the country voting to pick a new president after its former leader was ousted by a corruption scandal. and pain for hertz. the stock is getting slammed after posting a bigger than expected hertz. it's tuesday, may the, 2017, "squawk box" begins right now. live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" right here on cnbc live at the nasdaq market site in times square. i'm andrew ross sorkin along with joe kernen and melissa lee hanging out with us today. becky quick has the day off. take a look at u.s. equity futures. dow opens up higher, about 19 points higher. nasdaq up as well. 4 points higher. s&p 500 about a point and a half. this is whis the highest since

1st. is that what the date was? the fear gauge hitting the lowest level in more than two decades. the volatility index closing yesterday at 9.77, the lowest level since december of 1993. >> i can't imagine that's not a place where you would buy. though normal stocks that hit new lows what do they do? hit more new lows. stocks that hit new highs, hit more new highs. it can only go $9 more lower. >> yeah. >> >> this only happened five times ever. >> having always thought in a contrarian way that complacency and when people get -- participants get bullish, you worry. call ratios, you worry. percentage of investment

services. if it's that complacent -- i admit, okay, it's not going to be le pen, but the world at this point, there's nothing that we're not thinking about that could happen that could throw us for a little bit? it scares me. >> the flip side is if premiums are so low, you can buy insurance and remain long or replace your stock with calls. there are different ways to use this to your advantage to remain long in the markets. >> one electromagnetic pulse from north korea that shuts down an entire grid -- >> that is your fear. >> that's a binary issue. because once that happens -- a lot of bad things happen. >> if the world ends, it doesn't matter if you're in cash. >> doesn't matter if you're hedged n cash, all that out the window. >> we'll tell you whether people are hedged or what they're doing. overnight in asia, the nikkei down. the hang seng is up. a little over 1%.

european equities, 48 hours after the macron victory in france, cac up, dax up, ftse 100 up, and the italian ftse as well. the big stories we're watching today. shares of hertz down sharply. the car renting company reporting a loss of 1.81 this qua $1.61, far more than the 81 cents expected. that stock down 17 1/2 percent in premarket trade. shares of hertz plunged 88% since 2014. express scripts will start offering cheaper drugs for unsuinsured customers. they will offer a lower rate for a select group of frequently used drugs to those without insurance or those stuck in plans with high deductibles. and target is taking the fight to amazon prime and

walmart. they will test a next day home delivery service called target restock in minneapolis. target says household essentials like laundry detergent and coffee will be packaged at a nearby store allowing the delivery the next day. amc entertainment topping street expectations. admissions revenues surging more than 69% in the latest quarter. the company saw a big increase in food and beverage revenues. shares of marriott getting a pop after beating on the top and bottom lines. the world's largest hotel chain reported a nearly 67% rise in quarterly profit as more people booked rooms at higher rates. pandora reporting a smaller than expected loss in its latest quarter but guidance was weak. shares trading higher as the streaming company announced a $150 million investment from kkr and a boardroom shakeup as it gears up for a potential sale. a couple things on the agenda.

at 10:00, the job openings and labor turnover survey along with wholesale trade data. three fed speakers, regional presidents neel kashkari, eric rosengren rosengren and rob kaplan. lots of earnings on tap. discovery communications, liberty media, dean foods and valeant all report before the opening bell. we'll bring you that news as it crosses the tape. after the close, electronic arts, news corp., tripadvisor and dow component disney. we will get comments from bob iger. don't miss it. an exclusive interview -- or a cnbc first interview with bob iger, that's at 4:10 eastern time on closing bell. joining us is ed keon from qma, and jurian timmer. knowing both of you as i do, and i'm not sure that technicals

necessarily are pairment in either of your view. i guess what the vix is indicating, that is a positive in the french elections, positive earnings, things like that. you would probably be part of the camp that says this is good stuff. you don't need to look at, you know a gift horse in the mouth, take it for what it's worth. >> we've become more cautious over the last month or two. >> because of the complacency? >> not necessarily directly because of that, but i think there are -- first, valuations have gotten to the point where we have gotten nervous. not horribly high but nervous. there are some signs that maybe the economic growth might be slowing at the margins. even though earnings have been terrific, much better than expected. we've been trying to be more cautious. >> when you see -- i'll get right to you -- >> did you strain something. do you need an ice pack.

>> you'll see. it's just age. when you see a headline, investor anxiety drops to a 25-year low, does that make you think this is a -- this is a "usa today" or business week death of equities or something like that? >> you generally do not want to be aggressively buying when the public is complacent. so that's not directly playing in our thesis, but it's reason for caution. you see that through the upper valuations. so it's reason to be, i think, more cautious than to be more exuberant. >> the election in france did not fix the senate's fear about obamacare repeal. didn't make tax reform score any better on a revenue neutral -- none of these things help here necessarily. nothing has changed here in our prospects either. has it? >> no but it's one more piece from the wall of worry that's been removed, if you will. >> i thought you liked to build

pieces of the wall of worry for the market to climb. if the wall of worry is going away, this is the sort of the -- >> i think the outcome from the french election has more to do as europe as a region to invest in i've been bullish on europe to the u.s. because it's lagging behind. >> i think because you're from there. does that color your -- >> my dutch pride? >> yes. >> do you ski? >> no, i grew up in aruba. >> anything else going on over there other than speed skating? >> soccer. >> soccer. a bit of soccer. okay. so when i was eluding to fundamental types, you look at these things as positive. you don't look at them as instilling too much complacency, things are good in your view? >> if you see the low vix as a sentiment measure, sentiment is an ab tribute of priattribute o.

if something comes along to shake up the apple cart, we'll have a problem. in the absence of a catalyst -- the vix is like credit spreads. normal is slow, then you get occasional shocks. the question is what will create the shock. >> this is abnormally low. does that concern you? we've said this, this only happened fivetimes in the vix history where we've been in single digits. >> single digits are the norm, and then the spikes are the abnormal. certainly since last february, a year ago, when the global cycle bottomed, we had investors getting bang for the buck. if you look at the return of the s&p versus normal vol, you usually get 10% of return for 14 vol. over the last 12 months we got 17% return for less than 10 vol. so this is about as good as it

will get. certainly investors should expect at some point to see some more volatility. even with the french election, the vix went to 18, but the s&p only fell about 2%, 2.5%. it doesn't necessarily mean prices go down when the vix goes up. >> why do -- why did you say earnings were so much better than you expected? you missed that. >> i went to work at ibis for a long time. the fact they beat consensus was not surprising, the fact they beat growth. i think corporate earnings are good. but there's a warning sign that reminds me of the late 'the 090. if you look at the gdp, that number has been flat. you're seeing a divergence between the s&p 500 and the broader sample taken for the nippa products. that happened in the late '90s it was a warning that trouble

for the markets ahead. that compared with some other things, tightening of credit standards, auto sales off their peak, it doesn't mean things are terrible but just little warning signs that we could see a downturn in the economy. we're not priced for that. we're not priced for a soft patch. i think there's a possibility -- even though i think the second quarter will bounce back, there's a possibility that growth this year will be sub 2% and that we're not really breaking out of that soft range we've been in for several years. >> just by you saying that suddenly stocks have gotten less cheap, even though earnings were way above what you thought, we were at 21,000 on the dow before we knew the earnings. if the earnings came in better than expected, the market didn't get more expensive t got che, i cheaper --

>> the last return was based on the beat in earnings. so now that's in the price again. so earnings are still quite high, but also prices. the vulnerabilities that things will get worse is heightened by the fact that is already reflected in prices. >> joe, if you think of it this way, after the election the pe based on trailing current earnings jumped from about 18 1/2 to 21. the market was pricing in an earnings rebound. which happened. q1 earnings are growing, 14% year over year. that's against easy comps, last year q1 was the cycle bottom. even if you take calendar year numbers, you apply the usual drift, we should end up at about $126 at the end of the year, an 8% gain from last year. that's about the normal 6%, 7% gain. but the challenge for the market is it has to grow into its new

valuation. 21 times trailing is too high. so the pe has to come down as earnings grow. and then price goes up less than earnings. i think that's where the risk is that the market priced in a nice outcome. now it has to actually grow into that. >> i think the market will end the year from here, maybe a couple, 3% higher. which is good. i'm not bearish. when you think about expected return of a couple percent over eight months with the historical volatility of stocks, it doesn't look attractive. we also rotated towards europe. and we're just fairly cautious in our equity allocations now. >> good number on friday. so i guess the fed is back on track. you saw buffett yesterday, andrew, said the most important thing to think about are yields. in ten years. that's the one thing, if you knew rates would stay low, you would stay lock. th stay long. maybe the fed is important again. >> fed is always important.

>> you know what irritated me. he said i'm getting a hell of a tax cut with this obamacare repeal. >> yep. does that mean when obamacare was passed, it was a hell of a tax increase? >> yep. >> that's all this is is reversing what was done to the wealthy when this very unpopular bill was passed. so i didn't hear anyone saying this is a hell of a tax increase on the rich. now i'm hearing just by getting rid of obamacare shg it's, it'sf a tax cut for him. the most unbelievability thiloe >> not as unpopular as you described. >> i saw yesterday, heritage came out saying it was just as unpopular as it has ever been. >> heritage. of course. >> they went into -- they looked at a cnbc poll that asked a certain question -- >> quoting breitbart. >> when you take an entitlement away, it's going to increase.

it's also -- >> understood. understood. >> andrew -- whe >> where are we going with this? >> most of the added people covered are medicaid. so when healthy, working age people are suddenly covered by medicare, if that's the way you want to go, that's fine. but that's really what it is. increasing the number of people that are in that entitlement. maybe as a society we want to do that now. >> that's the question. >> but one thing that got me yesterday -- i kind of missed it did buffett say his entire tax bill was $4 million last year? >> i think that's what he eluded to. >> i didn't pay 4 million. but we're in the realm -- i think my net worth versus $60 billion. he is right. he is undertaxed or structured everything in his life in a way to totally avoid paying taxes.

that's staggering to me. >> he's giving it all away. >> i know he is eventually. >> not eventually, but 40% is given away. >> that's also his choice to direct his philanthropy where he directs it. he says i would rather choose than the government do it. >> which you told me you like. you applaud. >> he's just -- no, but to always talk about -- >> you want to keep the money in the market, right? >> yes. >> private market rather than the government hands. >> but he's very pro higher taxes. >> he is. >> would be easy for him if he felt this strongly about things, just write a check for 100 milt on. why? >> that's a silly argument. >> $60 billion. >> why give it to the government when you can distribute it yourself to charity. >> because he's always lecturing about tax rates being -- >> i don't want to speak for warren, he would engage in a conversation with you about a

wealth tax. he would. >> i don't know that. i think he might engage with it because he knows it will never happen. 20% wealth tax may make sense for people over 10 billion. >> now you're confiscating profits? >> no but for someone -- >> made in the free enterprise system? >> for someone who all wants to raise taxes on everybody else and who paz no tys no taxes -- >> it's not that he pays no taxes -- >> basically pays no taxes. >> he made his money in the stock market. >> i know how he has done it. i know how he sets it up. >> if he was spending it, that would be a different story. >> he's a very frugal man. something you identify with. >> i do. >> any way. ed, jurrien, thank you. let's get to washington for the top political story. eamon javers has more. >> we had sally yates testifying yesterday on capitol hill. it was the first time for many americans to hear the voice of the former acting attorney

general. remember, she was fired by the trump administration shortly after they came to power. she was an obama administration hold over. she was on capitol hill yesterday testify being some of the intrigues surrounding former trump national security adviser michael flynn and his intera interactions with russian officials. sally yates testified she had a conversation shortly after donald trump was sworn in with don mcgann, the white house c counsel for trump, and she raised concerns that she felt flynn was lying to the vice president. >> we began our meeting telling him that there had been press accounts, statements from vice president and others, that related conduct that mr. flynn had been involved in that we knew not to be the truth. >> but more than the question of lying and what was the truth and

what was not the truth, yates said to don mcgann that was she concerned about potential of compromise with the russians. that is if he had not been telling the truth inside the white house the russians would know that and could potentially use it against him. here's how she explained that piece of it. >> compromise was certainly the number one concern. and the russians can use compromise material, information, in a variety of ways. sometimes overtly, sometimes subtly. again, our concern was that you have a very sensitive position, like the national security adviser, you don't want that person to be in a position where again the russians have leverage over him. >> in many ways this was a tale of two hearing hearings. for democrats, the focus was on the 18-day gap between that meeting and when general flynn was ultimately fired by the trump white house avenfter deta

leaked out to the media. democrats want to know why did it take so long for donald trump to fire him after lying to the president and potentially compromised for the russians. for republicans, the focus was on news media leaks about all of this. how that got into the newspaper. sally yates and james clapper were both asked if they had been sources for any of the media information. both of them said under oath that they had not. this is not the end of this conversation. but a few new details about who knew what when and what they did about that. >> all right. thank you. coming up, when we return, we're going whale watching. some big investors at the sohn conference revealing some big investment ideas from tesla to teletubbies. on power lunch today, wilfred frost will be sitting down with lloyd blankfein. blankfein.

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welcome back to "squawk box." the sohn investment conference providing ideas from real estate plays to tesla. leslie picker was there. she has some highlights. >> the sohn kicked off with the bulls. century link and its merger with level 3 was touted. chamath palihapitiya urged investors to buy convertible bonds in tesla and to participate in the upside in case elon musk is the next thomas edison. debra fein brought up tel teletubbies as her next play. much of the audience was looking for a big pick from ackman, but he opted instead to talk about howard hughes corporation, which he owned for years. cliff robbins talked about investors bank corp. but there were bears there.

david ireinhorn said he was shorting . gundlach createded an account at twitter, and he has already over 1,000 followers. >> what would you say the big takeaway? what was everyone buzzing around in the hallways about afterwards? >> people were surprised by the number of tech picks and tech long picks that there were. you look at the s&p 500, the nasdaq, just consistently going higher. you have these smart hedge fund managers who say here are specific opportunities that we think can still go higher from here. >> all right. we'll have chamath on in a bit. he was on yesterday in the afternoon. >> closing bell. >> asked about -- we always talk about ibm.

he was asked about watson. he laughed and said watson is a joke. we talked about how there are people in the valley who think watson is like an "if then" program and a great marketing effort of our time. we'll have a conversation about that. >> i like -- i'm not worried about him being ineffectual, i'm worried about him being manevolent. >> you are talking about it like it's a he. >> it's watson. i think it's a he. >> it's an it. >> if i'm traveling somewhere, and they got me asleep but my life -- sthey have my essential life things, he can turn them off any time. once machines -- >> is this a gender bias issue? >> i don't know. i think it's peculiar that joe

thinks this is a person and you can assign a gender. >> he's got a -- it sounds like a guy. >> a thinking entity, so therefore -- >> it's supposed to be a thinking entity, chamath will tell us whether it's a thinking entity or no. >> he might not like the way you're talking about him. him. >> if he's good at what he does, i'm worried. >> okay. thank you. leslie picker. thank you. >> it will take over blackrock, we know that. coming up, disney set to report after the closing bell. we'll find out if cost cutting at espn helped offset subscriber losses. analyst predictions next. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest

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♪ welcome back. you're watching "squawk box" live from the nasdaq market site in times square. good morning. equity futures had turned positive last time we checked. not in a big way, but s&p is up a third of a point. dow jones up about 12. nasdaq up just under 2. after all the trading and movement yesterday, i think we had a five-point gain on the dow. we are watching shares of apple. the company's market cap briefly topped 8$800 billion after berkshire hathaway said they boosted their apple stock to $20 billion. the market share hit 800 billion when it was at a price of 153.44. it's there again at 800.

i think brian white put a price target yesterday of -- i forget, 206 or something. which put it at -- >> over a trillion. over a "t"? >> yeah. amazon preparing to launch an improved echo. the "wall street journal" reporting the new device features a seven-inch touchscreen and a camera for video calling. the announcement could happen as early as today with the new echo going on sale as soon as next month. the new device priced above $200. separately a new research firm says the voice controlled speaker also command more than 70% of the u.s. shares -- u.s. market this year. that puts it far ahead of google home a similar gadget that has a 23.8% share of the market. the number of active users of voice controlled speakers will more than double this year to more than 35 million. i'm shocked by that.

35 million people have one of these devices in their homes already. >> do you have one? >> we have both. >> you do? >> we have a google home and amazon echo. we tried to get them to talk to each other. the fcc says its website was hit by a deliberate denial of service attack yesterday after john oliver called on his viewers to flood the fcc website with complaints to save net neutrality. the fcc says hackers not john oliver fans downed the site. disney set to release quarterly results after the bell today. expected to report profits of 1.41 a share. joining us to talk about the profits of disney is the ceo for cfra research. good morning to you. >> great to be here. thanks for having me. do you think they'll nail the 141? >> i think we're right around the consensus expectations.

this quarter, i think s going to be tempered by difficult comparisons across the business. i would look to, you know, this back half of the year for the acceleration. that's where i think the focus should be. >> big issue for you is what? everyone is talking about espn. >> and for good reason. the data that has come out, in terms of the shift from traditional to nontraditional distribution is sobering. if you look at the pay tv subscriber losses this squauqua and also the over-the-top gains that were seen, we think that the pay tv industry is somewhat at an inflection point. obviously espn is exposed. we're getting more cord cutters, so investor are focused on that. if you look beyond that, this is happening at a time where the studio and consumer products are kind of reinventing the whole idea of content creation, franchise. pipeline is robust.

so i think there'sheadwinds, bu same time things to be excited about. >> how do you want to hear espn being talked about on the conference call? they laid off 100 mostly on-air or audience facing people. they said they have to recognize how people are consuming sports content. it seems like a totally different way of viewing espn. >> that's right. it's a new paradigm. so i think espn is facing major programming cost pressures. they are trying to mitigate the impact of that. ratings are down, that's putting pressure on advertising. so investors need some comfort level to be able to view espn's long-term prospects in a favorable light. the mantra that ig ser taer is

about is disrupt or be disrupted. the question is how soon will these over-the-top offerings make up for the subscriber losses in the pay tv universe. that's the biggest challenge they'll try to mitigate. >> we'll have bob iger on cnbc later today after those earnings. there's always the issue of bob iger himself and his contract. are we going to hear anything today about that? >> i think he put that issue to bed. he's got his contract extended for another year, 2019. i think that buys him a lot of time to look for a well-groomed or external successor. >> there somebody out there inside that you know about that you think could do this job tomorrow? >> frankly i think at this point in time it's hard to put a finger on a leading candidate. you'll have to look outside of the company, which buys them time, as you look to iger's extension. ultimately the succession

question now has been pretty much addressed. and investors are shifting their focus elsewhere. >> why is 65 even in the -- bob iger is 66 years old. he probably has about -- you look at his physical health -- >> physically problem 35 years old. >> have you seen shatner? shatner is on a race around the world. he's 85 years old. he could still be a ceo. why not give him a five-year -- i would give him another five years. >> maybe he doesn't want it. >> i think maybe he does want it. >> probably want it if it's a football team. >> maybe he will run for office. >> there's nothing magical about 65. you're right. >> in this day and age it's no longer -- >> absolutely. i wouldn't be surprised if he kind of has another extension beyond 2019, though the chances of that are slim now. investors wanted him there as long as possible. >> do you think he acquires his

successor, acquires a company whose ceo then succeeds bob iger? >> that's -- >> like a netflix? >> that's farfetched at this point. i don't think they'll have a successor through acquisition. >> so you don't think they'll do a major acquisition then? >> they'll do acquisition in the couple billion dollar range. >> we all talk about a netflix transaction. something that gives them true access to the consumer in a way that they don't have now that creates almost a universal ott platform for all of their content. >> i wouldn't rule that out. but it's hard to visualize how that can come together given the valuations for some of these companies. >> that's the problem. the problem is the multiple on netflix and disney are so far off, it doesn't -- >> having said that, you can look at the acquisition record that they've had which is spectacular. bob likes to talk about, you know, marvel, lucas film, pixar, he gives you a post-picture look

at growth, 9$900 billion in box office. that's as close to low risk in the film business as you can get. >> how disappointing is it that they do not have an internal successor? to the extent that is part of the job of running a company, of planning to have a successor internally that people feel comfortability with. >> that was originally the plan. but that got derailed. we all saw what happened to tom staggs. that came as a shock. every company should have a back-up plan. >> it's nice to say, well-run companies always do, but a lot of times they don't. >> no, a lot of times they don't. but to me the ultimate standard for a truly great ceo is somebody who has the -- who is grooming the successor, no? >> i think it would be -- you should never go to a meeting that can start before you get

there. i would not want people to think they can replace me as ceo. here's a quote. i get up at 4:po in t3 hk 3 4:3 morning, no matter where i am in the world. so he does sleep in. >> he probably works until 6:00 p.m. >> so he does sleep in. >> where can you find someone with that level of experience that can run this conglomerate. that's part of the challenge. people are waiting to ea potential announcement of a chief operating officer. there's issues with finding the right candidate. >> tuna, thank you. >> thank you. >> we'll look for those numbers later. coming up, the very young -- i don't know why he can't do 70.

72. >> he doesn't want tofrmt. >> i don't think you know that. >> i don't. >> we'll have sam zell at 7:00 a.m. plus venture capital investor chamath palihapitiya will be our special guest for an hour at 8:00 a.m. yet at the sohn conference he told cnbc that ibm's watson is a joke. which is good. if you're outside the ship and you say let me in, watson, he won't say i'm afraid i can't do that, and drew. and later, the afl-cio with a website that attracts union pay. we will have richard trumka. you're watching "squawk box." of the world's top companies. the power of an etf.

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. time for the executive edge. small business optimism dropping for the third straight month. kate rogers has the details of the nfib report. >> for the third month in a row, small business optimism took another dip. the national federation of independent businesses monthly

read on main street sentiment fell to 104.5 for the month of april. expectations for business conditions fell 8-poi points. the nfib said this is directly tied to house republicans pulling the bill on the american healthcare act directly before a vote was scheduled. now that that is passed, sentiment could be raised. that being said thfshgs is the sixth month for high optimism. sales expectations numbers increased, as did the number of firms seeking employment. but finding skilled employment is a major challenge for small business owners. taxes jumped to the top of the list of concerns in april with 21% listing it as the single most important problem. in the past it had been government regulations and red tape. taxes falls under that category as well.

but the nfib said shifting taxes to the top concerned said this group wants to see action from b.c. on what they voted for back in november. >> taxes as well as healthcare. so this particular month did not capture the newest version of the healthcare act. >> no. >> so next reading could capture it, the following reading could capture whatever happens with the senate. >> exactly. so the next reading should capture what happened in the house, round two. >> right. >> passing the bill. also some of what we have heard on tax reform. though even though they're promising parity between large corporations and small busine business businesses, it's not sure how that will work. but having an equal playing field is something that advocates were happy about and main street as well. kate, thank you. coming up, the effect of tax reform on charitibility giable . and as we head to break, a look at what's going on in the european markets.

green arrows across the board. germany with a gain of 0.6%. ray's always been different. last year, he said he was going to dig a hole to china. at&t is working with farmers to improve irrigation techniques. remote moisture sensors use a reliable network to tell them when and where to water. so that farmers like ray can compete in big ways. china. oh ... he got there. that's the power of and. dearthere's no other way to say this. it's over. i've found a permanent escape from monotony. together, we are perfectly balanced, our senses awake, our hearts racing as one.

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charitable giving is up, hitting a record $373 billion in 2015. that's according to an estimate from giving usa. but today, there are some concerns that president trump's proposed tax plan could leave fewer dollars flowing to charities. for a look at the state of giving we're joined by stellene volandes the editor in chief of "town & country." the magazine is out with its yearly philanthropy issue and holding its fourth annual summit in new york. the three covers of the philanthropy issue. how do you choose these philanthropists. >> we really take the idea of philanthropist of the year very seriously. so we look at who has made news and made real impact that year. but also we looked at what are the areas of concern. and you'll see we have cate blanchett by david mill bnd and they discuss the refugee crisis.

john legend and cory booker talk about criminal justice reform. those three topics seem to us urgent topics to discuss. >> it seems like one difference between this year and past years is that you're recognizing philanthropists who are not just giving money, but devoting time or other ways of showing their dedication to a cause. >> philanthropy really begins very simply with a question of what can i do? and i think that over the last few years certainly there has been a great focus on wonderful, big donations. and that's certainly true again this year. the combined giving power of the list is like $319 billion, i think. i think we also have begun to see that philanthropy needs to be more broadly defined. there's a wonderful section on the list called why didn't i think of that. and it really celebrates ingenuity. it celebrates a man who in south korea sends information across the border on balloons to north korea.

a man who created a whole online community for mental health to combat the stigma. and so the idea that we all have something to give, i think, is very important this year. >> you think if we change tax policy around, philanthropy in terms of the deduction, it would change the way these people give? >> it's an interesting thing to think about. because, of course, then we're all saying that a lot of philanthropy is about the tax break. >> so that's -- i'm asking. >> certainly, some of it is. but i think to stay that it will change dramatically is to be cynical and to say that it won't change at all is to be naive. i think that what's happened this year is that the concern for some areas of that need donations, that need time, that need new ideas, is so high that i think it could balance out whatever tax deduction you don't

get. >> so basically not much of an impact? >> i think this year there probably would not be as much impact as other years. i think that we have people who are concerned and i think sort of ready to do their part. >> who on this list is a name that we have not heard about? >> well, there is the man i spoke about before lehman bok, he lived in north korea, suddenly discovered that the information he was getting his whole life was incorrect. now he's in south korea and using information as philanthropy. and i think the idea that facts matter, that information can save you is something that is important this year, and i think that it really also shows that everyone has something to give. >> is there anyone on this list giving awaymonny that we haven't heard about? meaning secret billionaire of some sort? >> well, we have a wonderful piece in the issue, not on the

list, about philip anchel who is this reclusive billionaire. but i think that we celebrate people, certainly for their financial donations but i think that we also spend the whole year looking for people who give in a whole variety of ways. >> all right. so the summit is today. >> i'm on my way there. >> excellent. >> celine, thank you for joining us. >> thank you so much for having us. >> thanks. >> still to come this morning, real estate magnate sam zell is going to be our guest host right after the break. his take on the economy, politics and climate for business in america of course, never one to hold back. and then at 8:00 a.m., venture capital investor chamath palihapitiya is going to be our very special guest for an hour. yesterday he told cnbc that ibm's watson is a joke. we will talk to him about whether he was trying to tell a joke or not. "squawk box" returns in just a moment.

good morning. another record high for the nasdaq. today earnings and fed speakers take the spotlight. sam zell is here to tell us where he thinks the market is headed. and share his thoughts on the president's first 100 days. maybe on his first 109 days or 10 days, whatever it is. opening the door to a virtual office. how tech is changing the office landscape, and what it means for real estate. that story is just minutes away. plus former british foreign secretary david miliband on the uk snap election, what french president macron brings to the economic table, and reaction to yesterday's travel ban hearing as the second hour of "squawk box" begins right now.

live from the beating heart of business, new york city, this is "squawk box." good morning, welcome back to "squawk box" right here on cnbc. we're live at the nasdaq marketsite in times square. i'm andrew ross sorkin along with melissa lee this morning, and of course joe kernen. the futures right now this morning take a quick look. dow looks like it would open up higher about 23 points higher, s&p 500 up almost two points higher and the nasdaq 3.5 points higher. among the stories front and center at this hour, small business optimism remaining near historically high levels. the monthly optimism index from the national federation of business did tick down 0.2 of a point in april. the reading remains near the highest level since the 1980s. the april decline stems from curves over health care reform. three fed officials will have public appearances today as investors try to look ahead to the june meeting. minneapolis fed president neel kashkari, boston fed president and dallas fed president will be

speeding at separate events. cash carry and kaplan are voting members of the fomc for 2017. whether we raise rates in june is the big question mark. widely anticipated earnings report coming after the day's closing bell, dow component walt disney expected to report earnings of $1.41 per share. the key issue for disney in recent quarters has been subscriber numbers at its espn cable channel and we will keep an eye on that. and then we can tell you that the ceo of disney will be on closing bell later today. stocks on the move this morning. amc entertainment topping expectations admissions revenue surging more than 69% in the latest quarter. the company also seeing a big increase in food and beverage revenues. that stock slightly higher this morning. pandora reporting smaller than expected loss but guidance was weak. still shares are trading higher as the streaming company announced a $$150 million investment from kkr and a board

room shake-up. health care tax reform are key topics for investors. yesterday we asked warren buffett for his thoughts on president trump's tax plan. >> i'm $680,000 better off if everything else is equal. just because of what happened this week. now has to go through the senate and a lot of other things, but, it was huge what they did on cutting taxes for the rich. i mean, if 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. >> joining us now is billionaire investor and real estate magnate sam zell. he just released his new book, am i being too subtle? he will be with us for the hour. i made the point, sam, earlier, that the $680,000 that mr. buffett is -- would -- would not have to pay, this was -- this is the new tax that was levied a couple of years ago with obamacare on the wealthy to pay for obamacare, so if you

repeal obamacare it's really just reversing this, what bill gates called, i think he called it a super progressive tax because it's very progressive because of who it affects. and it's just reversing that. so it -- i found it disingenuous to call it a huge tax cut for the rich. >> i agree. i think that the tax was kind of a violation of what was the deal at the time and getting rid of them makes a lot of sense. and i don't think it's for the rich or the poor. it's just balancing out the system. >> for obamacare which, you know, you can -- we'll talk about the replacement plan and the repeal, and maybe tax reform as well with you. as a high net worth individual i was also, it just struck me that the -- i don't remember the exact number warren said that he paid in taxes last year but i think it was $4 million and change for a guy that's worth --

>> that's cheap -- >> $60 billion or so. did you have a higher tax bill than $4 million -- do you remember? >> i will try to get you the number. we'll play back the tape. >> right. i thought it was in -- i thought he said something like four. >> i thought it was something like -- so you're above four at this point? >> i'm afraid so. >> and i don't hold anything against anyone that looks at current law and even arranges their -- the way they take income, whether they avoid dividends. they avoid capital gains. whatever they do, i think that's not, you know, avoidance is fine, obviously tax evasion is against the law. i don't hold anyone against that. i just don't know about lecturing people on paying more in taxes, when you pay less than $4 million. >> a little less than $4 million. that's what he said, in quotes.

a little less than $4 million. >> so you know what? that probably is a indictment of the tax system that we have right now. it's not simple enough. and there are definitely too many loopholes for people that are doing that well. tax reform that you've seen proposed by the trump administration are there good things and bad things in it? where are you on that? >> i think, you know, i think it's so hard to have an opinion at this stage of the game. because i think that the degree to which it's going to get changed as it goes from the house to the senate and back i think we're in the first inning. and i'm not smart enough to know how we're going to end up. >> how do you -- >> other than to the extent that we can make it simple. and people can understand it better it will help our society. >> we had been on the all tax reform all the time then

suddenly the obamacare repeal and replace came back to the forefront. and the house actually passed that. again, i don't know what happens in the senate. and i don't know what happens when it comes back to the house. i don't know how this works. but is it possible for the republicans to take away an entitlement at this point without being hurt politically? >> i don't know, to tell you the truth. i mean, obviously so far taking away anything is anathema. but sooner or later, you know, if we -- we're going to have to take away stuff from everybody. whether it be this year, obamacare, social security, i mean, you can't afford all the entitlements we've written. so, by definition, we're going to have to take -- either take away or create massive inflation. >> so, if you were advising -- well, let's talk about the first 100 days. 110 days, whatever it is pip

should probably -- do you know the exact number? anyway, it's over -- we said we're going to look back at the 100 days. that would have been a cutoff. since the president was inaugurated, how do you -- you like what he's done. i know you're worried about immigration. the anti-immigration sort of stance, but -- >> i think that generally speaking, he's done okay. i think, you know, perhaps a few less tweets, a little more gravitas, would make all of us more comfortable that this president is a lot more -- than previous presidents. but i'm not sure that this president is ever going to be a lot like previous presidents. i think he has, however, given hope and optimism to the country that it desperately needs. you know, when i was on your show, maybe a year ago, i think i said i thought we were in the

8th inning. and i think what trump has done is create a-but i think we're going to extend this further than we would have had we elected another democrat. >> the economic recovery. not just the stock market. >> i don't necessarily connect the stock market and the economic recovery. stock market goes up and down. >> the fed, everything else. >> and some other issues. the economic recovery is the key. we solved the unemployment problem to date, the employment problem is very much a function of people in some respects, you know, taking jobs, dramatically below their education levels. and also a lot of people dropping out of the job market, which makes unemployment numbers

look better. >> hmm. you've been coming on for awhile. i've known you for a long time. you long time democrat. until when? or still -- are you still registered? >> oh, no i was a democrat -- >> you were a democrat until they nominated mcgovern. then you went independent. would you call yourself independent? >> i think i'm probably closer to a republican today. >> so a republican at this point. >> but i'm -- >> social issues -- >> social issues i'm definitely a liberal. economic issues i'm definitely conservative. >> all right. so, what do you think trump is at this point? >> i don't think he knows. >> in -- as far as judges that he's nominated. >> they're great. i think his judges are great. i think his nominees for cabinet positions is terrific. the fact that we're going from a administration that had 4% business people in the cabinet

to 50-some-odd percent, that's really important. last time -- i think it was bill clinton who said, it's the economy, stupid. so, the idea that we're are reorienting our government toward the economy, and recognizing how important the improvement in the economy is to everybody, i think is a very positive thing. and i think it's probably reflecting why you're getting positive small business numbers, et cetera. >> but in terms of the extra innings, how many extra innings can we play if there aren't any more points on the board, so to speak? or do you think there are points on the board because there are business people in the administration and it doesn't matter if we actually pass health care or tax or any of that? >> because the yankees played 18 innings the other night. okay? that's a long time. >> that's true. that's true. >> but, i think, you know, there's a lot -- i don't know the answer to how many innings but, i think that you look at

american business today, corporate america has never had more money in the bank than they have today. that's a lot of fuel for extra innings. and what we need is confidence. need people to spend. need people to hire. we need people to promote. all of which comes from more confidence. >> let me ask you a question, which is the market right now, the vix is suggesting that things are about the least uncertain they've ever been. there's as little volatility as ever before. as the investor that you are, both in the market itself, but also in real estate and what might describe as a real economy, do you have that same level of conviction that everyone else seems to about where we are? do you know what the chances -- amazing things or terrible things happening are very low? >> i think they're very low. i think just the opposite. i think the vix index is talking

about the stock market. >> right. >> it's not talking about the economy. and i think the economy has all kinds of issues that are hanging out over it whether it be the middle east or venezuela, or ukraine, or china or north korea. all those -- are all those political events worldwide going to have no effect on our economy? no effect on our stock market? i don't believe that. do you? >> have you changed the way you're investing in this new administration which is to say did you think there was more opportunity in the fall before the election than now, do you see more opportunities today? how are you thinking about it? >> i don't think there's any question that we've gone from an anti-business administration to a pro-business administration. i think a pro-business administration translates into a much more positive environment.

so i think i'm much more optimist optimistic. i think that where mr. obama had to spend a trillion dollars to create a bill, i think mr. trump, in repeal a trillion dollars worth of regulation achieved the same objective, really creates stimulus. >> have you put more to work -- put more money to work in the past couple months? >> too short a period of time to answer that question. certainly i think we're more enthusiastic today than we were in october. >> your book, "am i being too subtle?" i thought you were being too subtle. did you say half-assed? >> i did. i could talk slower if you -- >> no, no, no. i just -- i would say yes you were being a little too subtle

originally and then i would say you became where i like you to be now. >> i've been accused of a lot of things. never being too subtle. >> you know yesterday the other thing we didn't talk about, andrew, with warren buffett was the complete sort of reputation. i like refute yags, i think it's a better word, sarah palin came up with it, so i use it, dynamic scoring. buffett does not believe there's anything at all to dynamic scoring when you're doing supply side growth programs and you say maybe we'll get more sox revenue because of that. >> that's like going to a fight with one hand tied behind your back. if you don't believe in dynamic scoring why would you pass tax reform? >> i don't think he thinks we should. i don't think he thinks taxes are the issue. >> why would you pass any piece of legislation? the idea behind passing legislation is to make things better. >> to make them dynamic. >> dynamic scoring suggests that

nothing changes no matter what you do. >> all we got him to concede was that 100% taxation might cause people to work less. but it's almost as if 95 would be okay under certain -- >> if fairness to warren, though, there are a number of studies on both sides of this issue which would suggest that even when we have lower taxes, we haven't necessarily gotten that much more revenue -- i mean it's not clear that just because you lower taxes -- >> andrew the only one that i could come up with is every single time we've cut capital gains tax revenues to the government has increased. and at no time when we've taxed capital gains tax did dynamic scoring come into the process and say, there's going to be more revenue. every time -- >> all right. >> so how do you explain that? >> sam is with us for the rest of the hour. we go all the way back to reagan, we go back all the time. i go with andrew and he tells me

it was defense spending. i say it was dynamic scoring was what did it. i don't know. if it was defense spending we did end the cold war so at least we got something for it anyway. it was all good. it was all good. >> all right. >> i want you to come back and be like in a time machine go back and come into the workforce -- >> i was -- >> in 1981. you were at camp. 1981. >> anyway, coming up, coming up, technology opening the way for virtual offices. diana olick joins us with that story after the break and later the trump administration defending its travel ban in federal appeals court. we'll speak to the ceo of the international rescue committee david miliband about the issue in just a bit. take a look at futures we're indicated for a higher open across the board. ross the board. ray's always been different. ross the board. last year, he said he was going to dig a hole to china. at&t is working with farmers to improve irrigation techniques.

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information technology has caused a boom in small business. anyone with a computer can launch a website and start working from anywhere. for some where you work is still key, even if it is virtual. diana olick joins us now with more. diana? >> well, melissa, where you work can say a lot about your company. so what if you're a start-up in

your mom's basement? well believe it or not, with a little technology, the sky can be the limit. on the 85th floor of one world trade center, there are receptions, offices, conference rooms, and coworking spaces. but it's what's not here, or rather who is not here, that matters. >> virtual office is really people who are working from home. >> australia based serve corp has operations in 24 countries but entered the u.s. only recently during the recession. when real estate prices slumped. they took space in several prime locations, including one world trade, where they're selling both the space, and the address. >> we number 40,000 customers who don't rent any space from us. they can use our space on a casual basis. they can use the infrastructure that we've got, and new technology, the telecommunications tech nogs. >> the ceo of a small tech consulting firm in oregon, just seven employees. but you'd never know that from his one world trade address.

>> there's a good deal of prestige that comes along with being here. it's the most recognizable address in the world. >> so starting at $250 a month, clients can get the five-star address, the urban area code, secure e-mail, and a reception who answers for their company, and can accept real mail or faxes, and they tell me 40% of their revenue now comes from virtual clients. andrew? >> thank you, diana. we want to turn back to our guest host real estate titan sam zell who has a new book out. i wanted to ask you about this whole virtual office phenomenon. what do you think of companies like we work and where this is all going? >> this whole concept began in the '50s, with a guy who was an anchor tenant in the construction of a new bunch of office buildings. he did very well until the office market softened. he was followed by headquarters,

regis, all of which did very well, until the office market softened. we have yet to find out what happens to we work and things like this. when the office market softens, which is probably not too long from now. >> you did say we may go into extended innings, so maybe they have a little bit longer than we thought. but have you ever put money into one of these kind of companies? >> yes. >> you have? >> yes. >> successfully? >> no. >> i would think that this -- >> well successfully, until the market turned. >> right. >> and -- >> one of the things we hear about we work in particular is that not only are they trying to create virtual offices, but they actually want to go in to companies and effectively create a service, if you will, to recreate the dynamics within people's offices. is that a -- is that a viable business model to you? >> i don't know whether it's a viable business model, but i wouldn't let those guys near my

business with a ten foot pole. you know, how your business runs, the culture of your business, how decisions are made, is something that evolves and represents the culture of your company. the last thing i want to do is introduce somebody else's culture that may not agree with and have them influence the way my company is run. >> to the extent that you are a buyer in this market right now and i don't know if you are, where in the country do you see opportunity? >> why don't you ask me what i'm selling. >> are you a seller? >> i think i'm much more of a seller today than a buyer. >> you just told us that the economy is going into extra innings. i would think that you would be a buyer. >> oh, i don't think that that is necessarily great opportunity because recovery lasts a lot longer. if corporate america's starts spending money, building plants, making commitments, then the

possibility of changing what inning you're in and how you feel about the inning is much more realistic. >> so you're selling. >> i think in the last four or five years we've been much greater sellers than buyers. >> sam zell. he is never subtle. that is part of the title of his book. coming up, a national security or religious bias? the court's questioning the trump administration over temporary ban on travelers from six muslim countries. we're going to hear from former british foreign secretary david miliband in just a bit. and then in the next hour of "squawk box," tech investor, co-owner of the golden state warriors champal palihapitiya is going to join us. he's going to talk about why he says ibm's watson is what he calls a joke and what he thinks of warren buffett's take on the supercomputer. only t-mobile one gives you unlimited data with taxes and fees included. that'll save you hundreds.

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center we're watching shares of valeant pharmaceuticals this morning. the drugmaker reported a quarterly profit compared to a year ago loss helped by a one time tax ben fit. valeant raising its full year forecast and that stock is surging premarket by more than 12%. we'll be getting a fresh read on the labor market when the government releases the jolt report expected to show 5.7 million job openings at the end of march, roughly equal to the prior month. hedge fund elliott advisers is going to court to try to oust the chairman of akzo nobel after they rejected three different takeover bids from ppg industries. elliott says the rejection of those bids is a flagrant breach of fiduciary duties. federal appeals court heard a legal challenge yesterday to the trump administration's so-called travel ban for more let's bring in david miliband, who is ceo who formerly served as british foreign secretary.

good morning to you. >> good morning, andrew. >> what's your take on this news and where does this all go? >> look, the legal stuff is going backwards and forwards. but the big question is not is it bad law? is it bad policy? because we're in a situation four months into the administration, they say they've got concerns about the vetting process. but they haven't yet started a review of that vetting process because they're caught up in court and my message is very simple. we can get out of this mess by simply doing a review of the refugee vetting process, which is the toughest way of getting to the u.s., and then if they want to bring in some improvements they can do so. and i think the fact that they've overreached in this way is actually getting in the way -- >> putting the law piece aside for a moment do you believe that the vetting process as it is today is good? not good enough? >> no, i think -- >> bad? how do you rate it and rank it. what do you know about the actual process? >> great question. look there are 21 steps to the vetting process for a refugee to get into this country. it takes 18 to 24 months upon

average. it involves 12 to 15 government agencies, including the cia. it involves biometric testing to make sure people are who they say they are. it's tougher to get to the u.s. as a refugee than by any other route. and so my message to the administration is simple, totally legitimate for you to want to review the system when you're coming to office, you're a new administration. but don't stop the existing system and cause chaos for people who are expecting to come here. and, frankly, for america's relations around the world. because you've got allies of the u.s. like jordan, with citizens of syria, who have fled to that country, they've been promised to come to the u.s., and now they're stuck in limbo and that isn't good for anybody. >> what is this costing your agency right now? >> well, it's suspended. it's costing the refugees rather than us. >> right. >> so the refugees have had to buy travel tickets, and then you saw the scenes when their flights were canceled. >> right. >> so it's not a matter of what it costs us. we've had to make some reductions because the administration says it wants to reduce the overall number of

refugees coming. but we're not a profit-making agency. we're not making profit out of the refugees arriving here. and americans should know they have a successful refugee resettlement program. 875,000 people have come here since 9/11. you've got business leaders. you've got political leaders. you've got academic leaders who have all come through that refugee resettlement. >> how do you articulate to those who don't like, frankly, refugees coming or even immigrants coming into the country right now, who say, people eventually going to take our jobs. that even if it looks like there's full employment out there right now there really isn't full employment there are so many people out of work and this is only making it more competitive for those jobs that people don't even have. >> i think the best answer to that is that refugees are a proven record of job creators not job destroy ert. and just think of some of the great companies across this country that have been led and founded by refugees. they've created jobs for people rather than suck jobs away from people. we're talking about a global refugee crisis at the moment.

25 million refugees around the world. 14 million people displaced. a fraction of those are coming to the u.s. from syria, which is the greatest crisis less than 15,000 refugees have come in six years. the u.s. last year took 85,000 total. we're not talking about millions of people. germany, 900,000 asylum applications this year. they're dealing with it. no one is saying the u.s. has to do that. but for a modicum of humanity to help the most vulnerable of cases those most vetted people get the chance to restart their lives and contribute to this country. >> from the irc standpoint how comforting is it that le pen did not rise to victory in france, and that angela merkel looks a little bit more secure and her party looks more secure after the victory over the weekend? >> i think that you're seeing the pushback against so called populism in europe. we shouldn't be complacent. 35%, 34% of people in france voted for someone of the extreme right, avowedly of the extreme

right questioning whether or not france had had a role in the extermination of the jews in the 1940s. so we're talking -- we shouldn't be complacent. but macron i think is occupying a unique space in european politics now. because on the one hand he's saying he wants to reform france. on the other hand he's saying you've got to boost growth. listening to the discussion earlier about the need to get confidence going and get the economy moving, the eurozone desperately needs to get out of this low growth syndrome. and i think macron, by being a reformer, is also able to be someone who credibly can say we've got to get the economy moving. >> what else happens in the rest of europe right now? meaning, do you think that the extreme side of it is going to win out? or do you think this is a true sea change? >> i think that you've got to say that europe has showed remarkable resilience over the last ten years. if you think about what greece, spain and portugal have been through, 25% youth unemployment at one time, 45% youth unemployment, there has been

resilience in those countries. but what they need is some economic growth. because what we saw in italy last december when the renzi government otherwise popular lost the referendum it was having on reforming the constitution, frankly that was an economic vote and the challenge for the germans now is how are they going to build a new consensus within europe? i think you're right it's not just mrs. merkel. the cbu and the social democrats together have strengthenstrengthene strengthened they're now competing with each other but they're in coalition. they're competing in the september election. i think the extremes have been driven back in germany. that's obviously a good thing but the policy mix has got to get stronger. >> you invest in europe right now? do you find it interesting? we have people who come on and say between the u.s. and europe, actually europe may be more of a value proposition. >> maybe that's true in the short term but, i think the longer-term issue is that europe doesn't have the demand or

inclination to work and consequently they're great for wine, cheese, castles, you know, tourism. but it's not -- i don't see it as a great economic power that you want to invest in. >> david, would you like to rebut that? give your province -- >> i live in new york. i run an american ngo, american headquartered ngo but try telling german manufacturing that all they are is cheese and wine and castles, i think they'd have something to say about that. >> they've got a pretty good deal with, you know, with where the euro is, and you know, obviously they -- that's the whole argument. and you know, extreme, the word extreme is in the eye of the beholder. >> maybe i shouldn't have used -- >> some people think that merkel's policies have been extreme in terms of, you know, bringing to bear a lot of the problems that europe is facing right now. there's a reason that populism rose in europe. >> well, no, no one thinks that mrs. america s&l responsible for the syria crisis. >> i'm not saying. i'm just saying that people

disagree with her policies. >> which is -- >> and call her policies extreme. to you the other policies are extreme. we also heard that dynamic growth doesn't work if you cut taxes or deregulation and there's not much europe can do, right? it's not going to help if they cut taxes. >> germany is in a position where it's a very strong fiscal position, actually got plenty of room to reflate the economy. >> that was the best line that le pen has that france is going to be run by a woman either way. it was. because germany benefits from the eu. who else does? >> well i think that the fact that the southern european states despite the trauma of the euro remain committed to it. the fact that the northern border states, france and italy are the core of europe on the real issue. now i think that your point, though, is that the germans are in a fiscal position where they could actually run a much more expansion i think is the core of the argument. you're actually right about that. >> david miliband, thank you. thank you for the work we do. we appreciate you being here

this morning. >> more from special guest sam zell on the markets and the economy. in the next hour tech investor and co-owner of the golden state warriors chamath palihapitiya will be our special guest. and afl-cio richard trumka will join us. snooe i count on my dell small business advisor for tech advice. with one phone call, i get products that suit my needs and i get back to business. ♪ ♪

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i'm sorry. sam zell is giving me a look and i love him. welcome back to "squawk box." in tech news this morning, amazon preparing to launch an improved echo. "the wall street journal" reporting that the new device features a seven inch touch screen and a camera for video calling. the paper says the announcement could happen as early as today with the new echo going on sale as early as this month. the new device said to be priced above $200. an increase from the current price of $150. separately new research firm e-marketer says amazon's voice controlled speakers will command more than 70% of the u.s. market share this year, far ahead of google's home device which is a similar gadget which has 23.8% share of the market. the number of active u.s. users of voice controlled speakers like this more than doubled now 35 million people have one of these things in their home which is remarkable to me.

>> do you have one joseph? >> never hooked it up. >> are you afraid -- >> sam zell is raising his hand. >> i have two and i haven't hooked them up. >> why not? are you afraid that they're spieg on you? >> i'm technologically challenged. >> that's part of it. but my samsung is listening to every word i say. >> your tv. they may be recording you. >> i know. i know. there's strength in numbers. maybe i'm not saying anything that interesting, 35 million people. you only hope. >> we can only hope. >> coming up we're wrapping up our time with sam zell. this time last year when he was on the show he said world trade was sounding an alarm for stocks. we'll find out if he's changed his tune and what he thinks of the president's trade agenda. meantime let's take a check on futures and how we are set to open. dow looking down about 23 at the open. s&p looking to add about 2. stay tuned. stay tuned. the show's about to start! how do i look?

like a bald penguin. [ laughing ] show me the billboard music awards. show me top artist.

show me the top hot 100 artist. they give awards for being hot and 100 years old? we'll take 2! [ laughing ] xfinity x1 gives you exclusive access to the best of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. anybody that prefers bonds today to stocks is making a big mistake. i've 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 and so on, at these rates, in preference to buying stocks. stocks will bounce around a lot more and 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. >> that was warren buffett, of

course, talking to becky yesterday in omaha. let's get back to sam zell, author of a new book "am i being too subtle?" and we said we'd talk a little bit about trade, sam, because i think there were a lot of people that, you know, as president trump was coming into office, they, you know, the republicans, he's got gorsuch and conservative ideas but then on trade, it almost seemed like that was different than your classic free market republican idea. and people were worried about it. was there reason to worry or does it look like, you know, it wasn't as, i guess the worst case scenario did not come to pass with china and tariffs and things. >> well, i think that trump is a provocateur and i think he throws out a lot of ideas. i do think that one of the things that he's done and done very successfully is to make everybody realize how much of

our trade agreements were really foreign policy. i mean, the foreign policy behind nafta was very simple. stop illegal immigration, strengthen our second largest border in the world, and it was phenomenally successful. but you couldn't sell it like that. you instead sold the whole thing as trade. guess what? trade didn't work out well if you solely used trade as the measure. somewhere in between is probably the appropriate balance. and interestingly enough, i have partners in mexico and we have a number of investments in nextco. i was surprised that they're not anywhere near as alarmed about trump as we think they are. and i mean many of them said to me, you know, we spent our whole life, whatever we build, we sell north, and this trump thing has forced us to think about where else we would sell.

also forced them to think about where else they would buy. i mean, there's an article in -- i don't know what newspaper the other day the fact that mexico is the largest buyer of milk from the united states. and for the first timexco is in new zealand trying to negotiate the purchase of milk. so it goes both case and i think when it's all said and done nothing that trump has done as opposed to what he said, something that he has done would alarm me on the trade issue. >> andrew, if watching the relationship with president xi, sometimes it almost looks like if you have good personal rapport with the leaders that your overall trade policy might somehow be softened. it has not been it still could be, you've got navarro, he talks tough. >> he still has north korea, right?

>> true. >> that's driving the relationship right now, not trade. >> but also rapport and everything else. can it still happen? can there still be a trade war that wilber from soft wood in canada or something is that still a worry? >> you tell me. how much power and influence navarro, bannon, have on -- >> yes. >> gary cohn. >> but it hasn't happened with china. we haven't called them currency manipulators. you would acknowledge the worst case trade war scenario at this point -- >> hasn't happened absolutely. >> and doesn't look like it's going to happen either, does it? it looks like he's going to be a different president than the campaigner in terms of -- >> very well may be. >> i'm just asking. >> i -- i -- thus far, he seems to have not gone down that road. >> and you were worried about it. you don't think he has either. and not likely -- >> i don't think he has. >> not likely to? >> and not likely to. and i also think that it's very

important, trump is very much of a personal person. >> yeah. >> and he puts great value on his personal relations with other people. that's the way the world always used to work before we got him to this technological scenario. i travel, you know, a thousand hours a year on my plane because i go see people in their locations. because it's so important to create a real relationship with someone you're doing business with. unfortunately that's an old fashioned idea but a very effective one. and i think trump is practicing. >> so we didn't do the tpp people like to do these big deals because you can do them more quickly. is a one-on-one approach to negotiations with all these different trading partners, do we have the time to do that? and can -- eventually be better

should we try and do, you know, do more at once? >> i think that very much depends on the timing. and i think the tpp was driven by the desire to get something done, as opposed to the desire to fix things. and when the objective is the objective as opposed to what the objective stands for, you generally produce negative results. >> hmm. >> we've been through a lot of different periods. i would go all the way back to -- i can remember when president kennedy was assassina assassinated. and i remember the animosity and animus words w. i remember it, you know, towards really reagan, from the left. all through his eight years. is there any way this heals? any way that we -- it becomes a

country more -- god forbid something happens. remember george w. bush became sort of the president of -- you know, he became more the president of the entire country on september 11th, if you recall. does this -- does anything ever happen to lessen the resistance? there are people that, hillary now has got a super pac, just call it resist. >> i think that there's always going to be resistance. there's always going to be people on the other side. the degree to which there is denial that president trump was elected, is preposterous. and it's a self-fulfilling, you know, scenario where you talk to yourself and then you agree with yourself. i think mr. trump is president of the united states. i think over time a lot of these denial people will come over and i think it's likely that trump

will be much more less of a tweeter going forward. which i think precipitates that kind of denial. >> coming around a little, andrew? i mean, do you agree? do you -- >> i'm trying -- i'm trying. >> there's seven stages, i think. >> seven stages of grief. >> like denial, and then grief, and then -- >> i'm not grieving. i'm not grieving. >> okay. so you're out of that stage. where -- >> you know the seven? >> i don't know the seven offhand. i just remember andrew the day after the election, morning after he said -- >> we talked the night of the election. >> he said that he's our president now and -- >> he's our president now -- >> i mean. >> it was 10:00 at night you messaged me. and you said, looks like we're going to be talking about president trump tomorrow and i gave you a hug the next morning when i came in. >> you did, i know. >> then you lost it again and you just, you know, now you're i think you're -- >> you think i'm coming back? >> coming around. it takes awhile right? >> takes awhile. >> well not everyone is with you. >> am i being too subtle? >> name of the back.

sam zell, thank you. >> thanks, sam. >> appreciate it. >> coming up, chamath palihapitiya joins us for the next hour. we'll talk tech investing and why he says ibm's watson is a joke. plus tracking executive pay the afl-cio will reveal a new website which they say could level the compensation playing field. check on the futures as we approach the top of the hour here looks like a higher open across the board. oard. at fidelity, trades are now just $4.95.

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have no fear, wall street's anxiety index hits the lowest level in 24 years. as the nasdaq and s&p 500 rally to record highs. is tesla the next apple? a venture capitalist turned hedge fund manager makes the case for a not so bumpy road ahead for the electric carmaker. >> plus the players championship tees off this week. we'll talk to the world's number one golfer dustin johnson. as the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box."

good morning, welcome back to "squawk box" right here on cnbc. we're live at the nasdaq marketsite in times square i'm andrew ross sorkin along with joe kernen, melissa lee is here. becky quick is off today making her way back from omaha this morning. in the meantime want to take a quick check on markets right now. dow looks like it would open up higher about 26 points. nasdaq up about 6 points and the s&p 500 up about 2.5 points. a quick look at the 10-year, as well as the slowly flip the board around there it is 2.392. joe? >> thanks, andrew. among our top stories today, liberal political moon jai inis expected to win in south korea's presidential election. official results are still out of the way but the victory would end more than a decade of conservative rule. south korea's president was forced from office after a corruption scandal. back in the united states president trump's review of d d dodd-frank will be done in stages and not be completed until early june as originally

targeted. will not be completed. and according to a report from reuters officials now say that they're going to do it piece by piece the findings will be and give priority to banking regulations. shares of valeant are surging in premarket. the drugmaker reported a quarterly profit compared to last year so reversed the loss helped by a one-time tax benefit. valeant also raised its full year earnings forecast. >> ackman gets out of the stock and it goes up. >> of course that's always the way it works. >> you hear 12% move and you realize it's only a dollar. >> yeah. >> exactly. which sort of is encapsulates the whole sort of almost shakespearean what happened to that stock. and to ackman. let's get back to our guest host. sam zell. where do we want to go now sam? a lot of times we do six, seven, and eight and people that were watching at six, they're a whole new group of people watching at 8:00. let's talk about some of the things that we've already talked about. a lot of times it's helpful with

a guy like you, who's made so much money over so many different business cycles, i mean you're the mather of selling, selling when it's time, buying when it's time, and normally nobody else is doing it when you're doing it. you mention -- so a year and a half ago you sold $5 billion of multifamily stuff, right? who did you sell it to? what was -- >> we sold it to barry -- >> how they doing with it? >> i think they're doing very well with it. we expected them to do very well with it. from our perspective, equity residentials started out as a multifamily company based in suburban garden apartment project, beginning around 2000. we decided that we needed to shift and become a cbd company. over the period from 2000 until a year and a half ago we were slowly making the conversion. we had an opportunity to in one

fell swoop complete the conversion. and we did so. and we were raised a bunch of money. wee distributed $10 a share in dividends to our shareholders, and it was a great deal. and reflected the fact that we thought that we had gotten most of the benefit from the ownership -- >> how liquid are you right now overall on a scale of one to ten? historically you're at one place. where you are right now? are you more liquid than you've ever been? >> talk about equity residential -- >> talking about you as -- i mean you were in rail cars. you were -- i know you were -- >> we were involved in lots of different things. >> how liquid overall are you? >> i think we're very adequately liquid. >> you're liquid now. which is a common carry on whether you should be a buyer or seller. >> which is a commentary on if you think you should be a buyer, part of being a buyer is being able to or willing to leverage up to impact -- increase the impact of your bet. >> yes. but earlier we also spoke and

you thought that the election probably extended the economic recovery longer than you would have thought. i know in the past you've worried about the fed sort of it being a sugar high in the equity markets, at least. what about for the overall economy? >> well, i think the fed's role is still very benign. we are in fact, seeing increasing interest rates. i don't think interest rates have reached the inflation rate yet. so, the real interest rates are still below zero. and so i think that there's a lot of, you know, area to go yet. i believe that severe low interest rates of the past few years have been negative overall because i think it's eliminated any sense of urgency. any sense of need to act. whether it be corporations with record amounts of cash.

to individual start-ups, which are lower than they've historically been. so i think returning to somewhat higher interest rates, i think is a very healthy thing. >> hmm. do you think that -- you have differentiated between the economy and the stock market. for awhile you thought maybe the stock market was benefiting from all the central banks around the world. >> yeah. i don't think i ever stopped believing that. >> and you're still at the -- but does it seem like the election of trump may be the underpinnings, maybe the prospects for business have improved to the point where the stock market's more based on reality than -- >> i think that trump has a very unique opportunity an opportunity to materially deregulate, particularly the heavy emphasis on regulation over the last eight years.

i think that could generate stimulus without increasing any debt. and i think that's a very unique opportunity, and i think the stock market is reflecting that. >> right. and which is a different view than the stock market is reflecting future legislation on tax reform and obamacare. it could have just been deflecting regulation. >> there may be future benefits to repeal or change in obamacare, or other legislative changes for lowering tax rates. but i think the biggest motivation for the stock market has been the impact of deregulation. i mean, you know, six months ago if you had a puddle on your property it was navigable water. not anymore. that's a big step in the right direction. >> sam, thank you for all your time. >> my pleasure. >> appreciate it. >> got a lot still ahead on "squawk box," including world number one golfer dustin johnson. he'll be joining us live next

and just how much do the highest paid ceos take home last year? afl-cio out with executive pay watch study. we'll bring you the names and numbers. plus u.p.s. announcing a partnership with the dubai world expo. e-commerce and tax reform first on cnbc and later do not miss a cnbc exclusive interview with lloyd blankfein, that's on power lunch 2:15 p.m. eastern time stay tuned you're watching "squawk box" on cnbc. . i mean wish i had time to take care of my portfolio, but.. well, what are you doing tomorrow -10am? staff meeting. noon? eating. 3:45? uh, compliance training. 6:30? sam's baseball practice. 8:30? tai chi. yeah, so sounds relaxing. alright, 9:53? i usually make their lunches then, and i have a little vegan so wow, you are busy. wouldn't it be great if you had investments that worked as hard as you do? yeah. introducing essential portfolios. the automated investing solution that lets you focus on your life.

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we've got news from the golf world, joe. first on cnbc. lots of stuff going on here. dom chu joins us from ponte vedra beach, florida. dom? >> so, thanks, guys, very much. we're here at the famed 17th hole at tpc sawgrass the site of this week's players championship happening again on the pga tour. they call it the fifth major. and we're here for a very important reason. it's the cross-section of sports and business, and the pga tour is in the process of inking one of the biggest deals, if not the biggest deal ever in the history of the game. so we're joined by jay monahan commissioner of the mag tour, also the chief sales officer at

fedex and number one ranked golfer dustin johnson. let's start off with the news. mr. monahan, the pga tour has a very big announcement. >> yes, dom. today is a milestone game for the pga tour and golf. our great friends at fedex who we've been in business with since 1985 are extending their commitment of the fedexcup through 2027. we launched the fedexcup in 2007, season-long competition. really bolstering all of our tournaments, culminating in four playoff events bringing a dramatic conclusion. when we launched it, there was some skeptics at the outset. made some adjustment in the early years, but ten years later you look at the list of champions, you look at the moments that have been created, the fedexcup is embedded in our sport. our players, it's one of their -- that is a goal at the top of their list and near the top of their list every single year. and today really is a testament to our players. to have a company, a world-class company, one of the best

companies on the planet make this length of a commitment forward to our players is something that we're very proud of, our players are relatable. they're purposeful, they're global. that's everything. those are all the values that fedex represents, and like you said, today is a historic day and this is the largest partnership in golf history. >> the last five-year deal, it was $35 million a year in prize money that was allocated out there. is this deal of that same size and scope? >> well today we're not going to get into the specifics of how the deal is going to change but suffice to say this level of commitment allows us to significantly raise the stature and impact of the fedexcup as we go forward. and we'll be talking about that, you know, in the months and years ahead. but this is a significant step forward for pga tour and the fedexcup. >> don, fedex is putting its name on this for the next ten years. there's got to be a reason why fedex would want to make this time of a long-term commitment to the game of golf and the pga tour. take us through the reasonings

behind why fedex wants to be this big part of the pga tour. >> we're excited about today. tland are a lot of reasons. as you know, fedex, we're a performance driven fact based company. we make decisions about renewals in anything based on facts. we have a decade worth of facts that suggest the fedexcup is a great program. it's great for our employees. our employees are socially responsible. you'll see over 1,000 of them next month at fedex saint jude classic volunteering. we've donated over $35 million through the years to the saint jude children's hospital. a wonderful event and a wonderful charity. it's good for our customers. it's great for our customers. think about this, the opportunity to take customers on a weekly basis out to play golf with a guy like dustin johnson, be totally embarrassed for four or five hours. but to be inside the ropes with a number one player in the world on a regular basis, that's wonderful. and most importantly we think it's good for our shareholders. this program activates business

for us. and that's very, very important. so when we look at it through those prisms, we look at it through customer, through employee and through shareholder we're very comfortable this is a win-win-win and we're real excited about the next decade. >> dustin i've got to toss it to you because you turned pro in 2007. your first year officially on tour in a season was 2008 and that means mathematically you've only ever known the fedexcup era in the pga tour. how important is a season-long playoff series culminating in a championship important? how important is that to players like you? >> well it's very important to me. it's, you know, the fedexcup playoffs is, you know, it's the end of the year. it's, you know, it's the biggest stage on the pga tour, and you know it's something that i strive to win. it's very important, you know, throughout the year, too. it makes for every tournament count you know and it makes for an exciting finish, last year,

you know, was the closest i've come, you know, finishing second to rory, but you know it was very exciting there at the end. >> how did you feel at the end. were you cheering or other things to go down the way -- >> yeah, yeah i don't think i've ever cheered so hard for a fellow pga tour player as i was that week. you know, it was still a lot of fun watching the playoff in the club house. but you know, obviously rory ended up winning. but it was, you know, it's still super exciting. i think it was very exciting for all the fans, and you know, it was exciting for me to watch. >> now i know dustin, joe kernen back in studio right now has a question for you, as well, and you know he's an avid, avid golfer. he may have some questions for you about the game. joe? >> and just commissioner monahan, wishing him luck. what a tough act to follow of what finch up was able to do. and fedex, love everything about fred smith's legacy. and it is a great deal and it's great for golf. but dustin, great putt on 18. i guess you're as healthy as you

need -- you're back, right? i mean there's no question that that back injury is history, right? you made the cut on the number and almost won the tournament. which is weird. >> yeah, i mean, the back's great, you know, i'm very healthy, and yeah, i'm very pleased with the way i played on saturday and sunday last week. got off to a little bit of a rough start there on saturday, but other than that it was, it was very, you know, i'm very pleased with it. >> only putt better was i guess brian harman's. but that was like the longest putt you made in four days, too, wasn't it? so if you had putted well you would have won that tournament, i think, right? >> yeah. yeah, absolutely. obviously brian made a great putt there on 18 to win the golf tournament. but, yeah i missed quite a few pretty short ones. but you know, still happy with the way the tournament ended up. you know, played very well and i'm really looking forward to the players championship this week.

>> one of the things -- >> wants to give you a putting lesson >> no, no, no. i've had so -- you know, i've been right hand low, left hand low, belly, you know, claw, i've tried, you know, it's -- it's in my head i think. one other question i was going to ask you, dustin, just watching you over the years and watching the adversity that you've overcome, obviously, in some of the majors, and just i think a lot of us got thierry when you finally did it at the open, and you never seemed -- i can't tell whether it doesn't affect you or whether you're just so easy going or whether in your head you're just churning like crazy. i mean, what's going on, you know, when you're under the gun with pressure? doesn't look like it affects you at all. you've got the same expression. >> well, i try to keep a level head. i think that's important, you know, especially when you're coming down the stretch, not to get too excited, not to get too down on yourself, but, you know, at the u.s. open last year yeah,

i just kiechbld, you know, i try to just focus on the job at hand, which was each shot that i was hitting, and you know obviously there was, you know, a rules issue that we had to deal with afterwards, but that's what, you know, i kept telling myself, well, you know, i'll worry about it after i'm done, you know, right now i need to, you know, would worry about the shots that i'm hitting. >> really quick -- >> must be kind of cool when the entire place is chanting dustin, too, and you finally did it. maybe you're never going to lose again in a major. but, anyway, pleasure talking to you. go ahead, dom. >> thank you. >> i was just going to say really quickly as we talk about the state of the game, dustin has brought a lot of excitement to the game that a lot of young guns out there the competitive landscape has never been better in golf arguably. >> absolutely. >> tell us about the state of the game right now. are we in a healthy spot for the game of golf? >> absolutely. there's a ton of momentum behind the game. just a couple weeks ago the national golf foundation came out with their annual report. we're at 23.8 million participants. that's more participants than

basketball, baseball, tennis, soccer, we had 2.5 million new entrants into the game, which is the largest number ever on record. including larger than 2,000. the year that tiger was taking the golf world by storm. we're now at 2.9 million juniors. that number is up 20% over the last five years. you've got 12.8 million people that say they're very interested in playing the game. and for the first time of that number we're now eclipsing 20 million engaged and committed golfers. so there's a lot of positive signs and to your point, dom, there are, request all these young players, global players, global stars emerging every single week, we think that sets us very well up for tend growth with the game. >> big deal, guys. ten-year extension of the fedexcup playoffs here on the pga tour. jay monahan pga tour commissioner, don, fedex and world number one golfer dustin johnson. thanks to our golf channel viewers as well. >> thank you for that. >> did you know it was

simulcast -- >> i didn't appreciate that we were simulcast. >> we were simulcast with the golf channel. >> wow, that was a big moment -- >> touch more viewers. >> my brand. >> a lot of overlap. >> i could have gotten a shot on the golf channel. >> more watchers -- >> i really -- >> more watchers. watchers. we recently had a heart attack. watchers. but we are not victims. we are survivors. we are survivors. we are survivors. and now we take brilinta. for people who've been hospitalized for a heart attack. we take brilinta with a baby aspirin. no more than one hundred milligrams...

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made a big call on tesla at the stone conference yesterday saying the electric carmaker could be worth quote hundreds of billions of dollars in the next decade. and investors should buy the company's convertible bonds. joining us right now is chamath palihapitiya the founder and ceo of social capital also co-owner of the golden state warriors. we will talk about your call on elon musk. but before we do that, we got to talk about what you said yesterday about ibm's watson, which i'm supposed to tell you, by the way, has nothing to do with sherlock holmes. it's a separate issue. >> twitter told me that. >> but you said on the air yesterday, when you were asked about watson that you thought -- you laughed and then you said it was a joke. meaning that the a.i. technology was a joke. why did you say that? and then ibm by the way, i should tell you, has sent us a statement which i'll read in a second. >> i probably should have been more careful with my words. here's the reality, if you want to break down what artificial intelligence is about, there's

two really important things that are going on. the first is, trying to acquire all kinds of really interesting data. >> right. >> to train machines to then solve all kinds of really interesting problems. >> right. >> when you frame the problem that way, as someone who is investing in those kinds of issues, what you see are really two companies there in a meaningful way. and those are the two companies i talked about google and amazon. >> right. >> separately i have companies that we've been building and incubating for years in things like cancer and diabetes where we're bringing machine learning to the market, where we've competed with competitors including ibm, and it was sort of a culmination of a bunch of realizations and market expectations, and -- but i probably shouldn't have said it the way i did. >> let me read you what ibm has to say about all of this and we did drill down. ibm says watson is not a consumer gadget, but the a.i. platform for real business. watson is in clinical use in the u.s. and five other countries, it's been trained on six types of cancers with plans to add eight more this year beyond oncology watson is in use by

nearly half of the top 25 life sciences companies, manufacturers for the things ap lagss. what do you think of that? >> i do not. i do not. but i would say we've been building a company for seven years now that's also doing something equally equivalently productive, and probably i would say better. than ibm. i'd love to put us in a head-to-head and see how they do. >> and but just so i understand because i hear this from people in the valley all the time when people talk about watson in fairness to you, frankly, not even to ibm in this instance, they say the technology, the stuff that deep minds is doing, for example, at google, and what done is just at a different level. >> it's at a different level. >> having said that these guys are doing this in a very different way which is to say that they are actually reading and taking in huge volumes of text, things that amazon and

google are not doing at all, at least as of yet. >> again, here's the thing. depending on the type of problem you're trying to solve, what you really need to capture is not what is publicly and easily accessible on the internet, but it's sort of all these arcane heterogenus kinds of data. and when you frame the problem that way, people are the resources of an amazon and a google can go out and tesla, which is another example, can go out and collect unbelievable amounts of very specific information to solve these really difficult problems, that is hard to replicate. and i think what you're seeing is just a level of frustration maybe in silicon valley where there are a lot of people building extremely meaningful solutions who probably are getting somewhat outmarketed. >> right. >> and i think are probably reacting to that. and i think maybe -- >> let me ask the question in this frame, what do you think of the stock of ibm? would you ever buy the stock? >> no, never. >> no, never? why never? >> well again i'm in the business of buying things that i believe can grow, many meaningful multiples over, you know, usually i'd like to think about things in five to ten year periods.

and that's a business that i think can generate enormous amounts of cash. i think they'll acquire really aggressively. and so that kind of a sphere has a lot of value to a specific kind of investor. not my kind of investor -- >> as a value investor? like a warren buffett? >> up until such time i think that warren has realized that the capital allocation, he no longer believes it. >> but was that the right decision in your mind? >> at the time, yeah. for a value investor there was a period when ibm was a fantastic stock. they were buying back ee noormous amounts of their own stock which meant you could count on inflation. >> let me make it a little harder for you. the other company of course that warren buffett has bought recently is apple. >> yeah. >> do you think of them comparably? they're obviously in different spaces but in terms of growth trajectory. >> meares what i would say and i've changed my mind on apple somewhat. i think what that is misunderstood about that business and i'll be the first one to say i misunderstood it is there is an emerging business there that none of us are really paying enough attention to which

is the ios business. so all of the business of apps and selling subscriptions is extremely cruelly misunderstood including by me. and if you look at that business carefully now i'm starting to get actually slightly nor constructive on apple than i've ever been. >> the services -- >> the services is incredible. when you look at the amount of money they're making it is probably one of the single biggest software businesses in the world now. so, what it really is, is hardware on the surface. and some really powerful subscription and transactional software underneath and i think that if you really value that you could probably get really constructive. >> because it's up a lot since you were on where if i listen to you i would be really mad at you. although we can't -- >> ambien or something -- >> and that's right before it made the most recent upleg -- >> let's talk about like what it takes to be a successful investor over a long period of time. >> right. >> if i aspire to be as good as someone like a warren buffett or somebody else we have to be good over decades. >> right. >> the most important thing that we have to do is kind of divorce ourselves from psychological bias. so when we make mistakes we at

least go back and say, how do we reframe how we think about problems so that we can actually think about things correctly? and in the case of apple what we actually did was had an entire offsite dedicated to apple and we walked away and expanded the definition of the things that we would invest in because we were seeing that we were making a mistake. >> okay. so the -- watson you saw was, was it actually edison's watson? what -- >> thomas j. watson, founder of ibm. >> that's right. so it's not watson and crick either so it's none of those things. >> blame it on being a millennial. >> because i would have -- i wouldn't have thought sherlock holmes. i would have thought edison, right? edison is on the phone calling, are you there mr. watson -- >> okay we're going to continue this conversation in just a moment. we walk to talk tesla and elon musk. >> u.p.s. striking an exclusive sponsorship and shipping deal with the dubai world expo coming up in 2020. our morgan brennan spoke with ceo david abney ahead of today's event. morgan joins us from the u.p.s. sorting center in new york city. hey, morgan.

>> hey, melissa, that's right. so u.p.s. ceo david abney says he's hopeful about -- that he hopes that handling all of the content for dubai's massive world's fair will give u.p.s. name value in the fast growing legion. of course we also talked about package deliveries with gang busters growth of e-commerce. u.p.s. has struggled to keep pace. something that's pushed up costs. the reason the company is investing $4 billion this year. analysts have said the clock is really ticking on the company's ability to make more money on those residential deliveries. so i asked abney how investors should think about the company's time line. >> well, you know, many people would like for you to make investment and then immediately start returning. where many of these things, automation, adding buildings, adding aircraft, you have to first expand the money, or spend the money, and then you build up, so sometimes it's a little bit of a lagging effect.

>> now we also talked trade. you'll recall that u.p.s. was a strong component of tpp which has since gone away but abney says he is hopeful about president trump's recent decision to renegotiate or try to renegotiate nafta rather than simply pulling out. >> we're certainly encouraged that he made a decision not to exit nafta at this point. and we believe nafta should be modernized. it's a 25-year agreement. we would like to see it modernized into a 21st century agreement. things like e-commerce didn't really exist it 25 years ago. those are the things we'd like to see change. >> now u.p.s. would also lower from benefit excuse me from a lower corporate tax rate. they're on track to pay about 35% this year as well as infrastructure spending. companies also getting pretty creative with some of its pricing strategies for later in the year during the holiday season. we're going to dig into all of that a little bit more later this morning.

guys? >> all right. morgan, thank you. thank you. i'm getting a picture. aerospace, transport. if it's moving around, i think you send morgan out to cover it. when we return we're going to talk to afl-cio president richard trumka. he was tapped by the president to give advice on manufacturing policy. he will join us. join us.'s her ? apparently, i kept her up all night. she said the future freaks her out. how come no one likes me, jim? intel does! just think of everything intel's doing right now with artificial intelligence. and pretty soon ai is going to help executives like her see trends to stay ahead of her competition. no more sleepless nights. - we're going to be friends! - i'm sorry about this. don't be embarrassed of me, jim. i'm getting excited about this! we know the future. we're going to be friends! because we're building it.

good morning and welcome back to "squawk box." it was an zer graham bell, not edison. i'm worse than you. i'm worse than you. you know what? i'm glad i got yelled at by like randall stephenson. if i'm going to get yesterday at by someone. it's not edison, it was alexander graham bell with the telephone. with the watson thing. >> with the telephone, yeah. so we're both at least -- >> you're not -- as a millennial you are not entitled. welcome back to "squawk box" on cnbc live from the nasdaq marketsite in times square. you try, you know, just talking on tv three hours a day when you're, you know -- get up at 4:00 in the morning. afl-cio unveiling its executive pay list. the list tracks ceos income for 2016. among the findings the average ceo made 347 times more money

than the average rank and file worker. joining us afl-cio president richard trumka. it begs the question, and it's good to see you, mr. trumka, i guess -- >> thanks for having me back on. >> is your idea, or as a remedy if you think a remedy is needed is shining a light on this? i guess that's the reason for this initiative, i think i've asked you before, you're not looking for congress or someone to pass a law capping ceo pay, are you? >> well, we're looking to do a couple of things. one, shed light on the fact that the climb of the royal ceo continues, they get a 6% pay increase in 2016 while workers got a 2% pay increase. they continue to expand their domain, if you will, the royalty. we think that shareholders ought to become more active, and lower those, and that workers ought to get a bigger share of the wealth that they produce. they haven't gotten a raise or wages have been stagnant for nearly 50 years while ceo pay

climbs every single year without exception. >> they try -- you know, there's a multifaceted conversation, and i talked to andrew about it a lot of times. because you talk about pay for performance and you've got a guy like say let's say just for example jack welch or something. that goes from a company goes from $9 billion in revenues to $300 -- whatever it was during his tenure. shareholders are enriched. the employees are added. overall and there's a marketplace. where a ceo maybe his -- for his services, he does well one place. you see he's got this abilities. and the marketplace dictates like an athlete or like an actress that makes $20 million in a movie, richard, and i don't know if you -- that's three -- an actress makes 350 times what the gaffer with the microphone makes, and yet, you know, you don't hear the same type of

grousing about -- or a guy with a good football, a lefty that's got a split finger fastball makes $20 million in a year. it seems like if you're good at something the market dictates you make a lot of money. >> -- people that you talked about -- nice speech but it doesn't work. for every one of those ceos that you talked about, there are 300 or 400 that have had poor performance. and second of all the system is rigged. here's how it works. each year they get a pay increase, and they say, my peers are here. and each year they want to be above their peers. they just keep walking it up. it's actually in some cases pay per pulse, not pay for performance. they take a company into bankruptcy, they make a record amount of money. they leave a company, they get a record amount of money. the system is rigged, it doesn't work, they ought to be held down by shareholders, and those superstars that you're talking about, they'll find a way to make it to the top and get paid handsomely. i don't think they're doing too

badly right now. their average is over 13 million a year. in one case irene rosenthal made 16. she makes 1100 times what she pace her workers in mexico. she sends jobs to mexico and makes 1100 times what they make. so it's hard for workers, who haven't had a raise for a number of years, to say, oh, gee those poor ceos. they're getting paid for performance. >> chamath -- >> people perform, their prod t productivity is going up every year. >> chamath this year spends his time in silicon valley and knows a lot of people who make a lot of money. and you have to hire some of them. engineers are one thing. i'm talking about people at the very, very tippy top. is it rigged? >> here's where i think i agree with richard. which is that what we do right now is we allow companies to report in two different ways. we allow them to report gap and nongap and we allow them to essentially hide the cost of

stock-based compensation. which i think the numbers that richard speaks to, a lot of it is in stock. the reality is if you were forced to actually normalize the way every company reports, and forced them to show how much they actually pay in stock, you would have probably much more regulating effect on the entire industry. because right now people believe many of these companies are performing much better than they are. when you factor in stock-based compensation they're not nearly as performance -- >> richard what do you say to the argument that shareholders should be holding these boards, feet to the fire, and managing the compensation issue, but they don't, or they've effectively approved this and they've decided it's okay. and they're the owners of the company anyway. >> well, first of all, the shareholders don't approve these in many cases. it's only advisory for the shareholders. it's the board of directors, the board of directors are appointed by the ceo. he appoints his or her buddies, they sit on each other's

compensations -- >> if shareholders -- >> wages up -- >> the shareholders take the vote and say -- >> don't you think they would -- >> -- other side of this just for the purposes of this because joe and i debate this and i'm usually debating. i'm usually where you are, richard. taking the other side of it, if shareholders believed what you believed don't you think they would oust these boards? >> you would think so. but their vote is only advisory. 100% of the shareholders could vote to say no and it's not binding on the board of directors. >> but they can vote the board out, richard. >> moreover, more and more and more of the shares are held by the management people themselves. they're voting themselves a pay raise. >> i think a lot of -- >> i think a lot of this is like theoretically possible. you know the idea that shareholders will all of a sudden pick up picks and shovels and show up at a shareholder meeting and oust a board. but what's the alternative? and the problem for most shareholders is, they get these

proxy statements, they're byzanti byzantine, you can't read them, you check off the boxes that say this seems reasonable and you go back to work. the real problem is we play this really dirty game of hide the cheese here. so if you actually allowed us to understand how truly companies are behaving, and how they're really performing on an eps basis you would find that a lot of these companies that right now look profitable are not that profitable. and that's actually a reasonable act that regulates -- >> i think an even bigger concern the rise of passive investing. you don't have people actively engaged in a lot of these issues. >> that's a great point. >> a lot of proxy advisory companies advising how index companies or etfs -- >> you're absolutely right. >> richard, when you throw down just the inequality or the fairness issue, let's say you have a private company, let's say you have either a hedge fund or a private equity firm and some of these guys make hundreds of million dollars a year. much more than ceos. you've got some hedge fund and

private equity guys that have made a billion dollars in a year. you look at what the average person at one of their companies earns and it's not going to be 300 times what they earn. it's going to be 3,000 times what they earn. so are -- is that something that we should just say is wrong, and it's unfair, and that you -- you can't do that? or i just don't understand where you draw the line on whether you let, you know, just the private sector work, or whether you actually want some type of regulation that disallows this? >> well, it's pretty simple where you draw the line. you say to shareholders, give them the power to have a real vote. >> say it's a private company -- but say it's not -- let's say there are no shareholders. it's a private company or a hedge fund or a private equity firm and it's not shareholders. should that person be allowed to make a billion dollars a year? >> that's a red herring. look, that's a red herring. >> i'm just asking -- trying to figure out if you use -- >> they do what they want to do. we're talking about ceos that

are working for someone else's company. they don't own the company. they have shares in the company. they keep gobbling up more shares and giving themselves more shares. look what they've done last year. they used more than 100% of profits to buy back shares so that their shares go up. very, very little money was left over for capital investment or wage increases for workers. that's what we're talking about. a rigged system that lets ceos without regard to performance increase their salary, their average salary every single year. last year, or i'm sorry like twix, it was by 6% while workers got 2%. >> right, so, okay then you do think we need some type of laws or legislation to address the rigged system or just more transparency and more shareholder activism?

>> i think it's a little bit of both. shareholder votes right now are advisory. you know that as well as i do. 95% of the shareholders say don't give him a raise. the board still gives those ceos a raise. >> right. >> so shareholder votes need to become mandatory. we need to have more transparency out there, so that everybody knows what that shareholder or what that ceo's actually making. not that you have to pore through hours and hours and hours of 10k reports to figure out what the ceo is making. >> okay. >> and they also ought to compare it to what they pay their workers. so that the workers know how the increase -- how they're losing ground to their ceo. >> okay. appreciate your time here today. thank you. can't settle it all right now i don't think. but appreciate your time. thanks. >> coming up when we return we're going to get back to our guest host. we'll sound off on tesla,

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when we return -- when we return, jim cramer live from the new york stock exchange. we'll get his take on today's top stories. we all wish we were chamath, based on -- you know, you're doing pretty well. >> for a millennial. or a millen.

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let's get down to the new york stock exchange. jim cramer join us now. yet at the sohn conference, he said he's investing in tesla convertibility. he says you need to be on psych dellic drugs to understand the plan.

you have to believe it's not a car stock, but a tech stock. if they can do what tony says they can do, they would say, wait a second they could produce a lot of cars and make money per them, but i think what is so difficult -- we'll listen to this and say, wait a second, no real rigor involved, there's a lot of sure, we can do it, we can do it, we can do it. amazon always had great cash flow, this one accident, but they get the model 3, do the million in 2020, it will go higher. i wish he would not be so hyperbolic, more circumspect and take it more cecily. jeffrey gunlock saying -- you think outside the u.s. is

better? >> we have commerce bank, second largest bank in germany reported a great number last night. if bank the america blew up the numbers, we would be excited. like the call. i don't know if you want to do the short side, i've got to tell you on ibm, watson, very hard call, we're going differently from other guys, let me tell you why, it would be less susceptible to the idea that it is kind of a ki. thank, jim. we'll see you in a few minutes. later on cnbc adopt mitt an interview with bob iger, on "closing bell", 4:00 eastern time.

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♪ ♪ i'm dr. kelsey mcneely and some day you might be calling me an energy farmer. ♪ energy lives here. on our guest is also co-owner of the golden state warriors. we want to get to tesla, is that like a backhanded compliment?

tesla is great, but i do want the downside protection? >> i think the specific thing and jim cramer just talked about, they're in a period they have to generate cash flow. why the convertible is beautiful, in this transition from consuming cash to generating it, the bonds gives you the downside protection you want, with 90% of upside of the -- the way we think about it is now you buy huge amounts the convertibilities. when they chart to show that -- then you start to bulk up and build up a huge stock position. the point is there's a lot of people shot this company, and the reason is because the amount of consumer demand this company has is unimaginable. in -- in four quarters, they have captured 10% of every luxury suv. bmw saw 25% decrease in the 3

seri series, so this is a dangerous stock to be short. there's clearly a desire by consumers to have this company within. so from our pet spect tiff as an equity allocator, the right way to play this right now -- >> how much more capital do you think they me? >> management thinking it's 10 to 15 billion, we think the worst-case scenario is 20. we think this creates just complete downside protection. >> it's only an shall -- at every step they have tapped the capital market. >> it's a great point. the reason is because the consumer demand is there. frankly it's just unmitigated. that's a runaway freight train. every time we use a financial model to true to get in front of consumer demand, you lose, right in misunderstood amazon, google, misunderstood apple, facebook. and i think this company is very

similar to that ilk. >> you own the golden state warriors. >> part of them. >> would you good i have it all up if you could dunk a basketball. >> i used to be able to. >> honestly? >> he has it all. >> he can do everything. >> i used to be able to touch the bottom of the net, when i turned 40, and i tried to pull my hamstring. i'm like andrew, wire skinny guys. >> i can touch the rim. >> with a tennis ball maybe i could dunk. back in the day. >> i would hurt myself. >> you hurt yourself getting out of the chair. >> i did. i did. i admit. >> thank you, sir, always aish mr. >> it's going to be a great series if it happens. >> wait until we see hopefully

us versus san antonio. that would be incredible too. >> we wish you love. >> great to see you. come back. weep go to apple and -- >> and -- melissa, thank you. >> my pleasure. make sure you join us tomorrow. "squawk on the street" starts right now. >> you could dunk? ♪ this is how we do it ♪ this is how we do it good tuesday morning. welcome to "squawk on the street." eye karl quintanilla. pretty steady premarket opening. for, the dow has moved less than two tenths of a point. we get three more fed speakers today. we begin with president ale's record run, the company w