that so we'll let you have the last word on it. warren, charlie, bill, thank you very much for your time today and we appreciate it. we appreciate your generosity with your time. >> thank you. >> thank you. that does it for us today. join us tomorrow. right now, it's time for "squawk on the street." ♪ good monday morning. welcome to q"squawk on the street," i'm carl quintanilla with jim cramer and david faber. we'll recap everything from this morning, set up for a busy week in earnings. europe slightly red as the tension -- attention turns from macron's victory to the parliamentary elections in june. and our road maps begins with the oracle of omaha speaking out. the warning and plus his

thoughts on apple and the hot investments that he missed. >> it's a merger monday. comcast and charter, they're not merging, don't worry. but they have an announcement. kate spade and coach, yeah, they are. plus other deals brewing. >> and france has decided what the new president means for the u.s. and the global economy. first up though, warren buffett sharing his latest views on investing this morning. this is what the oracle had to say to becky earlier this morning on "squawk" about stock valuations. >> the most important item over time in valuation is obviously interest rates. i mean, if interest rates are destined to be at very low levels, not necessarily as low as they are now, but very low compared to the 100 year averages or 50 year averages it makes in i stream of earnings from investments worth more money. >> buffett said bonds is a terrible choice relative to stocks.

take a listen to that. >> anybody that prefers bonds to stocks is making a big mistake. i have been saying that year after year after year. now, i don't -- i won't say that under all circumstances but it is ridiculous in my view for somebody to buy a 30 year bond and some countries 50 year bonds at these rates in preference to buying stocks. stocks will bounce around a lot more. they can go down 50%. but a 30 year bond can go down 50% too at these rates. bonds are a terrible choice against stocks. >> echoing what he said in the past, that rates are the most important too many in evaluating valuations over time. not unthinkable they stay low for a long time and he meant about a hundred basis points from wherer right now. >> for me that's the most important take away. if you sweat all the interest

rates we have, you'll miss the big picture. don't make a move on france or large gdp or on companies. but i liked -- you know, they spent more time this weekend talking about things they missed and they were things that were kind of really extraordinary. i think the most important one was google. because he was doing this huge amount of business with google for geico and he just point blank said you know what? i should have bought it. i wish more managers would come on our show and said i wish i had bought it because i found it so liberating. i mean, he got apple. he talked about -- by the way the ibm discussion about look, watson may not be commercial yet. i looked at watson, very candid man. he made me feel better about stocks. you come in on monday feeling better, but one of the things that makes me feel good, for instance we have a huge slate of fed speak this week. he basically is saying that's so granular to him. i loved it. i thought it was great.

it was great. >> listen, berkshire's performance over any period of time you want to measure in terms of longer term you can't argue with it. >> no. >> he outperforms the s&p, unlike a lot of other companies we know in their stock prices. >> that's why there are periodic discussions of whether he's lost his touch or whether sectors are too foreign to him. suspici suspicious of dynamic -- and high on single payer. for a lot of people, maybe we figure it out like other countries have. >> look, he's talked about kaiser permanente, but these guys speak from such massive experience. they're very empirical and rationale. they have looked at situations and decided look this is the way it should be. there was a great moment where becky said aren't you a republican to munger?

he said i'm a different kind of republican. just refreshing. the whole way. >> the whole way. >> refreshing. >> i know this is an aside, but i'm -- i think it's remarkable that these gentlemen, one who is 93 and one is 86, the mind/body connection, when you have that kind of mind, your body stays strong. >> more cherry coke. >> my wife said what are you listening to? what are you listening to? because it's 6:00 they came on. you know, one time he mentioned apple. this time it was ibm. he basically said this wasn't a long term view of it. but you have to listen to them because they put everything in perspective. they also make you feel like you know what, owning companies is good. and i don't think -- yes, they do completely favor index funds. but at the same time, i mean, he just said, look, i saw a lot of kids with their iphone. we can do that too. i think that there's room for individual stocks in a portfolio of index funds which are

definitely still the bedrock of what you need. >> david, you want to do this? >> yeah, sure. we mentioned some merger monday. thankfully we actually got a headline that will make it that. because sinclair is finally announcing the deal. been much reported on as a possibility. it's worth $3.9 billion. certainly important for sinclair shareholders and tribune shareholders. it includes 35 bucks a share in cash and 0.23 shares of sinclair class "a" and it brings together the 42 stations that "the tribune" owns with sinclair and it creates a power house in terms of television stations. the local stations. not talking about all the networks although they get some ownership in the food network and things of that nature. there may still need to be divestitures but the reason this can happen is because the ownership restrictions had been relaxed at the fcc in terms of

how many stations one can own. sinclair called it a transformational acquisition that will open up a myriad of opportunities for the company and they're complementary to the footprint and will create a media platform that of course does include many of the largest markets in the country. so again, a deal in which a brief time it appeared that fox was trying to participate. got together with black stone. eventually dropped out and sinclair gets what it had been after. >> the rule changed in a way that made it so this deal would not have occurred because i know that i looked at next tar and that's another terrific company. they have kind -- they had kind of maxed out. so i guess it's game on. there are more -- >> it is game on. it is. >> wow. there's a concrete example of something -- >> yes. in terms of what they'll allow. by the way they still may exceed to certain extent some of the restrictions. it may require some

divestitures. i haven't finished reading the entire press release to see if there's a mention of that at that point. sinclair may sell in market where currently owned stations -- such divestitures will be going through the approval process. so there's that, jim. it's not something that could have occurred a year ago. >> when i had nexstar on, they make a compelling case, local tv it's what people watch in the morning, how they vote, they want to watch the commercials. it was a big year, with the election year. i want to remind people not everything is facebook. >> that's for sure. sinclair was already the largest owner of local stations in the country and now poised to control a third of them. and coach is acquiring kate spade. $2.4 billion in cash. coach says it maplans to mainta kate as a separate brand.

premium is based on a price last december prior to all of this speculation starting. >> terrific buy. coach had a magnificent quarter. it's a very energized company that's gone back to its roots in terms of how it works. it's got great clothes. we can't just think of it as a handbag company anymore. they made some acquisitions. this is another good deal. take out another competitor. >> kate went through ups and downs since the end of december when we learned about the idea that it's for sale and might be sold. you get the earnings per share not an insignificant multiple looking at the comps. i mean, coach trades at 16.6 times. and berlusconiurberry is around the time.

>> i know people are upset because they saw where the stock was. it was too high for what is basically an industry that is really hurting. and that's one of the things that i find about coach, the accessory business. remember these are places -- they sell their own stores but they are -- they're in the mall. so i think kate people should be pretty glad. >> it's being done as a tender offer and it can close pretty quickly. not an enormous deal although, you know, almost $3 billion. >> it's an important deal because i have been waiting for the consolidation of the companies that sell into the department stores. this is first one. they have been all very laggard. matthew boss has a piece out in jpmorgan saying you think that capacity is really coming out. it will be a 30 year bleed. there's 3,064 stores that closed this year and that's almost nothing. so you need to have the companies merge. i keep hoping that the f corps will do something. >> we'll get to nordstrom and

macy's and kohl's along with a bunch of media names. the french election came out as elected, macron beat he opinion. 66% of the vote. the polls had him up by about 24. le pen had promised to pull france out of the eu if she won. people may wonder if there's not more of a relief rally today, jim. but discussion is about how many seats he can win. >> yeah. the french market had a good week last week. one of the things that i think maybe we get away from this is this -- this constant worry about who's going to lead the eu. if we talk about italy it will be the same thing. you're not going to get -- it was the -- the dutch election was the high tide of so-called nationalism. i think that the french in the end really there was a lot of commentary. we have had some great from michelle and from wilf. but that last debate was kind f of -- you know, kind of a shocker to the french people about a lack of knowledge of the country. and i just think that when we

think about europe now we should think about it as an area of great growth. because we keep getting better and better numbers out of europe. when are they going to stop easing? >> a lot of the chatter does it give draghi enough cover to do something serious? >> there was a great interview that michelle and wilf had. is there going to be reform? yes. when is it going to happen? we don't know. at what kind of reforms? don't put us down. 35 an hour workweek -- wait a second. it wasn't like trump who called for a massive tax cut. right? and said no to china. and, you know, it wasn't like that. >> we'll get a lot more on today's movers this morning including this new agreement between comcast and charter. later on an exclusive with dell founder and ceo michael dell. get his take on the changing tech landscape. the s&p comes off the first record close since march 1st.

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comcast and charter communications confirm that they have a new operational agreement

that will involve the two companies working together on wireless communications plans over the course of a year or even more and across much of the country. a key part of the plan as weal calls for them to only work together with regard to national network operators and it's got as you might expect a number of the wireless companies in that sector chatting this morning, wondering what it may mean. it may not come to much. if you want to go back to the mid '90s i remember a partnership between pack tell and nynex that was put together by what were then the old phone companies if you recall to compete with cellular one. what ended up happening? they ended up buying each other. not much more than that. and that's one take away for some investors to say maybe this is leading comcast to potentially think about trying to buy charter one day? although regulatory wise, hard

to imagine that's something that would be allowed. what it will allow, well, you get access to the network overall. you get the buying power of the two companies together to allow them to get hand sets at a lower price. so there are some efficiencies there. and you do preclude them from doing anything to buy a sprint or a t-mobile separately. now, some this morning i have spoken to seem to think does it mean they want to get together to buy one of the companies? that to me is sort of the fanciful thoughts of people who have nothing better to do. when was the last time you saw a 60 plus billion dollar deal by two separate companies for one company, it just doesn't happen. this is more about trying to see what they can do in terms of wireless and their own mobile virtual agreements they already have in place. getting some handset agreements perhaps. then seeing if they want to come together under one brand. that would be important for a wireless -- a wireless offering.

right now, separate brands. >> well, john measure in the conference call at t-mobile point blank attacked comcast, parent company of our company. it's a store business, they don't have the scale and you see t-mobile ticking up and you see sprint coming back. the t-mobile quarter was excellent. people say, look, you do need the stores, you do need that scale. the tower companies last week, american tower, sba, those were on fire. as people continue to say that these unlimited plans are really, really causing a slowdown for everybody. so it's a lot -- >> more capacity is needed because they have so much stuff swamping the networks in terms of -- >> they're swamped. i find my comcast wi-fi faster than if i use my verizon. >> apparently the two companies, they talk all the time.

and they decided well this is at least something worth giving some thought to. or moving ahead on for at least a year in terms of not being able to do anything with anybody else. >> david -- >> don't know if it will amount to much. i'm not sure if they believe that it will or it won't amount to much, but at least they want to give it a try. do they really want to actually take a big step into what such an incredibly competitor arena. at&t is doing everything it can to diversity away -- >> you get hbo with at&t. everybody is being creative about not losing subs although verizon has yet to really emerge with something that would tell me that it's going to stem those losses. that was still the big surprise of the quarter, the verizon losses. >> that becomes a continued question as to what verizon will do. by the way, one thing they want to do is buy this company straight path. >> oh, my. >> straight path, straight up. it's verizon that's this multinational telecommunications company that straight path

refers to in the press releases. 184 a share. this thing started with the $95.63 deal to sell to at&t. then they went up from there. >> you know what -- >> 184. >> it was a heavily shortage stock. really questioning its worth. well, they were right to question the worth. it was worth four times. >> investors expected at&t which has three days to respond may come back and try to best verizon's latest bid. this is all just spectrum, that's all straight path had. they were supposed to build it out but they were doing fake things. >> are you serious? >> fake cell sites that didn't really work. and the ftc said stop doing that. >> the only thing that didn't happen by warren buffett is that he didn't say i like straight path. >> they covered everything else. that's for sure. we'll get you more on what buffett, munger and gates said on "squawk." look at the premarket as we kick off a busy five day week. a lot more "squawk on the

street" in a moment.

all right. we're counting down to the opening bell here to start the week. you want to talk a little bit newell in the -- >> yeah. nwl. now, david, this was a company, my charitable trust owns it. it had been a tough ride, why? because they indicated that things had gotten tough we are the channel. remember, they sell into the -- they sell into the targets of the world which have always been pretty terrific places to sell. until amazon.

well, mike polk got it together. he raised the numbers very big and dividend very big. i think a lot is international, but a lot of it is new products and a lot is getting rid of what jordan, he didn't like. he's really kind of sold a lot of product. added to the candles. >> so many different -- >> right. >> so many different versions had been put together by martin franklin and that was the definitive deal for the guys. >> now they're the largest consumer goods company and they have the best growth. i mention that because we only think about what cpg what companies can do really well here. i'm not saying it's a takeover target by any means by kraft heinz. but this group has gotten little growth. mike has more growth than the others. i have him on tonight to explain whether they have the -- really terrific by the way, sharpie business.

they had elmer's glue. they got rid of the tool business to stanley black & decker for a good price. some say flotsam and jetson, i say look out. the yankee candle business that has turn around. one thing they're doing together is making money, making money for the shoulds. a lot of -- a lot of people thought he'd short this. amazon, his store would be amazon, but he's apparently figured out the channel. congratulations. it will be great to hear. because he's really turned this thing. >> all right. we have an opening bell coming up right after this. en this bel.

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consistent jawboning from opec today. >> it's incredible because you have -- thank you, russia, brazil for this. yeah. the saudis have basically held off the market. but then you have half a million barrels coming in from the united states. so it's really a bush. isn't the world picking up, but then you realize that at $50 we have many companies that are selling futures. that's kept a lid on it. so we're really in a narrow range but it's predictable. the russians and the saudis come out when there's panic at 45. there was an intranight low at 44 on thursday night. i still think it has to be tested. but i will say that those guys, russia and the saudis they do know how to come in at the right moment before you break it down to 40 because the united states is pumping like mad. mad. >> the latest report out of reuters, they would extend -- they would consider extending these cuts for nine months.

after that six month announcement back in january. so we'll watch it closely. let's get the opening bell. s&p at the bottom of your screen. at the big board this morning, it is duff & phelps. celebrating the 30th anniversary of the select income fund. over at the nasdaq, cavium celebrating the tenth listing anniversary. micron, an important downgrade today. >> everybody wants to get in ahead of what will be a tipping point. the micron -- they make a lot of flash but they're principally known as a d-ram maker. so the stock did not go up. often that's a sign by some people to say you know what, this is really a price rise too much. there's been a 46% increase in capital spending to try to make more d rams. typically by asia. when pricing goes up this much there tends to be a crash. when i talked to apple last week, they were really saying

that, look, the inside -- these costs, d-ram in particular, going to come down big which is going to really expand the gross margins for apple. i think that when you read this, you should think two things. one, the semiconductor equipment and the d-ram market are -- they're getting less hot. certainly come down in price. because of just an overwhelming supply. but the companies that use them, in particular apple. very big windfall. don't forget. i know warren buffett talked about apple. he was indifferent about whether he was buying it or not. but if you want to see an expansion of gross margins, d-ram prices come down. they buy a lot of them. >> the other one is evercore resuming tesla. outperform. target at 330. target at 160, the split is on. >> well, the tesla conference call was one where i mean, i really think -- you need -- as i said, you need mind altering

drugs. look, friday night was cinco de mayo night at bar san miguel. that would have been a good time to listen to tesla's conference call. the red queen is -- the mushrooms. they say that because at one point someone says do you think you can do a million cars in 2020? >> he said -- >> maybe more. >> remember what the doorman said. >> yes. the doorman said -- >> the model 3 is big. you come through the conference call and you say, all right, like what happened this morning when warren buffett was talking about amazon. you have to have a tremendous leap of faith. and if you keep your head, you keep your head at the 160 price target. if you have that leap of faith that it's a technology company and there's really the -- the bounds are limitless you want to pay these prices. but when you listen to the call, you have to understand that mark fields is saying, listen, things are -- autonomous cars.

when you listen to tesla anything you ask, anything you ask it gives you more. so it's like you could say, hey, is it nice out? super nice u. -- it's super nice. >> i did want to get to some other m&a news. akzo nobel saying no thank you to ppg. the third time they have done that. and perhaps the final time that at least these two companies are going to have a civil back and forth. although things are already getting a bit testy. as they have been. ppg's response to the rejection from that akzo nobel is getting particularly -- >> yeah. getting nasty there. >> hostile. that's the real question. will they choose to become hostile under of course the laws of the netherlands where akzo nobel is incorporated. that will be a key. there is a shticking.

that will enable akzo nobel to in many ways certainly defuse what might be a hostile front for ppg but not entirely. you can go through the round about of them replacing the board and it's not worth getting into right now. p pg though goes through some of the scenario and says, listen, we wanted to talk to you after april 24th when we made our last offer. we made another attempt to talk to you on may 4th. then you told us on may 5th, you want to talk, get to rotterdam on may 6th at 3:00 and we'll talk to you which they did for 90 minutes and nothing came of it and they rejected them and of course ppg said we're very disappointed in that. we continue to believe the proposal that we have is vast vastly -- it provides more to the shareholders than splitting the companies that akzo nobel -- to spin the chemicals. >> it would be a fabulous deal

because you had sherwin williams merge with valspar. the paint difference it's a duopoly. they could go into home depot and say, listen, the game -- the game's changed. you do need scale when you go up against home depot and lowe's. this would be a fabulous deal for ppg but remember this is no longer a chuck bunch's ppg. i would think -- he never did anything hostile. mr. mcgarry is saying we need this. i don't know if he gets it, ppg has been going higher and higher in part because people think he will get. >> hugh grant is their lead independent one from monsanto who sold the company. >> it's worth watching because ppg, it has been a fantastic stock since they started this. >> if they get encouragement from the shareholder base they're probably going to keep going at it. but again a lot of potential impediments of them being able to successfully see through. there's some debate around that

because it does get into the intricacies of takeover law there and the presence of the shticking. >> masco is up, kitchen and brand, fortune brands is fantastic. the best is stanley black & decker. they bought craftsman up. bought the tool business from newell. anything at home depot it sells at home depot has been terrific. >> elliott a large shareholder and akzo pushing them into talks. they filed a small -- it's a small company. take a look at it though. you seem to know it. >> it was incredible. >> you know every company that -- >> i missed a bunch of quarters. i have to tell you everybody who i know who owns arconic has gotten a call from elliott and arconic. that's been very heated. my charitable trust owns arconic. i think that the -- i have to tell you that the elliott slate is stronger.

strong slate. strong slate. >> wow. you have turned. >> yes, i have because you see they fired klaus kleinfeld. >> i noticed that. >> klaus is out. when klaus was out, who was the visionary who should have gotten credit for the split, and patricia russo is the chairperson and i remember her from lucent. one of the things that makes my feel like elliott has more game. there's mr. hess from united technologies, retired. a group of people who can come in and great some noise. don't forget that warren buffett owns precision cast marts. maybe they would be -- they might buy arconic which has so much of the engine of the actual engine, the ring around the engine for united technologies. so stay tuned on that one. that is very, very heated. >> as you're talking, guys, s&p hits its first record high since march 1st. we got to 2401. >> oh. >> been a while. nasdaq has been doing it day after day. but nasdaq is lagging behind. goldman has a note this morning

looking at whether or not nasdaq can continue to outperform s&p. they say over 12 months, yeah. not by a lot. >> i don't know. >> valuation is not out of line with historic. >> people are quietly saying better things about this market. it's overrun a lot of price targets. people kind of couldn't figure it. i know there's a feeling that perhaps when repeal and replace failed the first time the economy slowed. there's an overall sense that maybe now that it's out of the house it can take up something else. i feel like the spirits are back. and a lot of that is because the quarters were great. i mean, wow. >> quarters were amazing. especially in information technology. now looking at 21% year over year earnings growth. >> yeah. >> only telecom is in the red. >> alphabet is great. facebook, the window, they opened to sell some and facebook had a great quarter. microsoft had a great quarter.

cloud based, just anything cloud based had a great quarter. >> did you hear charlie munger giving bill gates a hard time about it? that was so funny. yeah, you're five years late. >> well, i know. munger is -- he's unique. >> i mean, the question was, bill, what did you miss -- at microsoft -- i wish we were in the phone. i wish we were in the surge. and munger piled on. >> it was a great moment. >> you know what just cracked 150? apple. >> well i thought his comments on apple were kind of -- listen it's the oldest consumer product company that hasn't had to cut price. you talk about the price of it and how people love it. it's really interesting. it was liberating to hear him talk about it as being a company that has pricing power. that people love and can't live without. it's a different narrative from the analysts who keep saying, where is it? they don't have a new iteration and it's doing great. i don't know how they do that. and the answer is that he said

it's a great company. i know then he compared it to ibm where he said it didn't pan out as a great company and the commentary about watson was i felt very double edged. that watson could be great. but the commercials indicate that watson is already great. i think that there's a sense he said watson's good off of a low base. there was a lot of damming with faint praise with ibm and a lot of praise about apple. it was between 6:15 and 6:30. >> i got it. thank you. apple, that is an all-time high in market cap as well. remember we're going back and forth on that in a bit. because they had reduced the share count even though you had a new all time share price -- >> it was kind of the lure of ibm. >> incredible return of cap that will apple is able to do. >> mr. buffett talked a lot about the rails by the way. there was a note about warrior coal today. a bunch of guys liked it.

that's steel coal and natural gas -- we think of oil -- at 350, a lot of utilities switched to coal which is particularly good for burlington northern. he said the biggest swing in a big story. why are the rails up? he gave you a good insight into the rails. natural gas came in a little. that was a great story you want to be in the railroads after you listen to buffett. pretty amazing story. >> so let's get to bob pisani on the floor. >> good morning. happy monday, everybody. a mixed market at the open. but europe right now, we are down just fractionally, but remember, we closed at a record high in germany on friday. we close at a multiyear high in france. so you see a mixed market here what's going on. but overall europe has been a great per former year to date. i like at the stoxx 600 which is the s&p 500 of europe. i closed at a 20 month high on friday. there you go. down fractionally today. let's not quibble, it's

essentially at a multiyear high and that's because there's strength in europe. if you wonder why it's a lot more than just political risk. the earnings have been better and the earnings are rising. earnings estimates, and we have seen better economic growth. and the ecb is there and we have lower political risk. that's the icing on the cake, but not the main thing and not the only thing. a lot of people wonder what this have to do with me? a lot of big companies get a lot of their revenue from europe. a lot of people point to priceline, but i count to the companies that are 15% of the revenues like hewlett-packard and goldman gets about 21% of its revenues overseas. amazon, 20%. united technologies, apple gets about 17%. 3m, these are big companies that have somewhere around 15 to 25% of their revenues overseas and that's a big tail wind for them

in terms of the earnings situation. here in the united states today, mixed market as you can see overall. energy still a problem. even with oil to the upside. there's not much follow through with energy. tech has been a fabulous performer. that's still holding in there very well. we had a big discussion in morning meeting about stocks priced to perfection. well, they are priced to perfection. when you get this kind of perfection it's hard to argue with it. earnings are rising. we have lower risk for geopolitics. the u.s. economy is improving. the federal reserve is essentially neutral on the markets. everyone believes there's two rate hikes coming. they have done nothing to dissuade that. that's why i'm calling it neutral for the fed and tax cuts are in play. you get this kind of perfection it's no wonder that world markets are essentially at new highs so we have the u.s. at an histor histor histor histor historic high right now. japan helping, 16 month high over there. that's what happened when you

get a global -- not necessarily synchronous, but global economic expansion helping out. take a look at the united states overall still fantastic here. we're at new highs on the indices. we have modest amounts of in highs. that's because some key indicators like tech stocks have been dragging these indices forward. so i would like to see more new highs but the advanced declining line is at new highs. more advancing than declining stocks every day for a long time. the volume on the light side. volatility, i'll call it high complacency but i'm not sure that means that much given the ability of the option markets and how diverse the option market is. the bottom line, yes, stocks are priced to perfection and yes, there's a good reason for that. a lot of perfection. it's about as good as it gets for the markets right now. a lot of reasons that there might be risks out there, including north korea for example. right now the s&p 500 over 2400,the first time. historic highs. back to you.

>> thank you, bob pisani. let's get to the bond pits and rick santelli at the cme group in chicago. >> good morning. carl, as we look towards last fed meeting -- not the last one, but the one in mid march that's the last time we saw two year note yields in the 133 camp. if you look at the 24 hour of tens, as we start the roll into the time zone the little bit of slippage that carried overnight ended. so yields are now up a basis point everywhere on the short end up a little bit more. you can see what i'm talking about. but let's stick with more of a macro view. you can see it looks as though we're -- now hang out in the range we hung out in earlier in the year but let's compare it to europe. especially not only after the french elections but think italy, think germany. they still have all of this yet to come. our chart with regard to the two year euro minus 66, big negative

there. but it wasn't that long ago it was minus 76. look at bound, not as much horsepower. the euro versus the dollar getting a lot of pub listy after the macron win. there was a lot built in. and open it up to november 1, you can see we have had lots of action around this 110 area. many look at it as resistance and looking at the dollar index rebounding a third of a cent. maybe there's some truth to that, at least technically speaking. carl, david, jim, back to you. >> all right. rick santelli. when we come back, vanguard founder jack vogel will join us later on as to what warren buffett is aissing about -- is saying about investing. the s&p is now back to 2397. back in a moment. [vo] when it comes to investing,

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morning to our becky quick from his berkshire hathaway annual meeting. here's what he said talking about missing the boat on google. >> charlie actually brought up the fact that we missed it too. google i should have had some insight into because geico was a heavy user very early on. here we saw value in something at that time i had no idea what we're paying, but we were paying 10 or $11 a click that had no cost of goods sold and we'd keep doing it. we could see that. so i should have had more insight into that. >> to your point earlier, jim, through geico he had a window into the company's business. >> i think that was one of the periods that he said, listen -- what an unbelievable insight he had because that cost of goods sold has -- is always what attracted me to that company. it's really what does it cost?

but there's always people who say, listen, now amazon is going to go after them. there's always someone going after them. in the meantime they have not sat still. they got youtube. they did data center. they're way ahead on the autonomous car. my hope is that when intel finishes its merger with mobile, they can make the chips low enough that they can sell into waymo. waymo and fiat have a great deal so i think that people who want to write off alphabet are not looking at things since ruth porat got there. >> nice discussion this morning too about the evolution of the industry to where you do not need capital or capital investments. it's not exxon or ge anymore. you can have a trillion dollar business and not need equity capital. >> i love the fact they look at the different businesses and then they do the read throughs from the businesses. they don't sit still. it's -- they have to read through the housing and rails

and geico is just incredibly important to get customers online. that was something that people didn't think could happen. it's only now that it's dawning on people. it dawned on him very early. didn't necessarily make him pull the trigger but when you speak to a lot of consumer product stores, look, they have on t the -- they have to be on google. that's the point of service. they have to be on amazon. the biggest adopter of clorox, unilever is a great adopter of this. they know. but they're not holding companies, they're not buying shares of google. >> we'll get to "stop trading" with jim in a moment. it'll get better. i'm at the edward jones office, like sue suggested. thanks for doing this, dad. so i thought it might be time to talk about a financial strategy. you mean pay him back? knowing your future is about more than just you. so let's start talking about your long-term goals. multiplied by 14,000 financial advisors, it's a big deal.

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♪ it is time for cramer and "stop trading." >> you see apple going up. and warren buffett alluded to the idea that they don't have something -- they'll have something later. the iphone 8 is getting a lot of talk about as is samsung. people buy universal display, that is supposed to be in everything. there's a 10% short position. these guys are fantastic.

this is light emitting diodes and sky works is doing well. broadcom is doing well. this is the one that everyone seized on as being the next generation and i have to tell you i wouldn't get in front of the juggernaut. forget it, a great company. it's been held down for a long time. it's got the right product and be they're pretty amazing. >> you have been resolute. >> they yeah, they're not scientists, not hype artists, but they're scientists and engineers. because they're not in silicon valley doesn't mean they're not smart. >> who do you have on tonight? >> i have newell, the power of brands and michael polk people -- jareden had some brands, he's getting rid of some of that stuff. >> ski stuff. >> see you later. you want consistent growth.

and rubbermaid containers we use them don stantsly. i was at stu leonards and i think you'd rather die than go to stu leonards. it's really terrific. i'll take you there. you'll be flabbergasted and you'll never shop again. >> i went once. it was fun. >> we'll see you tonight. 6:00 p.m. eastern time. when we come back, vanguard's jack bogle on warren buffett and the market's record run and an exclusive with dell founder and ceo, michael dell. jon fortt's got that when we return.

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go long™. ♪ ♪ good monday morning. welcome back to "squawk on the street." i'm carl quintanilla here with sara eisen and david faber. markets off the initial high of the mornings, a busy morning and week as we pay attention to that buffett said this morning on "squawk," the french election. plenty of fed speak and m&a. >> our road map begins with warren buffett speaking out. his warning to investors. thoughts on the economy. the united scandal and more.

we'll bring you all the highlights from omaha. >> busy day for deals. comcast and charter announcing a partnership. coach buying kate spade. we have all the details. >> macron wins, the political outsider defeating marine le pen and we have reaction from paris straight ahead. first up, after a busy weekend in omaha, warren buffett joined our becky quick for a three-hour special this morning. becky has some highlights from their conversation. you can essentially go anywhere because you guys covered a lot today. >> we did. the three of them happened to have a very deep and a very broad series of interests and expertise. we dug into a lot of different issues but one of the big topics that we touched on today was health care. it's not only important for consumers but for businesses. in fact, buffett says when it comes right down to it for american business, getting health care right may be even more important than getting taxes right. >> probably hear more from

business leaders about corporate taxes. being -- causing them to buy with one hand tied behind their back in terms of foreign competition. corporate taxes as a gdp have gone down to 2% so they have been cut in half as a percentage of gdp, but health care has gone from 5% of gdp to 17% of gdp. and business pays a lot of the health care costs. >> of course, getting the health care system right, how you do that, well, that depends on who you ask. there are all kinds of opinions on how to do it. the house passed the bill last week that went through about how to change obamacare. how to change the american health care system. buffett had some thoughts on that as well. he said when it comes right down to it, that bill that the house passed does one thing for sure. it makes guys like him a lot better off. >> i'm $600,000 better off

because of what happened this week. now it has to go through the senate and other things. but it was huge what they did on cutting taxes for the rich in this -- i mean, there's one clear cut message that comes out of that bill it is we're going to cut the hell out of income taxes for the rich on investment income. >> now, bill gates was here as well and he pointed out that when you look at the health care problem, there are two very distint problems. the first is trying to figure out how to bend the cost curve, the costs that have been spiraling rapidly. it's now 17% of gdp as buffett pointed out. and you have to get some control of that. gates said the other issue is figuring out how to pay for it and that's where you get the tax issues, who will pay for what. charlie munger was here as well. charlie came out with a pretty radical idea. he happens to be the chairman of good samaritan hospital in los angeles, so he has experience on

hands on issues of how health care and how hospitals are dealing with these issues. he thinks we should go to the universal health care system. basically, medicare for everyone. and if you want to buy out of that, opt out of that, you have the money to do it, you could go ahead and do that. i pointed out hes a republican and that doesn't sound like a very republican idea. his quote back was, i'm an unusual republican. carl, i'll send it back to you. >> i thought that was a good moment, becky, it's issarah. i know you talked about the stocks, but it was interesting to hear him talk about some of the bad behavior with wells fargo, with united. we're wondering is he going to sell a stake like he did with ibm. sort of backed up the investment. what was your take on how he answered those questions? >> well, i think he kind of looked through it. his point with wells fargo, they have made some pretty serious changes. i quoted back his own comments

from the solomon brothers if you lose a shred of reputation for the official i'll be ruthless. how come you weren't ruthless when it comes to wells fargo, because he didn't weigh in publicly on any of the issues. he said, look, if you're the ceo who lost his job, then you probably felt it head on. he pointed out that wells fargo has made some changes as a result and he said, look, you're probably not going to see any big problems coming up there because they're so strict and so concerned about this and so on the forefront of the issues. when it comes to united he said he never spoke with oscar munoz ever, even before or after the united issues with david dao, the passenger being dragged off the plane. he didn't know if munoz had seen the clip before he made the kind of tone deaf response that came out afterwards where he was defending his employees. he understood why you'd defend your employees. he said that's every chief

executive's response. and he also said look, you're going to have issues like this and that somewhere in berkshire hathaway's empire that are employees doing things wrong all the time, all you can do is make sure you fix things and move on. he didn't sound like he had lost faith in either of those two investments, sara. >> becky, we'll come back to you for more as long as you stay sitting upright after a long weekend. becky quick in omaha. >> thanks. >> the market rs are digesting comments from buffett over the weekend. let's bring in david wolf and back here at post 9, alexandra lavin that will. buffett said on the markets at large that the stocks are cheap. are rates are to be at these levels for five years he said he's having trouble finding opportunity to put his $95 billion to work.

is that code for stocks are expensive? >> yeah, i think so. it's interesting that, you know, one of the world's greatest investors is sitting on $95 billion in cash. and he's lamented over the past couple of years that he's having a hard time putting that money to work. that was my big take away from the meeting actually, carl, i think buffett what -- he did a good job of giving us his evolving thinking as how tough it is to put this money to work and how he may have to change some of his classic margin of safety precepts in order to put that money to work. >> meaning what? going further into tech or something else? >> i think the field is wide open. when he talk z about -- he doesn't want to come back in a couple of years and have $150 billion in cash and that in ten years they may have $400 billion in cash. given, if he didn't put anything to work. i think there's a chance that

berkshire could look very, very difficult five to ten years from now. he could do four $100 billion deals, he could do three $$150 billion deals or maybe the composition doesn't change hardly a bit but hebeis in -- he buys in a huge amount of stock. that means going to more fair value which is 1.5 to 1.6. i'm sure he doesn't want to do that. but his hand is being forced as we speak and i thought his remarks on how that is informing him was really insightful this weekend and then he talked about that this with becky this morning. >> you have been looking at the portfolio holdings and in your notes it says we have to see how good he is at selling for a classic buy hold investor. what did you mean about that? >> he said the stock doesn't

know what price you bought it at and he's certainly made some changes by selling ibm and he was a 9% holder of ibm altogether. so i think he's in addition to that cash that's there, he looks at what he has, how he can take advantage of that and then have more cash to invest. >> it was interesting to hear how he talked about some regrets. missed google and amazon. and around technology. i wonder what the take away is. >> i think adding on to the further comments in how berkshire hathaway might change and look over the next five to ten years i think the comments about google and apple were very telling. that they were a sign that you know maybe i need to look at new industries and look at things in different ways so i don't miss that the next time around. >> yeah. the comments i mean both on google and amazon this idea that it's very tough psychologically to pay 10 x when you could have bought it at 1 x. if he was forced to do it, he would do it, but hard to get

your head into that place. >> it is. going back to that, the stock doesn't know what price you bought it at. it could be more than 10 x. that's the thing about the market. you know, my grandmother used to say, you can never judge interest rates, you have to buy when you have the money. i think to a certain extent obviously warren buffett is much more sophisticated than my grandmother was back in the days of selling municipal bonds but that's always the case. you have to look at where the value is today. >> he did say it's not unthinkable that rates stay this low for a while. and by low, he meant maybe 100 basis points higher than where we are right now. does that make sense? >> i think that makes sense. i mean, we still aren't seeing gdp going up by any measure that would suggest that there's a need to increase rates faster than they already are. i think we'll see the next two increases over the year. i don't see interest rates going significantly higher than that. >> david, on that gdp point, buffett sort of gave us -- this is a constant buffett theme but a reminder he doesn't make

investment decisions around gdp numbers and elections when referencing the french election. seems like a good lesson for investors that get caught up in the short term numbers. >> yeah. i agree. he's the classic long term investor and he also, you know, kind of took a little rewind in history about how much he would have missed if he had been focused on economic news that he doesn't have an edge or in terms of politics. i think that's a very big lesson. a very important lesson for investors. i think maybe even in terms of amplifying that lesson when he talks about the efficacy of investing in index funds. for those who say i'm going to invest in the invest fund, i won't try to pick stocks i'm going to go live my life and won't worry about it, that's another way of saying that, that's buying whole. that's not worrying about all the daily vicissitudes of the news and the changing stock

market environment. that has proven to be a good thing. >> i guess. i wonder how many investors that are making up the market right now invest like that to buy and hold and don't pay attention to some of the big near term risks like the french election was for the future of the euro. >> i think your point is right on. when the markets are in the ninth year of a bull market everybody is a long term investor. let's have a 20% correction. let's have a 30% correction. let's have another typical bear market. i think the long term horizons will for the most part for too many investors will evaporate very quickly. i think your point is spot on. >> finally, i'm looking at the b-shares of buffett. lagging the s&p by about 600 basis points this year. is that people are uncertain about his prowess as a seller -- as opposed to being a buyer? >> i don't think's true. going bag to the -- go back to

the comment before, think of how many elections he's been through. he's been through a lot, he won't look at where his returns are right now, versus the s&p but taking that longer term view. i don't think so. >> good to see you both. >> thanks. coming up on the show, it is a big deal for -- big day for deals. straight path getting a new offer from the mystery bidder and coach buying kate spade. warren buffett kicked off the shareholder meeting with some high praise for jack bogle. the vanguard founder will be joining us straight ahead. the show's about to start! how do i look?

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of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. welcome back. a wealth of telecom and media related stories to get through this morning. let's start with a partnership announced between comcast, the owner of our network right here, and charter this morning to explore efficiencies to enter the wireless market. remember, both companies have these mobile virtual network agreements already in place with verizon, which allows them to resell verizon spectrum as their own service. comcast has already started to roll that out. now they're going to be partnering with charter to roll out in their regions the wireless offering of their choice. why getting together? well, it may help them in terms of efficiencies in buying handsets. it may also help them in terms of network access. and you might see at some point

a combination of the two companies into one brand in a wireless offering. but that's not where they are right now. now, as for how investors are taking it this morning they're saying, okay, that kind of makes sense to me. but why this one year provision that doesn't allow them to do anything with any other mobile network operator? that will at least keep comcast from bay at considering something. it doesn't stop verizon from attempting to buy charter, but charter's price may simply be too high for verizon. at least where it would want to sell for verizon to really consider. as for t-mobile and sprint, we continue to look at the two companies and wonder whether they're going to try to engage in as ceo claure indicated last week, some talk about a linkup. at this point, comcast and charter going to explore working together to build out their own wireless offerings and gain efficiencies in doing so. does it actually pave the way

for comcast to potentially look at buying charter some day? they may want to. but you have to remember we do have a department of justice in this country. by the way, that's the case for anything between sprint and t-mobile. you have to wonder if the doj even in the trump administration would allow it. you can own more stations and sinclair announced the deal to buy tribune this morning. it will bring together tribune's 33 stations with what sinclair has, make the largest single national owner of local broadcast stations. that being sinclair. it will have significant power in many of the areas. why? well because the fcc has lifted the ownership caps and restrictions although sinclair is saying it does expect it has to divest at least a few of the stations that it will be gaining here.

as you can see, both companies responding positivity to this deal this morning. even though it had been well telegraphed. it did represent what was it, fairly significant premium on tribune's price before we got talk. 26% before we got talk of this potential deal. finally, speaking of stocks that have done well since deal talk began, straight path which really owns spectrum, but spectrum is very valuable for either at&t or perhaps even more importantly verizon. as it seeks to build out its 5g capabilities and that is why verizon came in to top what was originally a $95 bid from at&t. or i should say deal from at&t to buy the company. then came back again after at&t raised. $184 is where we are right now, but investors expect that at&t is going to respond yet again. sending straight path shares up to $217. well above the $184 deal.

verizon is not saying it's not then, but it's them as everybody has speculated in terms of who the other bidder is. at&t will have some big decisions to make, sara, as this thing eclipses or roughly approaches $3 billion. this stock was trading in the 30s not long ago. >> a lot of the stories are intertwined. one note i wanted to bring up does the charter/comcast partnership make it less likely that verizon would go after charter? do they have to back off now? >> that verizon -- oh -- >> to buy. >> no, it doesn't affect it in that sense. >> they don't have to stay away at all? >> that means charter can't do anything, but it doesn't stop verizon. charter and the key shareholder they would want 450. it's hard to imagine that verizon would be able to do something without massively changing its balance sheet. >> this industry is going to be fascinating to watch over the next few months. separately, many investors are breathing a sigh of relief

today after centrist emmanuel macron beat marine le pen by a wide margin. winning the race to become france's next president. our michelle caruso-cabrera joins us from paris. that was certainly a macron strong hold. >> well, they're celebrating but they're also protesting. we have live pictures where protesters have come out because they're against the policies of the winner of yesterday's election, emmanuel macron. we understand they're going to march to the place. the headline number, you have 66% of the vote, versus 34% for le pen, but there are another set of firms that you should know. which speak to the widespread discontent actually. turnout was the lowest for an election in 40 years. and of the people who actually decided to go to the polls, almost 10% of those people voted what they called blank.

they didn't vote for either one of the candidates. that means that macron received 20 million of a possibly 47 million votes and that's only 43%. that's hardly a mandate. why are they unhappy? i had at least two different voters yesterday tell me macron is too free market. why? because he wants to reduce the strict labor laws that are here in france. he wants to pare back regulation and he wants to simplify taxes and pensions. that's not very popular in france which still has a large socialist group of people. as for what's next for marine le pen, she's going to reform and rename the party, going to try to win more seats. and she's also somebody who is politically active and considered to be very popular. we're showing you the live pictures, you can see the riot miss -- police are out. they're not surprised there would be anti-macron protesters. remember, there were 11 candidates in the first round

and almost 50% of the voters went for the anti-eu candidates so you can see why they're not happy. >> that's a big part of the conversation as we move into this next chapter. michelle, good to have you there. michelle caruso-cabrera in paris. when we return, coach buying kate spade for $2.4 billion in cash. we'll talk to the president and ceo of the american apparel and footwear association about what that means. stocks in a pretty tight range after losing the initial highs. the dow is down 24. this is my headquarters. this is where i trade and manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you.

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more deal news to tell you about. this one in retail today. coach announcing it is buying kate spade for $18.50 per share in cash. the total value of the deal -- $2.4 billion. coach says it will be able to save about $50 million in costs. their operational efficiencies within three years, guys, analysts like this deal. they don't see it as a surprise. been a long time coming and rumored since that was leaked back at christmastime. the idea here is that coach may be up for becoming more like a european luxury giant where

they're more conglomerate status. analysts say it's a good thing because it's less reliant on the own name sake bag. things can be trendy in the handbag market. coach came off a strong quarter. it's resonating with consumers and reinvented itself. kate spade interestingly has a strong consumer base in handbags. and in clothing. it just couldn't get the public company thing right. it had trouble expanding internally. that's something that coach has presence in. so analysts like this. i mean, they look at this very positively, david. i know you're looking at the valuation as well. >> well, the valuation was fairly high in terms of earnings per share. even 8.5 times ebitda in terms of street estimates. the market likes it. it will be accretive and double digit accretive in $50 million in synergies, but the real barometer is the performance of the stock price of coach. which clearly is saying hey, we

like it. >> yeah. has done better and is doing well today. for more on retail, let's bring rick helfenbein into the conversation, president and ceo of the american apparel association. will we see more deals like this? >> i think you'll see more deals like this. i think this deal is beyond brilliant. i know david is looking at the valuations. i like at the shoppers, the millennials. you know 90% of millennials use their phones to either shop or price compare today. and kate spade has a huge millennial following. i think putting a truly classic and brilliant brand like coach attached to a kate spade, one of the smartest moves i have seen in a long time. i'm very excited about this. >> do you think that coach can model itself after some of the european luxury giants where they take on a number of different luxury brands? >> i think that's probably their long term plan. i wouldn't be surprised.

they want to expand beyond their core customer. and their core customer is liking their product right now. you can go back in our retail history to when like tommy hilfiger challenged polo. then you look, you know, at all of the things that you can do to add customers and i think michael kors challenging coach was a wake-up call. coach is on fire, their new designer is brilliant. >> they have selena gomez too. >> selena gomez. they have a lot going for them. this is a good deal. >> although citi had a note out last week, they said in terms of whether or not coach you can call it a turn around. if we put the turn around label on companies that shrink sales by 30% plus, net income down 50% from the peaks, we'd be labelling many more as turn around stories. is this more a matter of managing really low expectations? >> no, it's not managing expectations at all. it's understanding the retail environment.

retail environment as you know is changing rapidly. we have had 14 bankruptcies so far this year and there are probably two more sitting in the i think with us so you have to be able to figure out how to adjust to your new customer and your new customer is 18 to 34-year-old millennial who has their own ideas how to shop. what's particularly interesting right now what are they shopping? what are they spending money on? themselves. you know, you look at resorts and spas they're all on an uptick you try to book a cruise right now, hard to get tickets. this is very interesting. and then you look at like the jobs markets. you guys were talking about it on friday. largest increase, travel and leisure. handbag sales up 20% in the last year. so handbag actually i think was luggage sales so people are traveling. people are spending money on themselves. >> they're also increasingly buying online. in fact, warren buffett this

morning was talking to becky about the changing retail environment and the big elephant in the room which is amazon. listen. >> how come you don't buy shares of amazon? >> stupidity. i would -- i was impressed with jeff early. i never thought he could pull off what he did. what's really -- i mean, i thought he could pull off something but on the scale that's happened. it's changed your behavior, you know, it's changed everybody in the office's behavior. and the remarkable thing about jeff -- and everything else is he's a -- he's done two industries almost see mull us toly that don't have much connection. >> it's been a narrative and theme, we're headed into the department store earnings this week. is that present again? >> each department store is learning how to adjust to the market and look at the mall landscape in america.

and a number of years ago we had 1,500 malls. we have about 1,100 today. probably shrink down to 1,000. we have way too much retail space. a lot of paring is going on. but people are spending money. you have to figure out how to attract that customer. look at the millennials, they stopped using their feet to go to the mall but they shop from their hands. people have to understand that and relate to that. why go to the mall when you can bring to mall to you? that's been going on. but the reverse of that is very interesting. amazon is opening up a store in washington. they have opened in manhattan. so you'll see retail go on. retail will thrive. but people have to fully understand who's buying. >> what does that mean for the department stores and as we head into this -- another period of earnings, when are we going to

see the bottom? >> the bottom is coming, but it's a question of adjustment and of timing. smart retailers are adjusting as fast as they can. but the problem is they can't move as fast as the internet moves. brick and mortar moves a lot slower, but there will be a time when all of these things will morph together and we'll be in a new shopping environment. people will get it. people will understand. people will adjust. i thought it was interesting with warren buffett, you know, when you get into these discussions about trade when he talked about road kill on saturday. and what he was really trying to say, you know, berkshire hathaway's named after two textile companies. beckshire was from new bedford and hathaway from massachusetts. he understands road kill better than anybody else and his point was you have to educate people for the new opportunities that come along. you can't stop what runs in front of the truck on the road. just have to adjust and people have to change. people have to learn.

a lot going on. >> it's happening in retail. as we speak. >> sure is. >> thank you. good to check in with you. rick helfenbein from the american apparel and footwear association. >> let's get a news update with sue herera. >> good morning. defense secretary jim mattis enrived in copenhagen and he said that the u.s. will look at russia's plan to create several safe zones in syria. >> we have to look at it -- the devil is always in the details, right? so we have to look at the details to see if we can work them out. see if we think they'll be effective. can we actually execute them? >> pyongyang university releasing a statement on the recent detention of an american citizen saying the arrest of kim hak-song was not connected with the work of the university. north korea says kim was detained on saturday. former acting attorney general sally yates who was

fired by trump will testify this afternoon. she is expected to tell the senate panel she strongly warned the white house about michael flynn's contacts with the russian ambassador to the u.s. weeks before flynn was fired. that's the news update this hour. you are up to date. carl, back to you. >> sue herera, thank you very much. when we return, warren buffett sending a warning saying this investment is a big mistake. >> anybody that prefers bonds today to the stocks is making a big mistake. ed i have been saying that year after year and year and stocks will bounce around a lot more and they can go down 50%, but a 30 year bond can go down too. bonds are a terrible choice against stocks. >> we'll talk to legendary investor, vanguard founder, jack bogle in a moment. the power of the nasdaq market. the power of 100 of the world's top companies.

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u.s. markets largely flat

after both the nasdaq and the s&p hit some record intraday highs this morning. berkshire ceo warren buffett warning on "squawk" that buying bonds over stocks is a big mistake. buffett telling shareholders this weekend that our next guest has quote probably done more for the average investor than any man in the country. joining us this morning, vanguard founder and former ceo, jack bogle. jack, what a nice contribute over the weekend and we would be doubly remiss if we did not wish you a happy birthday today. so happy 88th. >> thank you, carl. when warren announces it to the world, a lot of people find out. >> he called you a hero, man. i mean, how do you take that? >> well, i mean, to be called a hero by a hero gives it more credibility than being called a hero by a non-hero. but i already written him a letter this morning of thanks. i'm not a hero. i'm an ordinary guy who gave a damn about the people who were

investing. i wanted to make sure they had a fair shake. if that's heroism, well, so be it. >> yeah. >> but it was wonderful to be out there. >> you had a lot of occasion to talk over the weekend about say the level of indexing and at what point that gets dangerous after a week in which that's been a big part of the market conversation. you say what? 75% and have it not become dangerous but dangerous in what sense you said? >> well, what happens is people only understand this, carl. what indexing does is neutralize a large part of the stock market. there's no trading in the stocks, so if the i believe dexing as it is -- indexing is short of 25%, if the market were neutralized at 50%, well, turnover in the market is around 250%. so it would theoretically and simplestcally put take it down to 125%. that's a huge turnover. when i came into the business it was 25% a year. so nobody knows how these things

will fit together. but i think indexing can grow an awful lot more before it makes the market and takes any kind of efficiency out of the market. and what people don't underst d understand, carl, it's so funny. they say well if the market gets inefficient, it will be a lot easier to make money. for active managers. well sure, it will. but it will be a lot easier to lose to the market because there has to be people on both sides of the equation. they're trading with each other. it's so simple. so it's not going to change the world. indexing is here to stay. and you know i feel very good about starting the ball rolling all those years ago and continuing to preach it all these years later. 44 years later. >> jack, people took note of the comments because there's such a massive rush particularly into etfs. i'm wondering what you say to those who worry that we haven't gone through a financial crisis

or any type of shock -- a large rise in interest rates for instance during this period when so many more individual investors are in etfs. how that's going to play out. >> well, etfs are different from what i call tifs, traditional index funds. the s&p 500 being the classic example of what i started way back in 1975. that was an instrument designed to be bought and held forever. it's the antithesis of trading as the early ads said. now you can trade the s&p 500 all day long in realtime. and my reaction to that was what kind of a nut would want to do that? so there was a lot of trading going on in etfs. and some of the less liquid seconds. you have heard about the gold section. something going on in the high yield bond section and it's the trading and the microscopic division of the market in the tiny parts that will cause trouble if it comes to the etfs.

i don't look at the traditional funds being threatened. they're total international, total bond market. those are the dominant forms of investment for the traditional funds like ours. that's where the money is going mostly. the fact of the matter is that in the last 15 months, last year and a quarter, we have taken in -- it's kind of frightening. $400 billion and the entire mutual fund industry has taken in 350. which means everybody else has had a negative cash flow together of $50 trillion -- $50 billion. >> jack, you had some thoughts on long term annual returns in the years to come. versus the ones we have had in recent years. and for both stocks and bonds, doesn't sound like you see a heyday in the near feature or even our medium term future. >> no, it's going to change the dynamics of how people invest, i think. the reality is since 1982, the

s&p 500 has given us a 12% annual return. and that means you made 60 times on your money. that's just the magic of compounding without any costs. and so that's -- so people are looking at that number and afraid, thinking it will happen again. i want won't happen again. and it's easy to tell you why and that's we started that period with about a 5.5 or 6% dividend yield. today the dividend yield is 2%. we ran through the period with a 5. 5% earnings growth. i don't know what it will be in the coming decade let's say, but i think 4% or 5% would be pretty good. finally we started with the market selling at nine times earnings and by my count using my accounting standards, gaap earnings of earnings already in the bag past earnings the market is selling 24 times. so it can't go to 48. i don't think. and the dividend yield is what

you get when you buy in today. no argument about that. you can argue about whether earnings growth is better than 4 or 5% or less. it's not a very profitable argument because nobody knows but that would give you a combined return, counting the negative -- the reduction in the p/e and the lower dividend yield of probably 4% a year. so the -- you take 2% out to get from nominal returns to real you're at 2. you take 2% for the average mutual fund's cost and you g get -- well not very much. won't do the math. >> but i'm just thinking back to your friend warren buffett's comment on the market valuation. he looked at it relative to interest rates and says if they're still going to remain very low, then that still bodes well for stocks even at record highs. i guess, jack, you have to put that into perspective as well when looking at the dividend yield which pretty much matches up with the ten year treasury

note yield right now. >> warren buffett is warren buffett and he invests for the long term. he doesn't have any requirements, you know, when he retires i think he'll do okay without having a big cash position. i don't think he'll retire any more than i will. but i'm looking forward to going on his board when i'm 90 which he promised me out of the meeting. but the reality is that with bond yields about -- let's say 3% overall. and stock returns at about 4, i think short term and -- i mean a combination of short term bonds and intermediate term bonds i'm with warren. that's a judgment on my part, but you'll probably get out of the bond market a 3% return over the next decade. it could be 4% in the stock market. so i don't look at having a bond position after the typical investor who when that day comes -- we'll have a couple of good market declines in the period. next decade, we always have, we always will. and the bonds give you more

comfort. a little better ability to stay the course. and not panic and so for someone who's typical like our balanced index fund, 60% s&p 500, 40% corporate bond index. i think that's going to be a fine investment. >> it's always good to have a chance to look parted down the -- farther down the road with you, jack. i hope you celebrated your birthday in style. >> in my style, quiet. it will be a family thing. we had a party at vanguard and for everybody who has been here more than 25 years and there must have been five people in the room. that's to me -- we don't like road kill here any better than warren buffett does. >> we'll talk to you soon. great to see you. >> great to be with you all. >> happy birthday, jack. when we come back, warren buffett is united airlines largest shareholder. find out what he had to say about the pr nightmare after the

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here's a question. when ceos visit the white house do the shareholders get richer? an academic looked at this question and we'll present his findingsed a tradingnation.cnbc.com. more "squawk on the street" coming up.

it's too time to get to rick at the cme group for the santelli exchange. take it away, rick. >> thanks, david. i'd like to welcome my first guest of the week, jim bianco. everybody was up late watching the cubs lose. >> it just ended a few minutes ago. >> and you found something important for the markets? >> the yankees have been a team associated with high payroll, older free agents. the cubs won for the first time in 108 years.

the cubs win undervalued assets. kris bryant paid $1 million a year. the yankees are winning. the best record in baseball. >> what does this have to do with the markets? >> the market is expensive. the market is old. buying this market now is like paying $25 million for a free agent and sometimes like what the yankees, it works. it seems to be working right now. >> you're rewriting an old ox yum. buy low, sell high. according to to jim, now it's buy high, sell higher. can it work? proof in the pudding? >> history shows over long periods of time if you pay up for assets, it usually doesn't work, but it is working now, and it has been working in the cycle. largely driven by some of the fundamentals. earnings -- >> yeah. let me stop you right there. you could argue what happened in november, which candidate was put into that move, the candidate that didn't get elected, but there's little

doubt. this earnings season can validate that. >> absolutely. earnings season, people were whispering we might get 10% earnings growth. we're getting 15%. it's been a huge baseball analo analogy, upper deck home room with earnings. the optimism that people have seen, at least in one heard data place, it's showing up in earnings. that's supporting the expense i old market. >> what isn't going along and seems a little bit out of phase are treasury yields. we see that big move from basically the 170s that ultimately went to 263 in tens. here it sets. 237. that's ten base points higher than it was not that long ago. many experts say two more tightenings this weir. if i cipher, that means a target range of 225 to 250. higher than the ten-year is now. is that likely? >> probably not. an inverted yield curve, but

everybody is betting on rates going up. >> so they're thinking that the ten-year is going to be much higher than yield when they're overnight rate is where the ten-year is, but it doesn't seem to be playing along with the earnings season move, does it? >> no. the stock and bonds move have been decoupling. every human being on the planet, everybody is positioned for a 3% rate. less so in the last couple of weeks. but the vast majority of people, the vast majority of opinions are rates are going to 3%. that's not even a forecast. it's a fact. and that's why the treasury markets has had a hard time going higher. there's no more sellers. the sellers have already sold and they're waiting for the higher yields. >> you're basically seeing beware and monitor the lower end of 2.16 range. >> yes, before the end of the summer. >> jim, thank you. >> david faber, back to you.

>> thank you very much. from chicago to right here at the -- let's look at what's coming up. >> we have an exclusive interview with michael dell as he's getting ready to take the stage. he has an announcement. he's trying to shake up the cloud world when it comes to the economics of it. all that coming up on "squawk alley".

stocks are taking a pause, sitting at record highs for the s&p and the nasdaq. the green sectors, energy and consumer discretionary. everybody else in the red. ""squawk on the street"" will be right back. stay with me, mr. parker. when a critical patient is far from the hospital, the hospital must come to the patient. stay with me, mr. parker. the at&t network is helping first responders

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i'm dominic chew. check out what's happening in real estate. that sector the worst performing sector overall. keep an eye on it as we watch the markets trying to go toward record highs. that's it for this hour of "squawk on the street." now over to the gang on "squawk alley". >> good morning. it's 10:00 a.m. 11:00 a.m. on wall street. and "squawk alley" is live.