i think it does signal some level of stability. i think it also signals the fact that you have two other factors that are very important here. the first is obviously, very low cost to undertake transactions. that low cost is in both the form of the debt financing that's available, large strategic players are financing deals at 2% interest rates. obviously the math works really well at reasonably high multiples from a stock perspective if you can do that and the second is organic growth is hard to come by so people are looking for acquisitions not just for the first order growth effect but they're looking to buy companies where the organic

growth of what they're buying may be superior to what their core business is and so therefore, reposition themselves. >> do you have any worry though that some of these valuations are now completely out of control? i'm thinking of biotech. >> sure. >> we see headlines come across with premiums of 30 40 50 60 70%. >> or even down multiples down in the 20s. for example, on those transactions. so break it into two categories. one category is there are a lot of smaller biotechs that are being acquired because they have really important science that larger player can leverage its distribution system and its ability to exploit that science more aggressively. those are multiples that are being paid basically for the science itself and perhaps for the fact they have already gone through some of the clinical trial issues that often eliminate other drugs. so those are big numbers, but in the context of the larger -- >> but what percentage of those are going to be write-offs in two or three years? >> we don't know do we.

however, i would note that the nature of the tools that we have today to understand both diseased states and the nature of the impact of therapeutics on diseased states is far advanced over what it was three years ago. and, therefore, the probability of success i believe is hire in that sector. by the way, it's not a sector we play in but i think it's a very important discussion. >> one of the discussions we've had this morning is yahoo! news. we'll call it irs tax news on how the irs may treat spinoffs in the future. a, do you think something is going to happen and then what are the implications? >> i don't know whether or not it's going to happen because again it's hitting all of us. the second is obviously, that it may reduce a mechanism for shareholder value creation that there's been a lot of pressure on the part of activists and others for corporations to

utilize. could that have a dampening affect by impacting the stock market? perhaps. >> then they're going to do it. >> but i'm thinking better for you. no, i'm thinking private equity if you can't do a tax-free spinoff, you'll have to sell to somebody who's going to buy it. >> we'll have to look at all the tax implications. >> we've tried everything else we'll certainly do this. >> even if you do a tax-free spin, there is also a role for private equity. i do think that we have gotten pretty good at buying assets and actually doing things to them to increase value. even if you spin it off, you're not fundamentally change the nature of the operational efficiencies or its ability to grow. you are creating a mechanism for shareholder growth but i'm not sure that even the continuation of the ability to do these tax-free spins is a negative. >> do you look at this as a time for private equity to harvest profits or do you see this as an opportunity to buy?

i think it becomes harder and harder for you to compete against strategics in this environment. >> clearly it's been a good time for harvesting i think for us and the entire industry. there was a overamount of portfolio companies, if you will. i'm not sure that's really a word. of portfolio companies because of the recession, people were holding companies longer so you're seeing more harvesting in terms of the magnitude perhaps than you would in an ordinary cycle. but it's been a good time to harvest because companies have been fixed, they have been made better. >> i think you're a big thinker because you just said something about people have the notion that people are overpaying for biotech. and what you said about there may be a quantum move in the next couple of years, because we've waited a long time. we've had a lot of science build up and haven't had the payoff in

therapeutics. but all these companies, they are buying the infrastructure apparatus that have the research to turn this basic science into therapeutics. all the companies might be worth more than they're valued at right now because they're right on the cusp. >> i actually think we are. i'm chairman of the board of brig hal and women's hospital. i am amazed at the nature and the progress of the research that you see not only from a basic level but the clinical application of those things. >> so buying research -- what it takes to do the research you can -- >> you're exactly right. so you're buying science, often very specialized science in an area and then you're using tools. those tools used to cost tens of millions of dollars for next gen sequencing, for example. that has come down by order of magnitude and come down boy another order of magnitude. >> you may not even know the

drugs in the pipeline you just know there will be many more drugs in the pipeline so that might be why maybe things aren't overvalued. maybe we'll find out later. >> now again, the deal yesterday, that's a different sort of thing but i think a lot of the things that people say that's overpriced, it's based on exactly what you're saying. >> scott, thank you. would you own shares of kkr, blackstone or anything like that? >> i'm a believer in our business, so i haven't looked -- i haven't looked at that as a share ownership. i'm kind of overweighted private equity already. >> got it fair enough. big movers this morning. we have your list of stocks to watch ahead of the opening bell. and then next and later, rather an interview with cisco's new cfo, kelly kramer will join us at 8:30 eastern time. we're back in a moment.

welcome back everybody. let's take a look at a few stocks to watch this morning. shares of etsy under pressure. they are posting a wider than expected loss. stock is down by 17% this morning. etsy says that it will increase the pace of hiring and spend more on marketing. pep boys shares are jumping on reports that it's been

approached about a takeover. golden gate capital and others have broached the topic of purchasing the retailer and that stock is up by 16%. when we come back this morning, a new report on china's investments in the united states. michelle has the highlights including top states for chinese investment, and which chinese companies employ the most americans. stick around "squawk box" will be right back.

welcome back.

there's a new report out with china's foreign investment in the united states. this as the u.s. government says it uncovered a chinese spy ring allegedly stealing u.s. technology. michelle caruso-cabrera has more on this story. >> chinese investment in the united states, long controversial. the headlines many americans are waking up to about this spy ring allegedly existing in the united states. one of the reasons why, because many people question the motives of chinese investment. are they trying to steal technology. this report which is commissioned by the national council on u.s./china relations, trying to ease those concerns and show just how important they think chinese investment is in the united states. let's give you the number. u.s.-based employees who are on chinese payrolls number 80,000. five years ago, that was less than 15,000. in 2000 it was virtually zero. the total amount -- to give yukon text japanese companies employ 700,000 americans, so it's much much bigger. chinese investment dollar figure $47.5 billion.

very teeny when you consider that that is since 2000. 90% of that is in the last five years and there's roughly 1500 companies in the united states that are chinese owned. >> $40 billion in pakistan a week ago. >> if you look at it based on states, california has gotten the most nearly $6 billion. texas is a close second. north carolina $5.5 illinois 4 and new york 3.8. for employees, north carolina is actually number one, 15,000. that's because of the research triangle. you know lenovo bought the pc business of ibm back in 2000. that was the first big chinese acquisition. you remember here. were you here? i remember the newsroom was like oh my god. chinese are boiinguying ibm's pc business? >> we were happy. it was like take it. >> but it also marked this rise.

>> they did something with it. >> i want to say 2003. i broke the story, that's why i know. i'm just saying -- >> you could be right but i could say it was 2000. >> that was the last time you actually did that, i think. how long ago -- what was it 2015? >> tuchouche. >> the chinese version of cisco. >> they want to be in europe. it's not because europe is a great growing market it's because they understand that they're not going to be allowed into the united states in the same grow. >> this has been a congressional report about huawei telling companies not to buy. >> number one, we have growing problems with china. what's interesting, of course is that china is the only country in the world with a global economic strategy. they are putting over a trillion dollars at play. they're changing architecture not just the infrastructure bank but the bricks bank the china development bank which is giving much more money than the

world bank is. the initiatives which are going to be aligning countries and their economies towards china. we've never seen a challenge like this none of us. and, you know the americans don't have a response to it. >> what i would argue on the other side is all of those people or all of those companies are countries that do alongside china are accepting trade-offs. capital flows that are restricted politically driven lending, et cetera et cetera. i fight back at the noegtstion that we're supposed to have some kind of international investment strategy. where capital is treated best is where capital goes. >> i'm not suggesting the united states should be doing the same thing as china, i'm suggesting that china is doing this now when they're still far away from being the world's largest economy and they're on that track. there are a lot of countries that find that attractive. >> sure. >> the conditionality that the chinese have when they give cash is not we want you to be a democracy, it's like the imf would. it's we want you to align to our

state-owned enterprises and i think that's a huge challenge for us. >> ian, thank you. and by the way, the book again everybody is "superpower." check it out. >> do you have the list of these people on the payroll? >> the individuals' names? no. they did not publish that. >> is steven roach on there? john rutledge? >> hey, joe, the last time i brought up a deal was in 2004. that's when that happened by the way. >> it was? i'm embarrassed. >> no i'm saying lenovo. >> if i broke one, i'd have to work the rest of my career fixing it. johnson & johnson planning ten new drugs in the future.

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breaking news now. target's results hitting the wires. with the trend toward online shopping and a hike in minimum wage, we'll take a look at how the company is planning to grow the bottom line. the numbers and the market reaction just minutes away. plus johnson & johnson set to talk to analysts about its share price. first time ever a company has spoken. and the pipeline. but before doing that. j & j speaks to squawk first. an exclusive interview with alex

gorsky straight ahead. and saying good-bye to a late-night legend. look at david letterman's impact on the television industry. >> please say hello to the lovely becky quick. becky come on out. >> the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york. this is "squawk box." welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernen along with becky quick and andrew ross soerkrkin. the s&p is a little red, up 12 on the dow, up a little over a point on the nasdaq. checking out markets in europe at this hour down in german and

dax, fractionally up on the ftse and greece all the way back to almost 850. >> let's take a look at shares of target this morning. the retailer just out with earnings. it looks like the numbers are better than expected across the board. they came in with earnings of $1.10 a share, that was 7 cents better than the street had been expecting. also revenue better than expected. in terms of the guidance they are raising the bracket of their guidance to what they had issued earlier. they're now saying they expect to earn $4.50 to $4.65 a share for the full year. earlier they had told the street $4.44 to $4.65. the street is already at $4.56 but the numbers across the board look like they're better than expected. same-store sales came in up 2.3%. that was in terms of transactions and in terms of basket size. compare that to what we heard from walmart yesterday. the retailer did show a little pitt of a turn-around with the u.s. stores yesterday with walmart's numbers, but their same-store sales were up 0.2%.

it is a much bigger company but take a look at what's happening with those shares. target shares are up by 1.4%. also a programming note for you, make sure you watch the fast money halftime report at 12:15 eastern time for an exclusive interview with target's cfo, john mulligan. we've got some other stories, home improvement retailer lowe's posted a weaker than expected report. the stock falling on that news. here's ou jpmorgan analyst chris horvers views the report. >> they waited around for the macro for about five years while home depot focused on execution. lowe's started to turn the ship back in 2012. there is momentum. they are closing the gap versus home depot. comps trail by 180 points. that was 200 to 300 basis points but it takes time. clearly the execution is still not up to par. >> and the other big story, the

justice department expected to announce settlements with some of the world's biggest banks accused of rigging the currency market. total fines are seen topping $5 billion. loretta lynch will hold a news conference all about it at 10:00 a.m. eastern time. take a look at shares of yahoo!. they're not bouncing back right now after getting slammed late yesterday. at issue, concerns in a possible u.s. changed tax regulation will affect its spinoff in ali baba. victor anthony joined us this morning and knocked down those fears. >> i think the irs officials' statement was somewhat ambiguous. it wasn't clear whether or not it applied to spinoff submissions as of yesterday or any future submissions that they received. essentially basically said they were going to suspend any evaluation of any spinoffs pending any rule changes. i happen to think this doesn't apply to yahoo! at all. >> and in a statement yahoo! says it's working toward the planned spinoff in the fourth quarter and adds it understood the irs statement was not

specific to the company. i think that part is right. the question is whether there's a broader change afoot and what that means. >> johnson & johnson, we've been talking about this interview, holding a pharmaceutical analyst meeting today. meg terrell is there and is joining us with a very special guest. meg. >> joe, thank you so much. joining us now is ceo alex gorsky. thank you for joining us. >> great to have you here in new brunswick. as you know, this is the home of johnson & johnson. who would have thought 125 years plus ago when the johnson brothers started j & j that we'd be talking about the kind of invags that we'll be reviewing today with the analysts and with you. >> and you're planning on filing for approval of ten new drugs in the next four years, each with the potential to bring in more than a billion dollars. does that assume basically everything in your late-stage pipeline is a success? >> look we're really excited about the innovation that we'll talk today. as you said if you go back since 2009 we've launched 14 compounds. now if we look forward between now and 2019 yes, we expect to have about ten compounds.

of course you're going to have some wins, you're going to have some that don't turn out quite the way you expect but overall we're very confident in the ability, particularly based on what we've been able to do over the past several years, on our ability to really impact patients and drive this kind of innovation going forward. >> some of the other news you put out on your multiple mieloma drug, you're going to file for approval on midstage data. so what does that say about how good those data look in just a couple of weeks? >> i'm so proud of our oncology team. the compounds that we've been able to launch now the phase two data i'm sure that you probably know people who have been affected by multiple myeloma. i have had friends and colleagues that have been affected and died from it. to think we could have this kind of data and this kind of results, even in patients that have tried previous therapies, it's really promising. it's just one indication of the payoff the patients are getting, that we're getting from the investments that we made in the

oncology area and other innovations over the past several years. >> a lot of growth coming you're laying out today. what analysts are focused on is a potential competitor to remikasde. >> what we're talking about here today is all the innovation coming forward. we do understand biosimilars are part of the marketplace in which we compete. first of all it's really important that we focus on the patients and we launched the first one more than ten years ago. when you look at biosimilars or generics keeping the patient first and consider indications, safety efficacy is the number one priority. second of course we'll protect our intellectual property rights. that's so important to our industry. that's what makes us -- gives us the ability frankly to invest in the innovation for the future. but we do feel there's a place for generics and biosimilars. third, if you look at our immunology portfolio, things

like stellara that are already doing very well you'll hear about others aisle 6, aisle 23 new approaches we think we've got a comprehensive approach to the way we'll go about defending our franchise and frankly helping even more patients in immunology. >> joe, do you want to ask a question? >> hi, alex. i know this is mostly about your pharmaceutical division today, but i look back on the last five ten years at j & j and it seemed like bill welldon spent a lot of his time putting out fires, quality issues that prevented him from maybe making more transformative moves. i wonder if you're considering, since this is the fastest-growing part does this consumer products division and medical devices, does it still make sense to keep all those under one umbrella? do investment bankers come to you and say you could do this if you did this or if you focus on this, you could get, you know shareholder value would go up?

are there any things like that that you think about from time to time? >> well thanks a lot for the question, joe. hey, maybe next time you can be out here to join us for this meeting as well. but whether it was bill welldon or ralph larson i think if you go back in the history of johnsonjohn zun johnson & johnson, one thing we've been committed to is managing our business as a diversified portfolio. frankly that gave us the ability several years ago to reinvest in our pharmaceutical pipeline when we experienced about an $8.5 billion generic launch and patent expirery. but we have a strong medical device business a strong consumer business and we've seen the benefit of that in our pharmaceutical pipeline over the past five years with all the launches and all the great innovations that we'll talk about today. so we think financially it gives us incredible flexibility and capability capability. the other exciting thing is about the scientific opportunities. as we think about areas going forward, whether it's oncology

whether it's things in the back of the eye, being able to combine devices and pharmaceutical products and even consumer approaches and perhaps wellness programs in new and innovative ways we think is particularly exciting. and finally it's really important for our colleagues here, giving them different career paths, different opportunities to develop their talent has also been a real benefit of having this diverse portfolio. while of course from time to time people are going to challenge you, saying you should be a pure play here or there, we think this approach in the long term is in the best interests of patients and frankly all of our stakeholders. >> just real quickly, one other thing that i think about a lot, i know ian reed and i know the man and i understood his rationale with pfizer. he made it clear that he could invest a billion dollars more with a lower tax rate into r & d if the tax rate in the united states was more competitive with the rest of the world. so it was simple for him to try

to change where pfizer would be domiciled. at this point in terms of the tax rate do you see other companies able to outbid you on attractive acquisitions other foreign companies, because of the inequitable tax structure globally? is that something that bothers you or you'd push to have changed? >> we've been working with the government and of course would like to see a more comprehensive tax reform package done in the united states. we think that would be good for all companies to help us be even more competitive. we also believe that tax is only one component of your overall m & a strategy. making sure you understand the science, making sure we understand the overall marketplace, putting all those things in the balance, we think that's what helps us remain very competitive. we think we've had actually a very good balance. if you look over the last 20 years, for example, with johnson & johnson, we've invested over

$200 billion, about half of that in internal r & d half of that in m & a, so we think having a balanced approach is really what enables us to have long-term success. >> i want to ask you about your m & a strategy because yesterday you announced a deal with achileon so where are you looking at m & a? would you do a bigger deal? >> look we think it's very important to ultimately go after the best science. we're really agnostic about whether it's internal or external. but if we get the best science, we ultimately know we'll help more patients and create the best business opportunities. we're always on the hunt for new scientific platforms. so whether it's in areas such as oncology whether it's in viralology whether it's in newer neuroscience, making sure we're always on the hunt sometimes it's complementary technology. so if you think about what we just announced this morning, we already were able to introduce

alesia last year. we went out and did an acquisition. but when we do those acquisition, the other thing that we acquire beyond molecules are great scientists. people like larry blatt who will be working taking perhaps taking what we have and combine it with other things to come up with a great approach in hepatitis c that's going to be great for patients and great for our business. >> so many more questions but unfortunately we have to loef it there. thank you for joining us. >> meg, thank you so much. >> becky, back over to you guys. >> meg, thank you. and mr. gorsky thanks to him too. when we come back this morning, our stock pickers have nearly doubled the returns of the s&p 500 so far. we'll check in with susan burn and hear from abbott labs is one of her new picks. "squawk box" will be right back.

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financial noise financial noise financial noise my name is julia grinberg. i work in energy efficiency for pg&e here in san francisco. my job is to help my customers save money, save energy and save the environment. when it comes to renewable energy, pg&e is absolutely committed to creating a clean energy future. one out of every four solar rooftops in america is in our service area. it's wonderful to work in the city

where i live and help my neighbors and i feel like the work that i do reflects that every single day. together, we're building a better california. developing story this morning. a cruise ship running aground on a bermuda reef. the norwegian dawn was bound for boston when a steering malfunction caused it to veer

off course into the reef yesterday. more than 2700 people were on board. the cruise line says there were no injuries. also environmental cleanup crews are responding to an oil spill just off santa barbara california shoreline. officials say a leaking pipe caused the spill, which is about a half mile long and 300 feet wide. the pipeline was shut down and crews are arriving to contain that mess. let's talk about the platinum portfolio because it is currently beating the s&p 500. the group's picks are up nearly 6% while the s&p is up just over 3%. joining us now with a couple of stock swaps, susan burn founder and chairman of westwood holdings. good morning to you, susan. you've got a couple of swaps you want to tell us about. not swaps -- not a stock swap but yes. >> yes. well i am going to add abbott and retire franklin resources. and in addition to which i'm going to add ebay to the

portfolio and retire qualcomm. so the abbott -- the first abbott story, our style is certainly to really like to find companies that can grow their dividend well in excess of growth of gdp or even the market. and abbott due to some restructuring is in a very very good position to do that. the ebay story is a little bit different. sometime in the third quarter they're going to basically split up the company. it will become paypal and ebay. and very well-known businesses. they don't pay a dividend now, but the paypal is likely to be the -- i guess that's the faster bunny.

probably won't pay a dividend but much faster growth whereas the ebay business which is asset light and cash genorative is likely to start adividend at the end of the year. >> looking 12 months or 24 months out, you look at abbott and you think it will be where? you look at ebay and think it will be where? or the split of both companies will bow wheree where? >> okay. ebay i think the overall entity which is like 57 right now, i think all combined over a three-year basis, the parts are worth about 100. >> wow. the two separate parts. they'll be very different kinds of businesses. and then for abbott i think it's a real steady eddie grower. i think you'll get a dividend appreciation of somewhere

between 10% and 12% a year of your dividend and that stock, which is around 49 i think could be looking at the 75 area in three years. >> and to the extent that there are people out there that have been holding franklin resources, for example, or qualcomm are you just lightening the load or getting rid of them completely? do you put a sell on them? >> no i would not. they're in our portfolio and we will continue to maintain them. it's just that these two -- the stories of these two stocks i think over the next let's say six to nine months could be a little bit more compelling. but they would still be in our portfolio. and honeywell, which is in the portfolio also as our third stock, we're not changing anything there. they had an excellent report for the quarter and we are just

letting that run, so to speak. >> okay. we appreciate your perspective this morning. i know a lot of people will be pick piggybacking on those trades. you can go on cnbc pro online. you can read their exclusive analysis right there. when we come back the nation's second largest city raising the minimum wage. and then what does spotify have up its sleeve? a big event in new york this morning. we've got a preview ahead. and then is cisco looking to do a deal in the storage space? we'll ask cisco's ceo about the company's growth prospects and changes at the helm. "squawk" returns in just a moment. so open an account with schwab. and when a market move affects, say a cloud computing stock you're holding, we can help you decide what to do. with tools that help you see how market activity is affecting your positions. so when the time comes to decide whether to scale in or scale out... you can make your move wherever you are. and start working on

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los angeles lawmakers voting in favor of boosting the minimum wage to $15 an hour by the year 2020. the action will gradually increase the guaranteed hourly wage of $9. the first increase to $10.50 in july of next year and annual steps until july of 2020. for nonprofit organizations with 25 or fewer employees, the scheduled raises won't begin until 2017. when we come back this morning, the cfo of cisco will join us in her first interview since taking the job. kelly kramer is with us on set,

right after this. right now as we head to a break, take a look at the u.s. equity futures. it looks likes across the board futures are higher but s&p futures up by just a fraction of a point. dow futures up 26 1/2 and the nasdaq up close to 4 points. stick around "squawk box" will bow right back. the design evolves the engineering advances. but the passion to drive a mercedes-benz is something that is common... to every generation of enthusiast. the 2015 dream machines, from mercedes-benz. today's icons. tomorrow's legends. visit the dream machine event today for up to $3,500 towards purchase.

welcome back to "squawk box." here is what's in our headlines. a key event for the markets this afternoon. the federal reserve will release the minutes of its most recent policy meeting. that comes at 2:00 p.m. eastern time. any investors looking for clues on the timing of the interest rate hikes will be paying close attention. also attorney general loretta lynch will hold a news conference at 10:00 eastern time to announce settlements reached in connection with a long-running probe of currency market manipulation. lots of big banks are involved so stay tuned for that. also egg prices now at 58% higher than they were just a month ago. that's when bird flu was first detected at iowa chicken farms. we'll continue to monitor that. >> stay with this food stuff.

check this out. starting today domino's says that twitter is a permanent option for ordering pizza. it's even easier for the chain's regulars. those pie lovers will only need to tweet the pizza emoji to place an order. they can set up a profile in the company's online delivery service and save an easy order. the company is trying to attract busy younger consumers. at this point 50% of domino's sales take place digitally. >> all you have to do is tweet the pizza emoji? do you know how many times i've actually sent a bunch of emojis? i get a pizza when you end up butt dialing. let's talk about spotify. spotify holding an event with the tag line we've got some news later on this new york. a lot of rumors swirling as competition in the music space grows. john ford joins us with more on what potentially this is all about. john. >> hey, andrew yeah.

could you be any more vague than we've got some news? but the rumors suggest there's some video involved here some new social features as well. and playlist features. and this comes as there's increasing competition in the streaming music space. you think about it titans and artists both weighing in. on the one hand you've got apple with its beats purchase expected to role out a new streaming service possibly this summer. also google has both google play and youtube that it uses for streaming music and then you've got jay z's title service with the $10 and $20 tiers. he's trying to change the way the music business works in the streaming era. and taylor swift, the biggest star of the moment saying spotify is giving away too much for free. now all of this is happening as spotify has amassed more than 60 million users overall. the vast majority of those free. but 15 million users are actually paying at one of the

two paid tiers. we'll have to see what more they have to offer that could entice people to pay to move up from the free version where you can play different playlists. you can't download the music to your device but that is clearly in spotify's interest as various sectors within the music industry are pushing back against their model, guys. >> hey john we've heard a lot from jay z in recent weeks about all of this. he's obvious lowly pushing his service. are we seeing a beginning of a fracturing of what ever control spotify had over this slice of the world? >> i think that's fair to say. apple has been moving and trying to offer exclusives to various artists, payments up front to bring the music to the beat service and to apple service first. then you've got jay z trying to bring live music events to spice up that service.

jay z just did an event in new york a few days ago that was on tidal so everybody is trying to figure out the angle to get people to pay more for music. but behind the scenes how much are the record labels passing along to artists in the streaming deal. the verge just had an exclusive hours ago where they showed the deal between sony and tidal where it looks like there's a lot of money going from -- between sony and spotify. a lot of money going from spotify to sony maybe not as much going from sony back out to the artists. >> john, real quick, though do we know if subscribers are following? are they subscribing to all these new services and are people leaving places like spotify? >> that's not clear. spotify is likely to give some new numbers at an event like this. we might hear a revision to that 60 million number to that 15 million paid number especially and the 2 billion that they say

that they passed along to artists. there's got to be some defection given the fact that apple and google are so big, but it's not clear how much. >> okay, john thank you. look forward to finding out what it really is all about. cisco, cisco with a c is celebrating its 25th anniversary as a publicly traded company. to commemorate the occasion our next guest will be ringing the closing bell at the nasdaq later today. i think you press a button kelly. >> that's what i hear. >> did you practice at all? >> not yet, that's later. >> a lot of pressure. oh, man. plus you've got to hit it right at the right time and there's an extra second coming. i don't know whether you know that. so don't get nervous. here now with us on set is kelly kramer, cfo of cisco and a member of the global cfo council. the tech landscape is fascinating to us. not all of us are equal in our understanding of everything but one thing we do know is how quickly things move. for me the landscape is littered

with great companies that had a great business but it moved so fast that someone else comes in. and i think about what was -- what cisco was facing a couple of years ago. basically you were a hardware company that built out the internet. >> yep. >> now you have to be a company that works with mobile devices and software and the cloud and security. i don't even see what the old cisco has to do with this new business and i don't know why it should be cisco that still succeeds. it seems very daunting to me. >> well i think what's good about cisco is yes, we started building out the internet but if you look at new areas like security or software, you know we have all the assets that plays across all of it. so security as an example, it's the number one concern of all ceos and companies, and it's not just security of -- it's whether you're breaking in the network, so we have security across it as well as stand-alone products and

threat protection. so what we've been able to do is broaden our portfolio to play not only in the networking space but as we go to mobile and wireless and security. >> revenues have continued to go up. >> absolutely. >> and i saw something. you've got to speak to me like i'm a child. we used to sell boxes and now we sell outcomes. >> yes. >> i can sort of understand that. but i mean i still don't see how you can guarantee success for a company that was so good at doing something so totally different. >> i think when we talk about selling outcomes what that is is instead of only selling it to the cio of an enterprise much more we're selling to the ceo and cfo where they're trying to optimize their cost structure, how they manage their networks. so we can go in with our consulting arm or our salespeople and help figure out what they're trying to fix, right? so whether it's a redoing of their network for more efficiencies or building out their wi-fi or adding in -- or

managing their networks, we can help them figure out how to optimize their own costs. >> and then there's something -- i'm just going to get even deeper into my total ignorance here but is there a way to work with face box where you create some type of white label networking? i don't know what that is but it builds a whole new type of business for cisco to play in to key off what facebook does? >> yeah, i think the big -- >> i don't know what face box is -- >> i think he meant facebook. >> i think so too. >> i was talking about the box, yeah, squawk box, but you know what i'm saying. >> yes, the big companies like facebook or amazon or linkedin i think, you know we work very close low with them. we've talked about nine out of ten of them are customers of ours already. it's a different -- when they scale so big, it's a different kind of outcome they're looking for, so we spend a lot of time with them understanding what they need from open network and

how we can help with our products. so i'd say it's a huge space for us a very important customers for us but it's just a different signed of solution. >> i asked you to use scaleability in a sentence. now you've got granularity. >> i want to ask about m & a. do you have to own one of these security firms or do you just have to partner with them? >> so i'd say for security -- so cisco yoefroverall, we've broadened much more past switching and routing. security is one of the big areas that i think we'll continue to be. what's good about it it's very fragmented. we actually from a revenue share perspective are the largest one but it's an 8% share, so for us it's good because we can build out. >> do you need a big player? people have talked about fire eye, for example. >> yes, i heard that. >> what do you know? what can you tell us? >> i think we obviously don't comment on acquisitions and i

think john referenced it in our call that perhaps that rumor wasn't true. but again, i will say we're going to be very very both inorganically and organically in security building. i think that's critical for us. >> kelly, it was just a few weeks ago that weeding the news john chambers is coming down. i don't remember cisco pre-john chambers. it took all of us a little time to get our heads around that. what can you tell us about chuck robbins and what that transition is going to be like? >> i'm very excited for chuck to take over. again, we're all -- john will still be around in the executive chairman role but chuck has been at cisco for 17 years. he most recently led our entire field operations and sales, so he grew up in the sales channel, he knows all our customers internally people are excited for what he brings and we're getting him in front of investors and our customers know him very well. so i think chuck is a natural choice. you know we've been going -- the board went through a

16-month process to pick chuck and it was unanimous across the board. i think he's going to bring just pragmatism and driving -- continue to drive our agenda and strategy along the lines of where we've been with acquisitions as well which is organic growth. >> do you anticipate any changes in strategy or is this kind of staying the course by picking someone who has been there so closely. >> i think our strategy is working if you've look at the results that we have. we do continue to grow and drive profits as well as top line. i think it is continue the strategy. i think we'll continue to look for other areas that can accelerate the top line growth and profitable growth but i think chuck is in the process of evaluating his first 90 days his leadership team and where he's going to go. >> will -- i mean you're international. how much is abroad? >> about 50%. >> chambers said we're building stuff over there. we'll build factories over there if we don't change the tax law. >> yes. >> is chuck -- will he follow along the same lines would you

say? >> i think cisco -- we are definitely very committed and spending a lot of time in washington to try to get tax reform so we can, you know bring some of that cash back. we're working very closely with both sides of the aisle. >> is europe back? is qe working? can you just comment on any other parts of the world? >> yeah for us europe turned around for us i think earlier than a lot of other enterprises saw. for us it's been growing for the last five quarters in the midsingle digits and even in a difficult environment of currency right now it's performing well. >> what hasn't turned? >> you know we're still -- where we have challenge is still in china and russia some of the big emerging markets. they have been challenging for a while for us. >> is the edward snowden fallout over in terms of sales internationally? there was a big issue. >> that is a big issue, why e. >> they had to go to every government that didn't want to buy their stuff and convince

them to buy their stuff. >> he's a hero. >> i would say there certainly has been some geopolitical kind of blowback. >> i thought chambers said it was not material to sales? >> well i would say i think it's been very material -- i wouldn't say it's snowden specifically. i would say china with u.s. companies has been -- has had an impact certainly on our results in china. >> anyway kelly, thank you. and don't be a stranger. >> all right. thanks for having me. nice to see you. >> you've got the apple watch on. do you like it? >> i love my apple watch, yeah. it's great. >> so say hi to the clouds on your flight back. >> i will. >> wave to the clouds. those aren't clouds i know that. okay, thank you. when we come back this morning, deflategate doubling sales of tom brady merchandise. we will speak to the ceo of fanatics fanatics, one of the nation's largest online sellers of sports merchandise. he'll tell us how merchandise impacts sales. "squawk box" will be right back.

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nfl owners have approved a new rule that will make it a little more difficult to get those extra points after touchdowns. the rules committee has decided to move the ball back to the 15 yard line on extra point attempts. the rule also says that the ball is still alive if it's blocked, meaning the defensive team can potentially return it for two points, two points not six. the reason for the change to add more excitement to the game

and make play more challenging, since 99% of extra points were successful. the two-point conversion will stay at the 2 yard line. this rule is only -- is one year only meaning that they'll re-evaluate it at the end of the season. oh look who it is. that's tom brady. anyway, they'll re-evaluate it to make sure that the intended things happened and it makes it a little bit better. it is kind of you know you don't even watch the extra point most of the time. >> i do. >> although when they get blocked or when you don't make them. it can change the game. >> you don't watch the kick? >> the extra point? >> yeah if it matters. if it matters you do. >> it sort of is taken for -- see, 99 -- that's what i just said, 99% go. so you're watching for one out of 100. >> that's like watching nascar. >> no! anyway speaking of tom brady, since the release of the wells report indicated the

likelihood that the patriots quarterback, brady was aware of intentionally deflated footballs, licensed merchandise with brady's name believe it or not, the name and number are best sellers. doug mack is the ceo of online sports merchandise al retailer fanatics. doug, thank you for being here today. >> thank you. >> that kind of defies conventional wisdom. what are these supporters of his coming out to show their support. >> it was very interesting to see on our end. because the patriots won the super bowl, brady was the sixth best-selling jersey. right after the wells report he jumped up to number three, right behind the two first round draft picks, winston and mariota, the quarterbacks. we've been watching this trend over the course of the last week and he's now jumped to the number one best-selling jersey in the nfl right now, up about 250% year over year. >> wow. >> what's interesting about it is not just new england supporting brady. we've sold them across 46 states. so it's national support for his jersey right now. >> pretty amazing. >> it is. >> and it's weird, because immediately you read if he had

deflated the balls in an elevator, he would have only gotten two games. i mean people -- a two-game suspension. people immediately sort of -- even patriot haters it's weird, that it sort of -- somehow the nfl just can't do anything right. they finally come down hard and sort of the pr move to the team that was doing the deflating, right? they have won this argument almost, haven't they? except for the true -- except for jets fans. >> you know all i can speak to is the merchandise sales. you never know how fans are going to react. sometimes when a player has a suspension or whatnot, sales will go down. in this case the brady jersey sales went up. there was a situation a year ago in the nba where donald sterling got himself in hot water. adam silver the commissioner came out, was very harsh in terms of a suspension. l.a. clipper jersey sales and product sales went through the roof. so you never know how fans will react. they often vote with their wallets. in the case of brady, they're very much behind him.

>> 45-7. >> super bowl champs too. >> in the game in question 45-7. i sort of think indianapolis sort of set him up didn't they for that? >> i don't know. >> did clippers jerseys go up in sales after they knew he was selling -- that he was going to be forced to sell? >> correct. after he was banned from the league. >> because nobody wanted to give -- >> things went very well after that. it wasn't just jerseys, it was all clippers merchandise. what i think we saw was a ground swell of fan support behind the clippers, the players, the coach where everybody thought the commissioner did the right thing and the team got a lot of support out of it. >> what happened when lebron james left miami and went back to cleveland. both to the cavs sales and miami sales. >> it's just incredible to watch. lebron is the number two selling jersey in the nba. cavs are up dramatically year over year. they're the number two selling team in the nba right now. the team i'm from, the san

francisco bay area is the number one selling team. the golden state warriors is the best team. steph curry is a sensation. he's the number one selling jersey in 42 out of 50 states right now. so even states that have teams curry is still outselling that team's most popular player. so nba, definitely lebron is popular just behind the golden state warriors. the other two playoff teams, houston rockets and atlanta hawks are doing well as well. >> how about the matchup between what fans are fanatics about when it comes to football when it comes to baseball when it comes to basketball when it comes to hockey. i know how i would stack them up based on the ratings. do you see the same thing in terms of sales? >> we do. you look right now, hockey is in its final four. the new york rangers here are doing extremely well. they actually made it to the stanley cup last year. they're up significantly year over year so you can see the fan base and nhl supporting the

rangers. chicago blockackhawks are slightly ahead right now. so one interesting thing now. lumquist is doing well. one thing emerging you can have rangers, black hawks, warriors cavs and also the top selling players. >> the rangers got, something's got to change on the last game. >> it's huge. what was it, a lock out or something? i don't know if they had a change. now all the sudden. >> hockey trends are famous. >> the interesting thing, we're not in the playoffs for the mlb but we've been watching baseball

closely. last year it was jeter. he was retiring and we didn't know what was happening this year. it ends up major league sales are up. they're doing well. >> anyone buying an a-rod jersey? >> he's in the mix. the mets are up. >> it's not even close to lance armstrong or ava. >> i think where you're going is big market teams. yankees. >> cubs begin since their last run as well. >> chris brian is a rookie as well. >> we return in a moment. financial noise financial noise

let's get down to the new york stock exchange where jim cramer joins us now. what's in corporate news today? no results really came out did they? >> i did like the target result. i think fashion is back there. people worry about apparel. they deliver on apparel. i like the dot com initiative. i love the kelly cramer interview. she has great presence. i think that's the strongest story out in tech right now.

you can see why. robin is going to do a great job. the transition scene was optimistic. that's a great place to be now. >> and then lowes. >> i didn't like their tool numbers. i wonder if it isn't lows not doing as well in the professional end. the home depot quarter was amazing. i think it might be an opportunity. i wouldn't write off lows so quickly. many are, i think that's a big mistake. >> the stocks have done better than home depot. >> i'm not sweating that one at all. i think housing is strong. that number yesterday was good. a great april. home depot and lowes had a great april. >> see you in a couple of

minutes. late night legend calls it quits after 33 years. the man who brought up the top 10 list had really great moments. never could use the data. we'll bring you a favorite highlight after the break and hear from the future this hour. futures are higher. we'll be right back. ndwriting, a wide-screen multimedia center, and a head-up display for enhanced driver focus. all inside a redesigned cabin of unrivaled style and comfort. the 2015 c-class. at the very touchpoint of performance and innovation.

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tonight david letterman signs off the late show after a run of 33 years. he's had more than 6,000 shows. last night, bill murray who was his first guest joined dave once again as part of a send off. want to remember how long this has been? what else was happening in 1982 when he first hit the air? it was the band hitting the top of the charts. the average home price was over $100,000. >> just stay up.

>> i feel like i would stay up to watch letterman. i was in school and didn't want my parents to know. >> tomorrow long time executive producer rob joins us in studio. maybe he'll be up all night. make sure you join us tomorrow. right now that's it for squawk on the street. good morning. welcome to squawk on the street. i'm carl with jim and david. new york stock exchange. a lot boiling today as the retail earnings come in heavy. meantime japan and gdp highest of the year. crude oil is up despite a dollar today and we'll get inventory 7:30 eastern looking for a draw. right around 224