"squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. let's look at u.s. equity futures. it's been seven days in a row that the s&p 500 and the nasdaq have been higher. both of those indices coming off new highs once again from friday. you can see this morning things are relatively flat. if the somebody manages to close up for another day this morning, it's the first time we'll see eight days in a row for gains in the s&p 500 in almost eight years. you have to go back to july of 2013. look now again at things relatively flight. dow futures down, nasdaq up

slightly. the chinese markets were closed for the dragon boat festival holiday. the nikkei ended flat. down by 4.5 points. in europe, some of the early trading, you'll see right now it looks like things are flat for the dax. in germany the cac is off, and in london stocks down by a third of a percent. crude oil prices last week were all over the map. ended up down $50. this morning down to 49.57. several headlines out of europe this morning. it is the euro moving following comments by mario draghi. draghi signaling the bank is not yet ready to unwind simplus measures decemb s simplus st s

measures. let's look at the euro, at 1.11 right now. a greek government spokesman denies that greece will opt out of the next bailout payment. athens was weighing the option, but the greek spokesman said there will be a solution reached when european minute centers and minute centers and i sglooifrnlgts ministers meet. >> british airways saying computer networks are operating

normally today after an outage this weekend forced the cancellation of hundreds of flights. the usual pictures, people sleeping on benches. what's the solution on -- sometimes they put the metal arms there to keep you there, so you have nowhere to go if something like this happens. the airline says it will operate a full schedule from both health throw and gatwick, the two london airports today. an electrical malfunction knocked out the airline systems handling the flights, bags and the customer service. it affected 70 countries. 170 airports. the company says it is working to get the delayed bags back to passengers. analysts estimate the disruption will cost about $90 million in lost sales and customer claims. that's the parent right there,

iag. down about 2.5%. >> it wasn't a hacking situation, but it's hard to imagine how it knocked out the website and internal sites. >> we take a lot forev granted when we go. >> did you see the story about no laptops on planes period. on international flights period. the airlines fighting back because what will you do on that flight? the movie options are not that great. >> not only that, a lot of these planes, not for international flights but for domestic flights, a lot of them don't have entertainment. they say bring your own device. >> this would just be laptops and just international, i think. but businesses are worried if you're putting your laptop under the plane, that that yatcreatesl sorts of issues, laptops could get stolen. >> you need to simplify your life. >> i know. you don't even have a laptop. >> whichever you can get on a phone, right? >> right. there will be a day where they

take the phone away, too. >> they already do sort of. i put it in my pocket. >> in airline mode, right? >> i don't know what that is. i put that in there until the last minute. i always think i'll get a couple e-mails as we're taking off. >> breaking the law. >> it does show you how dependent we are on what we -- on this entire grid. >> let's get to the developing situation out of north korea. the country's official news agency reporting that leader kim jong-un supervised that test of a new ballistic missile and ordered the development of more powerful strategic weapons. the latest test landed in the sea off the country's east coast. the leader was quoted as saying this test would in his words make a greater leap forward to send a greater gift package to

the wrayankees for greater amern prove investigation. president trump returning from his first overseas trip and a lot of news about jared kushner. >> the president is back from his whirlwind world tour. today the focus turns to jared kushner in washington, d.c. after reports that kushner had tried to open a back channel of communication between the trump team and vladimir putin's team in russia. some indication that some of the meetings that jared kushner held back and during the transition may have been towards establishing that. but john kelly, the secretary of homeland security was on tv over the weekend saying that's no big deal. >> i think any channel of communication, back or otherwise with a country like russia is a good thing. multiple ways to communicate back and forth is a good thing

with any country. particularly a country like russia. >> the president himself issued a statement in support of his son-in-law, here's what the president said over the weekend. he said jared is doing great job for the country. i have total confidence inspect everyone and is working on programs that will save our country billions of dollars. more importantly he's a very good person. it's truism in washington that if the president has to put out a statement saying he has total confidence in you, that often means that you have a problem, we'll wait and see where jared kushner's future goes inside the white house. there's been an expectation when the president came back from this foreign trip we might see a shakeup in terms of staff and team inside the white house. we'll wait and see whether we get news on that today. a light public schedule for the president today. sean spicer, the press secretary will be briefing at 2:00 this afternoon. so we might get more news then.

>> i haven't watched -- you know, i want to have a nice weekend. so i didn't watch a lot of cable. this isn't what you do all day long. >> here's the thing, i don't want to pop your narrative, but -- >> please don't. >> i know. >> it's painful. >> i'm trying to figure out if this happened with kushner in december, how was he working to clued with the russians to win the election when the election was in november. i didn't see anyone -- i didn't watch that much. because i don't want to. on cnn, more frothing which we talked about last week. >> we talked about the frothing. >> i can see the frothing, but i don't see it, because i'm at the health club. all i see are the lower thirds. >> i don't know what frothing sounds like. >> you can see it. there's saliva in between --

there's a lot of frothing. >> i got you. >> did anyone say if you're doing this on december 8th or 10th, how are you -- unless you're superman and you fry quickly around the world. remember when he did that, and he turned back time to rescue lois lane. >> i'm all in on this. i'm following you. >> how do you collude in december? how? how? how do you collude in december? >> that's a question for the fb fbi. >> we know the fbi has questions for kushner. >> that little detail didn't affect anyone's reporting of the story. >> the meetings that kushner had with the russians a lot of this has been out there over the past several months in different reports in the media. so what we're seeing now is people responding to the fact that the fbi is apparently looking at kushner. that is the catalyst for this

recent movement. people are saying what does that do for the president? and did kushner push for the firing of james comey. >> obama talked to russia. >> joseph -- >> andrew, just -- >> one point to make. if it was all perfectly -- >> he wouldn't be reporting on it? >> the fbi wouldn't be investigating if there was zero problem. we don't know if there's a problem. but the fact that -- this is not like the media includinclue col. the federal government is looking into this, fbi is looking into it. full stop, end of discussion. we can talk about it when they come up to a resolution. >> it's not collusion because it was december.

you don't have any -- >> the fbi -- the fbi has already determined that the russians have been involved in some way in our elections. >> right. >> first. two, there are people who are part of the trump campaign, and i'm not putting kushner in this yet, who have been involved in conversations with the russians that the government is investigating. now kushner is one of those people and there's conversations that some people are not happy with. >> you have a mike. you don't have to yell. >> i do, because it pains me that we're having this conversation and you're making light of it as if it's completely and utterly wrong for anybody to be reporting it. >> just the -- in december nobody pointed out -- the whole -- all of the smoke you're talking about depends on the fire being before the election and that people colluded with russia to try to do the e-mails. >> we all don't know what ultimately happened.

>> we don't. and maybe let mueller decide something, but there's no fire yet. so looking at what kushner was doing in december has no effect on whether he tried to get trump elected and his team. you can't rig the election in december. >> i'm not trfrothing at this story. >> you are yelling. >> it hurts me too much. >> you're really standing up for yourself today. >> i'm sorry. it's too early. >> it's not about the election, it's about whether there is a back channel and whether that's okay. >> why wouldn't it be? >> mccain will tell you it's not. members are -- there are lawyers -- former lawyers from cio, former lawyers for the nsa. the list is long of people who seem to think this is so far from being standard behavior -- >> we don't know whether the kushner thing turns into anything or not. if you have john kelly saying

that -- >> the fact that john kelly says it is okay, that is -- >> you have president obama getting a private -- >> he was the president. >> when the mike was off -- >> trump was president at that point, too. >> in transition. >> you're referring to the microphone thing. >> where i can do more after the election, but i don't see anything russia -- unless you have that collusion beforehand, having a channel to russia to talk about syria or isis or any of that other stuff is not a criminal act or something that's even negative. >> the russians themselves thought it was weird that he suggested using a secure line with them. >> there's people reporting that the russians brought it up. the russians asked jared kushner for that. >> i've seen both of them but also the reports that suggested that he, the russian reported back that it was a strange request. they thought why -- sometimes the russians leak false

information thinking we would pick up on that. but they thought why would they be doing that p it wasif it was friendlier administration coming in. there's a lot of smoke. >> we'll find out. people are not waiting. since november 8th they have not waited. a lot of people had their heart set on hillary being president. they did. it's been difficult for them to accept this. if m it may never happen. but at some point, someone wins 30 states, you know, actually wins pennsylvania, michigan -- >> we'll see. >> states that republicans have not won in 40 years, you have to say this is the way we do things. we have to say he's -- it happened. i have to -- we have to deal with it. >> sure. we'll see what happens with the investigation. >> you have to deal with it. there may not be an impeachment and he may serve out his term.

you have to deal. you just got to deal. >> the markets keep setting new highs. >> markets are dealing. >> be happy about there. there's a lot of things to be happy about. probably with the republican democracy, it will not come crashing down today. joining us is peter boockvar. great. he thinks they will come crashing down. and jim tirnay. you look like dan quayle. i thought we had the vice president on today. >> he does. >> how do you spell potato? >> i'll pass on that one. >> boockvar, you think the markets are so bifurcated that all these new highs are led by tech and the underpinnings are weak or that -- >> no. outside of technology, the s&p

is up about 22% this year. with the market kapp weightcape s&p, they can cover up the buying and we have to reconcile the flattening of the yield curve, and the continued weakness in the dollar. when you look at the markets, you look at the s&p, you have to understand what's driving. technology is almost 25% of the s&p. >> why utilities? >> it's the lowering of interest rates, the concerns about the direction of the u.s. economy. >> if you see the ten-year sitting at such low levels, utilities look a better play? >> that much more attractive. >> that's weird. >> jim, you are bullish? do you listen to peter? does he make sense? >> makes sense. the one dichotomy in the market is financials have not done much to date. for the market to be as high as it is, financials have to come

along in play. i think the low interest rate environment hurt the financials, but if the economy is as strong as the numbers paint it to be, the financial also rals will rae year goes on. >> so the lead story in the "journal," these guys are just as ineffectual and -- i don't know how to describe the republican party at this point. you saw this, tax reform, they're not even -- it's just any of the ideas they had, they can't agree on the slightest way to do this maychltthis. but the marketfeels like the post-election rally, some of the sectors that boomed, they have tailed off. other things have picked up the slack. technology is one of the sectors that has picked up the slack. the market is trading more on the numbers as opposed to what could happen.

that's a good thing. if anything happens if washington, it's probably upside. >> so we can't do the -- can't do the border adjustment. can't do business interest deductions. can't do repealing the deduction for state and local taxes, because cuomo would have a heart attack. >> i was trying to count how many congressional leaders or how many congressmen are in those areas. >> you have to belief -- >> california, new york, new jersey, connecticut. that's a big voting block. >> you have to believe repatriation happens. it's billions of dollars sitting overseas. that comes back, you tax it. those are real revenues that the government can count. when that happens, there are a handful of companies that will benefit. look at apple. 25% of its market cap is sitting in cash overseas. they can use that way more productively than sitting in a foreign bank account. >> to your point, the republicans in the house, more than 21 can vote no against that

deduction. they alone can eliminate that possibility. >> gentlemen, thank you. >> thank you. >> thank you. >> when we come back, breaking down our first look at president trump's middle east policy. a rundown of trump's visit abroad coming just after this. finally. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums.

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welcome back. president trump is back home after his first trip abroad, we have the first look at how his administration will handle middle east policy. joining us is the principle for albright stonebridge group. thank you for being here today. >> thank you for having me. what do you think of the president's first trip abroad? >> i think it was a lot of rhetoric over substance. the president in saudi and in israel talked about doing more to confront iran, to prosecute the war against isis, and announced a number of deals, many of which were already underway during the obama administration. he got a warm welcome, i'm not sure the substance matched the

rhetoric we heard. >> having said that, relationships with israel and saudi arabia had been stretched with the previous administration. this was certainly a different feel to the visit, maybe simply because of a different view on iran and having both saudi arabia and israel welcome him in such a way, what does that tell you about what might happen in the next four years? >> i think clearly they gave him a warm welcome. he appreciated that. the question is where -- what that means on the ground. with regard to the war against isis, the trump administration has taken largely the same approach as the obama administration. the question they have to face is whether they're going to step that up significantly by deploying for example more american troops on the ground in syria or potentially iraq. that's a decision they have yet to make. which would be a real change. but i think would also come with significant risks. >> how much of deciding what we do with syria depends on our

relationship with russia? >> a lot of it depends on our relationship with russia. clearly the russians are an important actor there. they control the skies in syria to a large extent. and whether they do more to reinforce the regime, do more to support iran, hezbollah will be a really important question in our policy towards syria. also frankly whether they allow us to continue supporting the opposition in the ways that we have have. >> what do you think about the relationship with iran? the deal was fraught with doubts, concerns about where we go from here. it's one the president campaigned against when he was running. now we have this deal, but an uncertain future with where we wind up with this. what do you think happens in that relationship? what do you think happens with that deal? >> so, this is another example of where, as you said, president trump campaigned against the

deal, he continues to say it was a horrible deal. and imply that we should withdraw, but the actions that the administration has taken over the past few months suggest something else. >> i take it we would all be concerned if he came in and ripped up that deal immediately. he's this for four months maybe they're trying to figure the best way about doing this is? >> actually i think there's a good case to be made that they'll continue to comply with the deal. i think they realized over the past couple of months, better to have the deal in place, in some cases harder to get out. but if they were to put this deal on the slow burn, then would see iran restart the centrifuges, progress again towards developing a ballistic missile capability with potentially a nuclear warhead.

>> what happens in nine years? people talked about the end of this year, ten-year deal, at that point iran was going to be able to have the ability to go ahead and become a nuclear power. what happens in nine years and counting? >> the deal doesn't allow iran to possess nuclear weapons. that's clear. the iranians have foresworn that deal and it's clear they won't be allowed to develop nuclear weapons. but they will be able to enrich y uranium. so in nine, ten years the iranians can restart their program but the monitoring elements will be in place. we'll have more visibility into what they were doing than otherwise. that's part of the reason why i think the deal is still a good deal for the u.s. okay. prem, thank you for joining us. >> thank you. coming up it was a tough four-day weekend at the box office. spending on the top ten films

brought in just $165 million. the worst memorial day weekend in 18 years. we'll run through the numbers next. here's last week's s&p 500 winners and losers. what if technology gave us the power to turn this enemy into an ally? microsoft and its partners are using smart traps to capture mosquitoes and sequence their dna to fight disease. there are over 100 million pieces of dna in every sample. with the microsoft cloud, we can analyze the data faster than ever before. if we can detect new viruses before they spread, we may someday prevent outbreaks before they begin. at crowne plaza we know

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in times square. good morning. u.s. equity futures at this hour have been mostly flat. maybe indicated a bit weak on the opening. it would be eight straight if it turns around today. the s&p, though, 24 and change. i don't know if we're above technical analyst resistance levels, but we've had most recently a technical analyst that we follow, katie stockton talking about 26 and above. if we get through some levels around 2420. we're at 2415 today on the s&p. i don't know. i don't know what backdrop will derail this move. if it's dependent on obamacare repeal, that's not looking to imminent. if it's depending on tax reform, that's not looking to imminent. i don't know what it's dependent

on. animal spirits go a long way, so does deregulation. we'll see. >> okay. let's talk movies. i don't know if anyone went to the movies over the weekend. disney's "pirates of the carribean" movie made $76 million over the four-day weekend. "baywatch" from paramount pictures earned $23 million. this is the worst memorial weekend at the box office in 18 years. joining us now is the vice president of content strategy and editorial director of box office media. this is what deadline.com has to say. in the united states this summer is on the verbal of serious franchise fatigue. this is only the beginning. what's happened? >> it's -- it's a disappointing start, of course. when we see a weekend like this, a prime movie going weekend, not living up to the expectations,

we all get nervous. but this summer was always going to be slower. i think we'd been predicting a slowdown. but we have to put that in context that we're coming off of very, very strong first quarter. the same thing as last year. we were not sure that summer would drive the whole year. movie going-wise and it didn't. we had a strong year last year because the big hits were spaced out throughout the year. so while the hollywood blockbuster numbers don't rely on the summer alone that doesn't mean you can slow down the way we did last weekend. >> this doesn't say anything about the changing view be habits of families and kids. that's not what we're talking about. this is a content story. >> coming off first quarter as strong as we have, a record year like we will last year. i don't think it's part of this very popular story that viewing habits and how streaming cuts

in. that's a hot topic moving forward for the industry. but we're seeing that exhibition, which is going to the movie theaters, the theatrical world of movie going has been able to do very, very well. i think there's a problem with home entertainment. >> okay. >> that's what's trying to get figured out. >> when you look at what happened over the weekend with "pirates of the carribean" and "baywatch," what was the issue? >> we had two movies that underperformed. i think these are two movies that were not going to come out of the gate as strong guaranteed hits. "pirates of the caribbean" has a star has that has not been performing as well as he has in the past. johnny depp is not the box office guarantee as he was before. >> both of these tested amazingly. apparently people who saw the film loved the film but critics hated the film. >> i can't speak for the divide. at the end of the day, word of mouth helps in the long run. weekend two, weekend three, if a good friend of yours goes to the movie and it doesn't really

appeal to you in the first weekend, you're more inclined to go later on. >> handicap it, for those investors out there betting on not just what we should all go see ourselves but betting on the companies behind the films, what are the films that you think will work this summer who is behind them and what are not going to work. >> "spider-man home coming" a lot of hopes for that film. the spider-man property has gone through hard times, the failed broadway musical to sequels that have not gone well. they are relaunching the whole thing. putting in iron man, tony stark, and we're looking forward for that film to put prime real estate in the superhero world back. >> when are the minions coming out? >> the spinoff, the stand-alone minions movie did well. the two despicable me movies did

well not only domestically but also overseas. >> we have a fart gun in our house. >> excuse me? the minions have a fart gun. it's a constant in our house. >> 76 million for pirates, i think the "squawk box" movie in four days, give us four days, we could do $50 million. >> it's a series that's also been declining. >> i know. but 76 million is bad. >> we were thinking it would be in the mid 80s. >> but that was lowered expectations any way. the rock's presidential aspirations, not helped by 23 million on this. >> a title like "baywatch" is a hard one to market. >> it reminded me of -- remember when entourage did that movie? five years ago i was sort of -- >> into it? >> -- watching that sort of lifestyle but something felt weird about trying to do that in current -- in the current

environment. i don't know. i think the same way with "baywatch." >> it's a bit of an off beat movie. a movie that i think depended on people going to see that first weekend and telling friends, hey, it's funny. it's a movie you have to audiences with the concept. >> who is that guy, zac efron? >> yeah. >> he's cut. next to the rock, he looks like -- if the rock is one scale, zac efron looks like 0.6 of a hummen. almost a ripped hobbit or something. >> it's because it's the rock. >> that's what i mean. >> zac is doing all right. do you think they have a trainer? how can i -- is it too late for andrew and me? >> whatever they did, didn't help out as much as they would have liked at the box office. >> no carbs? what do you think? >> we're well behind that if it's behind carbs. >> no carbs. zero carbs, i think.

>> i read about zac efron's diet, his hole -- it was in "men's health." >> why? >> like osmosis. i read these things in hope that maybe somehow if i read them it will pay off. it doesn't. >> so no carbs for him. zero. >> very little. very little food at all. >> a lot of training. >> daniel, thank you for coming nfr in. >> thank you very much. when we come back, an interview with robert kaplan. he will talk about inflation and interest rates at 7:15 eastern time. and also the comments we heard from mario draghi. then the gop tax plan reform in focus. grover norquist will join us at 7:30. and later, european airline ryanair out with earnings. we have michael o'leary on the "squawk box" set. stay tuned. "squawk box" will be right back.

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welcome back to "squawk box." right now it's time for the executive edge. as the nation's student debt

reaches the astronomical 1$1.4 trillion mark, scully, an app, has helped users raise over $70 million in scholarships. that helps to put a dent in the crisis. joining us is rick gray. scully lined up investment from two sharks, damon john and laurie griner. so this app is fascinating. you were somebody who needed help getting scholarships yourself. how did you go about getting them? >> yeah. so i used scholarships to overcome poverty. originallybirmingham, alabama. i was going to college in 2009. my mom lost her job.

i had to rely on these scholarships to raise money and pay for college. for me, it took seven months. i had to go through the remember. go through scams, et cetera, to find these opportunities. while i was successful in winning a lot of money on my own, it still was a very hard process i had to take out of desperation to find this money and scholly was born out of that frustration and the frustration that i could help others not go through that hardship. >> how does the app work? if i buy into the app, i can see scholarships all over the place that might fit my needs? >> the app turns the months of looking for scholarships into minutes. it is not just for people going into college, but also for people currently in college and grad students. we helped students raise $70 millions so far.

those are students from all across the spectrum. >> that was a problem i remember, trying to find scholarships, you don't know where to go. >> that's the hardest part. >> highway do y how do you get ? >> we have two ways. the app is 2.99. and then also we do have a good scholly models where nyu got scholly, and we've got this model where other organizations who want to help their students and their cities, students in their -- people belonging to corporations -- >> so corporation pay 2.99 per person or a different fee? >> there's a bulk price. we come out with it based on the organization size. >> what do you need next? what do you hope to do to kind of beef it up and take the next step? >> for us, we always are expa

expanding new scholarship opportunities and are exploring ways to create ways to pay off student loans. people can't get jobs and housing and et cetera because they have this debt. so working on ways to help these students find money to pay off their student loans. >> are there a lot of scholarships that now do that? >> actually, no. there's some grants. there's the public student loan forgiveness program to help with that, but not a lot of formalized programs. we want to help create that so a lot of students -- >> could you see yourself getting into the loan business? >> not really. we want to focus on helping people reduce debt. we want to focus on helping them pay off their loans and helping pay for college so they can reduce debt. >> it's an interesting idea at a time when it's sorely needed.

thank you for joining us. >> thank you. >> scholly is the app. thank you. >> thanks. >> president trump tweeting out just moments ago in his words we have a massive trade deficit with germany and they pay far less than they should on nato and military. very bad. used that in reference before to germany and their trade policies. he went on a twit errant once he got back. for someone being vetted by lawyers for his tweets. did you get one of these? >> what's that? >> this is a picture of the white house -- >> yes, i do have one of those. >> a bunch of twitter birds flying out of the -- flying out of the white house. >> made this year. it's always made by -- it's a retail -- >> it is, it's like an investment -- >> vineyard vines. >> vineyard vines makes it. ♪ >> this is worn without

commentary. >> without commentary. >> i'm not saying tweets are good or bad. i like the tie. it's okay. kind of ugly. >> i still have the -- remember the kick the can? >> i have that. >> we have euro ones. we have janet yellen ones. we have ben bernanke ones in a helicopter dropping money on people. when we return, defense stocks getting a boost. we'll look at the trump bump and where the sector could go from here. "squawk box" returns in a moment. when this bell rings... ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business, from the largest financial markets to the smallest transactions, by sensing cyber-attacks in near real time and automatically deploying countermeasures. keeping the world of business connected and protected.

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time now for our sectornomics series. landon dowdy taking a look at defense stocks since president trump was elected. >> defense stocks have been in focus as president trump's budget calls for a $54 billion boost in defense spending. and that has investors seeing a money making opportunity. the subsector of 22% since the election compared to the overall industrial sector up 14%. but take a look at the winners. arconnick up 57%. the specialty metals company split off from alcoa last year. that stock getting an extra boost last week after a contentious five month battle

finally resolved agreeing to give elliott management three additional board seats after the activist investor campaigned to oust the ceo klaus kleinfeld which later led to his resignation. general dynamics growing 31% as the company's biggest driver aerospace is bigger and profitable more than ever and boeing up 31% as well on cost cutting and production improvement. this is what's interesting. it's not just president trump that is boosting the defense stocks. we crunched the numbers with our friends and historically, defense stocks rose higher over the first nine months of a new president. joe, back over to you. >> all right, landon. how is it out there? is it raining in engelwood? we don't get out there much anymore. >> you know what? doesn't really compare to my live shot on friday when i was in front of yachts. you know? >> you were. >> that was a good one. that was a good day at the office. it's a little chilly. i'm ready for summertime. you know. we need summer sizzlers coming up. >> the stretch of april showers

bring may flowers. not raining for an entire month of may takes off one of the months of summer. we're going to get a crappy summer. >> we're getting cheated, joe. i completely agree with you. we should get extra vacation for that. >> it's cold because it's warm i think. that's what people tell me. thanks, landon. former panamanian dictator manuel noriega has died at the age of 83. a one-time american ally, he was ousted during a u.s. invasion in 1989. then he served a 17-year prison sentence in the u.s. on drug charges, sent to face charges in france. he spent all but the last few months of his life in a panamanian prison for the murder of political opponents during his regime. that's a place you hope you never end up, panamanian prison. on twitter, panama's current president says noriega's death closes a chapter in our history. and the mother of uber ceo

has died in a boating accident. her husband remains in serious condition. they were boating on pine flat lake near fresno, california, when their watercraft hit a rock and sank. rescue workers found bonnie unresponsive and flew donald to a nearby hospital. >> >> and golfer tiger woods says that an unexpected reaction to prescribed medications is what led to his arrest for driving under the influence. he was arrested, the 41 golfer around 3:00 a.m. yesterday morning in the town of jupiter, florida, where he has a residence. he was pulled over on a stretch of highway about nine miles from his home. he was booked into the palm county jail -- palm beach county jail and was released around 11:00 a.m. in a written statement woods says that he wants the public to know that alcohol was not involved and that he did not realize the mix of medications had affected him so strongly. he apologized to his family and fans and says that he will do everything he can to ensure it doesn't happen again.

woods had a fourth back surgery in april. and the daily news, daily news, i hate even saying it, but the daily news and "the new york post" boast have the same head line on the cover. du eye of the tiger. the mug shot. the mug shot nobody -- nobody takes a good mug shot. >> it's a -- >> what is it they -- i mean, there's no -- >> it's 3:00 a.m. >> i know. but it seems like the camera itself is a bad camera. >> i think it probably is. >> always. nick nolte never looked like that -- >> the lighting. we know about lighting. >> you're unhappy. there's probably a reason why you're there. >> you can't really smile because you just, you know, don't want to like -- or give a couple of thumbs up, you're not happy. but how do you -- is there any way to make the mug shot, because it lasts forever, is there any way to make it less -- >> i think it's lighting. it's all about lighting. >> i have a business question. about tiger. >> can he -- can any sponsor --

>> he's already got problems. >> i know but would any sponsor get near him at this point? >> we -- >> i mean we all root for him because we all -- >> everybody loves a comeback. want to comeback. it would be a good -- i don't know what his -- he swung so hard for so long. i don't know what -- says he feels better than he's felt in a long time. >> he also says he can't turn his back for awhile yet. it's going to be awhile before he really knows. >> people pull for tiger but there are people who don't pull for tiger because he was, you know, when he was on top he may not have been the friendliest guy all the time. but you know, i'm pulling for him. he's always -- he's always beaten the naysayers. >> you like to see it. when we return a first on cnbc interview with dallas fed president robert kaplan. he will join us to talk rates, inflation, the u.s. economy and much more. and later, european airline ryanair out with earnings. ceo michael o'leary will join us right here on "squawk." we'll be right back.

good morning. the fed's next move. a first on cnbc interview with fomc voting member robert kaplan is just minutes away. plus a shortened week on wall street. jobs data front and center. we'll tell you what you need to know ahead of this friday's report. president trump returns from his week-long overseas tour. the domestic agenda once again front and center. we will talk taxes and more with americans for tax reform president and founder grover norquist. and tiger woods speaks out. the golf legend apologizes for his dui and says that alcohol was not a factor in the arrest. we have the details coming up. 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 becky quick and joe kernen. take a quick look at the futures after a three-day weekend. you're looking right now, a little bit of red. dow looks like it would open off about 19 points. nasdaq off about a point and a half and the nasdaq -- i'm sorry, s&p 500 down about 3 points. here's what's making head lines. the shortened trading week beginning with a handful of economic reports before the opening bell. here's what's on tap. we're going to get april figures on personal income and consumer spending at 8:30 eastern time. 30 minutes later the march case shiller report on home prices will be out. also the u.s. may ban laptop computers on all flights. this is a big change in and out of the country. homeland security secretary john kelly says that terrorists are obsessed with the idea of

bringing down a passenger jet and that the u.s. needs to raise the bar on airline security. we talked about it earlier but it would have a huge impact on airlines, both u.s. and foreign. separately the battle over dutch paintmaker akzo nobel goes on. a dutch court has rejected a bid for action against the country. rejecting several takeover bids so far from u.s. paintmaker ppg following the ruling ppg said it will still -- it's still mulling whether or not to make another takeover offer and a number of european headlines front and center this morning. start with some comments from ecb president mario draghi because he signaled the bank is not yet ready to unwind its stimulus measures despite greater economic growth across the eurozone. draghi said inflation remains subdued, and let's show you what's going on with the euro right now, as a result of all of that, we're at about 1.11 at the

moment. we have a shortened week for markets because of the holiday but a potential big one because of some key economic data that's coming off. we've got personal income kicking things off today. friday we'll see how the u.s. employment fared in may. joining us right now with what this means for the markets is steven desanctis from jefferies. and joe quinlan who is head of market and thematic strategy for merrill lynch and u.s. trust. gentlemen, welcome to both of you. we're looking at new highs once again for both the nasdaq and the s&p 500. it's been seven days in a row of up days for those indices. steven, you're worried that we are reaching a peak here and the rally may have ended, at least for the short-term. >> right. especially for the small cap market, where earnings growth really didn't cut of keep up with what we saw on the large cap side. large cap earnings were up 13.5%, really supporting where the multiples are for the stocks and now when you start to look down the market cap which you've

ended up seeing is that earnings growth wasn't nearly as good mainly due to the fact that you've gotten a lot better earnings growth and acceleration for companies that had overseas exposure. so the improvement in europe, the improvement globally, really reflected more in the large cap earnings space than you have in small mid cap. >> what's happening here in the united states? is that a reflection of the growth just not being as strong? >> i think it's -- yeah, it's absolutely the fact that gdp is still stuck somewhere around 2%. you know, you've got a 1.2% for q1. q2 is shaping up to be about 2%. i know the atlanta fed is more like 4%. that would be pretty optimistic. i doubt that's going to happen. so when you've got 2% growth you just kind of muddling along with earnings growth, and so the large multinational companies are really benefiting from europe doing better, asia doing better as well. >> joe, what do you -- >> not only is europe doing better they're growing faster than the united states, so is japan, so many emerging markets. europe accounts for around 55%

of u.s. global earnings. that's a nice upturn. you've got a weaker dollar and then in the emerging markets there's been a profit recession for a lot of u.s. companies related to mining, commodity boom and both. so i think brazil's going to come back a little bit of russia, china, india. it's a good emerging market story for u.s. multinationals. >> are you telling people to invest in the multinationals or to go overseas and actually invest in those other markets directly? >> actually both. actually both, becky. we like the big large cap companies technology, pharmaceuticals but also look at some companies in india, south korea, mexico, brazil is a tough call here, it's a trade not an investment. i don't think the bottom's been reached here. there's good companies, particularly e-commerce companies like china you want to invest for the long-term. >> what do you think the prospects are for u.s. growth? we have a lot of moving pieces in washington right now, people kind of hoping on things. >> this year i don't know, 2%, 2.5%, we get escape velocity 3%. we still need infrastructure and tax reform which is a story for 2018. so we're there.

but we're just muddling along. >> steven's looking at this from the perspective of the small and mid caps. and is concerned that the rally's petering out. what do you see for the broader markets? >> i think we're going to grind higher. 5%, 6% on the s&p energy comes back we might get some lift there. really, whether it's pharmaceuticals, industrials, i think it really depends on the sector. broader indices is fine but i think it's a sector specific story. >> why pharmaceuticals? >> well, there's demographics here. whether overseas as well. if you look at china for instance, they're just beginning to build out a health care system, so is india, so is saudi arabia. there's a lot of upside globally for global pharma, medical equipment and so forth. >> head line risk has not been great. there's another story in "the wall street journal" today talking about the surging prices for drug costs. donald trump has been somebody who has said he's going to take care of this problem. that he's going to make sure you don't continue to see that. is it a risky sector when you don't know what the political scene is going to unfold? >> it is a risky sector, becky, but it's been a risky sector

under various presidents, administration mgs as well. it doesn't go away. you've got to look at good companies, good pipelines, good overseas opportunities and stick with them. >> steve, what areas are you focusing on? >> you know i think tech has been a really good group. i mean -- especially on the large cap side. >> the bank stocks in particular? >> i think you can broaden out fang to be secular growth stories and the argument there is if you don't really have great gdp growth you want those companies that can grow earnings a lot faster than what the economy is giving you. so, tech has been one of our favorite groups. i actually do like financials and the banks. i think, you know, reform is going to happen. at some point there's going to be consolidation down cap. you've got the bar set pretty low for these stocks. they've given back an awful lot but -- >> you think reform is going to happen and it's good for the mid cap? >> especially for the mid cap. because i think you do -- you're going to get a little bit of consolidation there in that you do have, i mean roes are so low that they've got to go trend a

little higher with that you can kind of support higher multiples and then you also are going to get a little better earnings growth. the earnings season has actually been pretty good for that group. >> steve, joe, want to thank you guys both for coming in today. >> thank you. >> okay, when we come back, fomc voting member and dallas fed president robert kaplan's going to join steve liesman for a first on cnbc interview. his comments could move markets. stick around for that. and later americans for fox reform president grover norquist is going to be here to talk tax reform, what congress needs to get done first. stay tuned you're watching "squawk box" right here on cnbc. it's an important question you ask, but one i think with a simple answer. we have this need to peek over our neighbor's fence. and once we do, we see wonder waiting. every step you take, narrows the influence of narrow minds. bridges continents and brings this world one step closer. so, the question you asked me. what is the key?

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toronto 17, cincinnati 2. welcome back. welcome back to "squawk box." the futures right now are indicated down a little bit down about 23 points on the dow jones. now everything is in the red. the s&p indicated down 3.75. nasdaq down just under 4. we'll see. we'd be eight straight days if we close higher, right? >> eight straight days. for the s&p 500. >> by the end of the session. but so far, not looking positive in the morning. maybe this will change, andrew. >> okay, let's get to steve liesman now who is joined by a very special guest this morning. steve? >> andrew, good morning. hope you had a great weekend. i am here at new york with

dallas federal reserve president robert kaplan who is in town for a speech presentation giving tomorrow at the council of foreign relations. >> good to see you. >> all the moving parts. there's rate hikes and there's balance sheet reduction. >> right. >> can you just put together your best view or best guess for how this year shakes out? how many more rate hikes? is one coming in june? >> well, so, let me -- i'd rather than talk about individual median let me talk about the path of rates and the balance sheet. my own base case is two more rate hikes for the remainder of 2017. we've already done a third rate hike in march. i think that any removals, the accommodation should be then gradually and patiently. in addition, i think in the near future we ought to be announcing plans, and our specific plans for how to let the balance sheet begin to run down, and i think we should begin the process as early as sometime later this year.

>> that's pretty clear. okay. but let me just get one complication out of the way that's been discussed. >> okay. >> some guys are saying or some people are saying when the fed starts to reduce the balance sheet, it ought to think about stopping raising rates. >> yeah. >> are you in this tradeoff mode at all where if you're going to reduce the balance sheet you probably shouldn'ting raise being rates at the same time? >> i don't think we should be committing to do that. i think it's going to be a function of what the economy looks like. so it's possible we will, in any individual meeting, separate those two things. but we'll have to see as events unfold. >> you don't feel a need to do that now? >> i think i'd rather leave our flexibility to decide as we get there. i think the key thing for people listening to this -- >> okay. >> -- is that we can do two rate hikes and begin the process of reducing balance sheet. and the individual tactics, meeting by meeting, i think are less important than the overall plan. >> just to note the folks at home, we're going to get to the broader econ stuff but i've got to get this technical fed stuff

out of the way here. do you have an idea for how big the balance sheet ought to be? it's $4.5 trillion now. what's normal? >> i'm not going to put a number on it. it should be substantially less than it is today. but we were $800 billion precrisis. i think it's going to need to be bigger than it was precrisis. so it will be sort of the balance of what it was precrisis and substantially below where we are today. and the reason for that is we're in a different economy, different liquidity needs than we had in 2007. >> does it have a 2 on it and a 5 after a dot? >> i would say it -- i don't want to put a specific number on it. >> okay. >> but if somebody says in the 2s, that sounds about right to me. >> okay, cool. let's move on now to the broader economy. you're talking about raising rates twice, but the inflation numbers have been really lousy. are you worried about the idea that maybe you're raising rates into an economy where inflation is declining? >> i'm concerned about the

recent weakness the last couple of months in inflation. but my own overall view is, gdp growth is going to bounce back. i believe the remainder of this year. >> right. >> it's been disappointing for the first quarter. revised number is 1.2%. the reason i think that is we've got a relatively strong consumer household balance sheets are in good shape. and we now have better business spending. so, i still believe we can grow at 2% this year. >> mm-hmm. >> if that occurs, i believe that while that's sluggish by historical standards, that's sufficient growth to continue to take slack out of the labor market. and regarding the inflation numbers, even though the recent numbers have been weak, some of it is a little bit idiosyncratic, telecommunication pricing, but i think if you're getting to a tighter and tighter labor market, my own judgment is, with a lag effect inflation pressures are building. we may not see them yet, but i think if we continue to run a very tight labor market, we're going to keep building inflation. >> you say 2% growth.

you didn't say 3% growth. why don't you think we can get to this number that the president believes is the one that he can get to? >> well i'm giving you my forecast based on policies i see today. here's the issue, though, for getting greater growth. two things drive gdp. growth in the labor force. growth in productivity. >> right. >> okay. so the problem is labor force growth is very sluggish. and my own judgment, our economists at the dallas fed think it's going to continue to be sluggish for the next ten years, because population is aging, and labor force growth therefore is slowing. we can do some things to deal with that. workforce development, immigration reform. >> right. >> we've addressed that. but right now we're not doing those things and then the other part that growth can come from is productivity growth. the issue is it's not that individual industries aren't a lot more productive, it's that when people lose their jobs, because of that increased efficiency, they're tending to

go to jobs that are less productive, and that's why all overall productivity has been disappointing. >> so you don't think 3% is something that is achievable for the u.s.? >> i'm not saying -- i'm commenting if you want to grow gdp beyond 2%, those are the two areas we've got to focus on. >> and i understand you want to stay away from the political debate. however, i want to read you something from the minutes from last week that came out. quote, a number of participants pointed out that clarification of prospective fiscal and other policy changes would remove one source of uncertainty for the economic outlook. is the fed becoming a little exasperated or a little impatient with what's happening over on the congressional and the white house side? >> so, and i may be an outlier on this. here's my own view. my own view is i think we should wait to see economic policies as they develop. but the reality is, some of the policies being discussed will help gdp.

regulatory review, if it's thoughtfully done, potentially infrastructure spending if it's thoughtfully done, could help. but some of them could hurt gdp growth. and my own view, some of the discussions about health care reform could affect significant percentage of consumers and propensity to spend versus save. immigration reform, if we want to grow the workforce, it could actually be hurtful to that and may also affect spending habits of immigrants in this country. so i think the net effect that both of these policies is still uncertain, and on terms of tax reform, if it's tax reform, i think that could be helpful. if it's a tax cut financed by increase in the deficit, my concern is that may give a short-term bump to gdp growth but not a sustainable bump to gdp and over the horizon we'll have similar growth we have now except we'll be more leveraged. we'll have higher debt-to-gdp and i think that would be negative to economic growth. >> i keep asking you this question. we've had a chance to chat a couple times since the election.

i think i know the answer, you have not factored in much of the way of fiscal policy into your forecast? >> correct. >> and what is the thinking there? even though, by the way, the market is way up and some people have, even the imf and even the world bank i believe have factored in some positive outlooks or some changes to their growth forecasts from the coming fiscal policy changes. >> you and i have talked about this before and i have consistently -- >> want to make sure you haven't changed. >> no i haven't changed. the reason is i don't know what's going to be enacted. and as i just said, some of the things that could be enacted may actually be negative for gdp growth in my view. some could be positive. and i want to wait and see what unfolds, and i think the better bet is to stick with a base case forecast along the lines of what i just skriebd. >> want to ask about market levels which seem to be high in anticipation of these fiscal policies. does the current level of the stock market cause any concern?

do you think they're out over their skis when it comes to anticipation of fiscal policy? >> in my current job, my previous life i was very willing to comment on market levels, i'm very careful about that as a central banker. i would say this, what i'm looking for is imbalances in the economy. increased leverage, and other imbalances because rates are so low. my own view, if there were some correction in the stock market, that could even be healthy. but, also looking at the stock market, other people can comment on whether the p/e is too high or too low. what i'm looking at is the fundamentals particularly earnings growth which is basically been positive. and so, i don't see a bubble out there. i don't see excesses or imbalances that make me as concerned. we've been concerned about commercial real estate exposure but we've done some things to tamp that down from a regulatory point of view. so, that's not to say these imbalances won't build and i'm concerned that they may. but if you ask me today, i think

right now it's manageable. but i do think if there were some correction also in the markets, that could actually be a healthy thing. >> i have one quick question about personnel. president trump has not said anything too much about the next fed chair. >> right. >> do you have -- do you anticipate that the fed chair janet yellen may be asked to stay? >> not surprisingly i'm not going to comment on that subject at all. but that won't surprise you. i have a great working relationship with janet yellen, and i think she's done a great job. but i'm going to stay away from that subject. >> i think the time for one more? very cool, thank you. what is the message coming from the bond market right now? you're at 2.2, 2.20 to 2.25 call it. it's not saying i see screaming growth and or inflation right now. >> no. >> what message are you taking from the barngt? >> here's what i take from the bond market. i think the bond market is saying is the outlook for

economic growth is sluggish. not inconsistent with 2%, it's not saying that there's a lot of upside from that. and i think the other thing you're seeing is because of some geopolitical issues that we've had, some flight to quality where because of maybe some upcoming elections in europe, geopolitical issues with korea, i think you're seeing some flight to quality, also. but i think the main thing you're seeing is sluggish expectation of sluggish economic growth in the future. >> robert kaplan, dallas fed president thank you so much for joining us. becky, joe, and andrew back to you guys down the road from here, actually. >> okay, steve, am i right the head line coming out of that is we can do two rate hikes and begin the process of bringing down the balance sheet? >> becky, i would never after how many years is this a decade and a half doubt your news judgment. i think you nailed it. >> steve, thank you very much. that was very interesting. when we come back we'll also be talking about tiger woods.

arrested over the weekend on dui charges. we'll take a look at what it may mean for his endorsement deals. and then british airways, now operating on a full flight schedule after an i.t. fiasco over the weekend that canceled thousands of flights. phil lebeau will join us with what happened and the fallout for the airlines. "squawk box" will be right back. meeting tomorrow. well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. that more accurately assess a business' chances of success. this is a good investment. she's a good investment. get ready, because we're helping leading companies lead with digital. mobility is very important to me. that's why i use e*trade mobile. it's on all my mobile devices, so it suits my mobile lifestyle. and it keeps my investments fully mobile... even when i'm on the move.

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golfer tiger woods has an unexpected reaction to prescribed medications is what led to his arrest for driving under the influence in florida. police arrested the 41-year-old golf former phenom, i guess, around 3:00 a.m. monday morning in jupiter, florida. in a written statement woods says he wants the public to know that alcohol was not involved. and that he did not realize that the mix of medications had affected him so strongly. he apologized to his family and fans, says he will do everything he can to ensure it doesn't happen again. woods had a fourth back surgery in april. his current reported sponsorships include nike golf, which as you know stuck with him. taylor made golf, bridgestone

golf, rolex, kowa, i don't even know what that is. upper deck, and hero motor group. according to golf digest, tiger woods is the fourth highest paid golfer in 2017 in terms of sponsorships, i guess. and people are saying that more details will be coming from him, i guess the police department or whatever. and one would be the alcohol level. >> if he took -- >> if he did take the breathalyzer. a lot of times the failure to comply with taking it can -- >> he did not take it? >> i thought the report suggested he didn't take it. >> that would be the only way he could claim it wasn't alcohol because if he blew over a 0.8. coming up tax talk with president and founder for americans for tax reform grover norquist. we're not going to give him a breathalyzer.

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good morning. welcome back to "squawk box" right here on cnbc. we're live at the nasdaq marketsite in times square. among the stories france and center at this hour, tobacco growers under some fire from the world health organization but this time it's not related to cigarette smoking.

w.h.o. saying the growing process is causing massive harm to the environment through the use of chemicals, energy, and water, as wells apollution from the manufacturing process. also a strike has been averted at canada's largest rail line. they struck an agreement with a union representing 3,000 conductors, hours ahead of a deadline this morning. a walkout at the railroad would have been the first in a decade. and burger king in a little bit of hot water with the king of belgium. burger king set to launch in that country next month. in advance of that it began an ad campaign asking belgians to vote online to quote crown the company the true ruler of the country. that didn't sit well apparently with belgium's king philip who issued a reprimand for using an image of him in cartoon format. burger king currently considering a change in that ad. nbc news confirming that white house communications

director mike dubke is leaving the white house. that news was just reported, i was just reading it by a site that i've seen more than a few times. he reportedly tendered his resignation back on may 18th but covered to stay through the overseas trip. president trump accepted, senior administration official said that he's parting on good terms. he's still coming in to work and his last day has not yet been set. british airways suffering a major technical failure on a very busy holiday weekend. that disruption causing hundreds of flights to be canceled and causing some pretty tense scenes at airports, too. phil lebeau joins us right now with more. >> becky have you seen these images? we should point out that british airways is back up running normally today out of heathrow and gatwick. but look at some of the images from over the weekend. if you've ever been delayed or stranded at an airport you can sympathize with what the people in great britain were going through. long lines, people camped out,

basically because they couldn't go anywhere. this was a power outage that knocked out several systems, several i.t. systems at british airways thappy canceled hundreds of flights saturday, basically sunday and a little bit on monday, as well. a total of 75,000 passengers were stranded because their flights were canceled. >> we were lucky enough to do that so we're flying with virgin today. >> there was some kind of disruption. but our flights were canceled. >> as you take a look at shares of british airways, it's important to point out that under eu law they are responsible, airlines are responsible, for picking up the cost of people rebooking tickets when their flights have been canceled. the total cost of this remains to be seen in addition to the fact that a lot of people are still waiting to find out if they'll get their bags. here's the ceo of british airways talking this weekend about what their facing.

>> absolutely profusely apologize for that and we absolutely are committed to provide and abide by the compensation rules that are currently in place. >> and again we don't know what the total cost will be to british airways but it will be hefty. one more time, guys. flights for british airways operating normally today out of heathrow and gatwick. certainly a relief for the thousands of people who fly that airline out of great britain, and into great britain. back to you. >> phil, i know the airline has said that this was not a hacker situation but obviously people were wondering that because it was so many different systems. any other word on that? do we believe that? >> well, we do believe it, because there's no indication. and you know the way it works with airlines, becky, and certainly here in the united states, and i'd have to double check what the law is over in great britain, but if it is suspected to be terror related, or if it's suspecting a hack situation is suspected with an airline system, it has to be reported to the federal government here. >> they have to tell? >> so they have to tell them.

that comes up quite a bit here, i'll hear people say well the i.t. system went on in this airline. they certainly were hacked by a terrorist group. no they have to notify the federal government if that's the case. >> all right. good to know, phil, thank you. >> you bet. >> ryan air in the meantime taking the opportunity to poke some fun at british airways on sunday. the company tweeting this picture. check it out. from a comedy show, the company saying breaking news b.a. appoints new head of i.t., #should have flown ryan air. ryan air ceo michael o'leary will be joining us in the next hour. this is a company that never face to capitalize on any potential headlines >> the ceo position at airlines. maybe their people might not be applying for that job quite as much. >> you're in the spotlight that's for sure. >> united, that was rough. and you know, a couple other -- everybody's having -- of course, everybody's got a camera. >> united before that.

>> united. and american, who got hit with the stroller? which one was that? >> oh -- >> i don't even want to say. >> i forget. >> that's why we have o'leary on to talk to him. >> o'leary is not a shy man. >> i want to talk to him about climate change rubbish. i want to -- >> talked about having standing room only, making people pay for bathrooms on the flights. >> right. >> okay, now that president trump is back in the u.s., there's renewed focus on the domestic agenda for more on the president's budget plan and plans for tax reform let's bring in grover norquist. super grover. that's taken i think, grover, but i always use it for you. president of americans for tax reform, and just hearing your title, and reading the lead story in "the wall street journal," your tiern life, you're the president of an organization that is for tax reform, and it's not working. it's not happening. i'm reading this in the journal.

did you read this? let me read it real quick to you, grover. the gop bid to rewrite the tax code falters. the boldest ideas for changing the tax code are either dead or on political life support. the clear winner is the status quo. i mean that's what you wake up to this morning as the president of americans tax reform you want to i mean it's depressing. >> the one thing that isn't going to happen is the status quo continuing. the consensus in the house, the white house is fairly broad. you're going to read six, count them six headlines like that between now and when we radically reform the tax code. there's a consensus to go to 15 or 20, on the corporate rate. there's a consensus that subchapter s. corporations, pass-through companies, will also get 15% or 20% as well. maybe a little bounce there. but that's the first time we've tied business income through the personal income tax to business

income in corporations. there's an agreement to kill the debt tax. there's no disagreement there. there's an agreement to get rid of the alternative minimum tax. and, what you're having debates on now is what about the border adjustability on the corporate income tax. do we go to full business expenses? some in the senate have only said partial. i think partial is a mistake. it's like cutting crab grass instead of pulling it out. we need to go to full and immediate business expensing to lower the cost of capital for new investment. but that's a debatable point. debated point right now and on the individual side you're looking at slightly lower imagine nal tax rate. not as large cuts as the corporate side. but also, increasing the personal and family exemption. so, within that list that i just went through, there you have agreement outside of that, think of it as three circles coming together, the diagrams overlap. the overlap is worth having, and is a very good step forward.

it can get larger, i hope, going forward. >> you write in the article, they're searching for ways to offset the deep rate cuts they desire and points out that a lot of the ways to offset them aren't going to come about. and i can just tell you that long time deficit hawks, like the democrats, and andrew, and others that have always never wanted to do any of the grow the deficit, they're not going to go along with this. if you don't -- are you going to do -- you know what this is going to be? voodoo economics. that's the only way you're going to get this, by dynamic scoring. they'll tell you that never works and you can't -- the long-term growth potential of the united states is only 2% so these assumptions for 3%, and this will be any type of benefit from this is not going to happen, and you're just going to add to the deficit. and that's the plan we're going to get, right? >> okay. at the end of every failed democratic presidency, carters and obamas, where they massively ramped up the deficit and spent a great deal of money and didn't

care about the deficit when they were spending then they decided that they cared about the deficit in order to not lower taxes on working men and women in the united states, carter took that position, obama took that position, and then each of them at the end of their term said you know this lousy growth rate we have, that's not me. that's the world. the problem is if you look at obama's eight years and compare american growth rate versus the european growth rate, for the first six years, we were growing faster after the bottom out of the recession. it's in the last year and a half we're growing slower than europe. slower than europe is not where you want to be. the reason we've done better is that over 100 years we've grown faster than europe. and we are now, thanks to the last year of the obama administration, and the first bit of this administration, we're behind european growth rates. so the idea that our lousy growth rate over the last eight years is some new normal, that's an effort to cover up failure, and we do need to go back to the

policies that reagan did, which got you 4% growth. all of a sudden evidently 4% growth was possible, if you cut marginal tax rates and deregulated. while we look at tax reform a lot of the initial growth we're going to be getting over the next couple of years comes from allowing permits for pipelines, a bit of war on infrastructure for eight years in this country. stopping the permitting process for power plants, and for pipelines and so on. that's beginning to -- >> grover when it's all said and done, just going back kind of kidding about it, will any of it, will any of it be offset? will any of it be paid for? and how do you get republicans, these guys that haven't governed for eight years all they know how to do is oppose things. really, watching this, i have serious doubts whether they actually can govern at this point. how do they get together and actually pass something when they, you know, you got mccain. he's a republican, really? how are you going to get people

on board for this when they're just going to be an onslaught from mainstream media and everybody else about how bad this is going to be? >> look you're quite right. don't watch it. because there will be headlines all the time about everything's falling apart until it comes together. again, there's a great deal of agreement. i went through sort of at the beginning the list of things that each of the republicans in the house, senate, and the presidency run. don't get distracted by asking what the democrats want. no matter what compromises are made there will not be a single democrat vote in the house or the senate for this tax reform and tax reduction. but we'll also extend the -- like the time that you measure from ten years, used to be five, then it moved to ten, i think we'll move it out to 20, and that allows you a lot more freedom in reducing tax rates for a 20-year period, and you don't have to have quite the same offsets. >> wow. i can't believe how optimistic you are. >> i am. i think things are going well.

i'd have preferred if we passed health care sooner. to pick up the pace. >> yeah. >> but we'll get there. this year. october. >> all right. guess you're not reading the papers, because russia is -- you know, nothing's going to happen until we get that settled. anyway, grover, thanks for being with us this morning. >> yeah. >> all right. when we return, the recent attack in manchester highlighting the risks of soft targets around the globe. we will speak to the former l.a. police chief who is now part of a security and counterterrorism consulting firm for sports and business entertainment. "squawk box" will be right back. . since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you.

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welcome back to "squawk box." the manchester terrorist attack is forcing a re-examination of how to protect soft targets. sports areasonas, concerts and citywide events. joining us is michael downing executive vice president of security. michael's formerly the happened chief. good morning to you, sir. >> good morning. i was actually the deputy chief for counterterrorism and special operations. >> we're happy to give you a promotion on this show. thank you for joining us. help us with this. just over the weekend, there was a sporting event i'm looking here the san diego padres were playing the arizona diamondbacks, and a drone almost

hit a couple of fans. what do we do about this stuff? >> i think we have to look over the horizon to see what's coming. and drones are something that we've thought about a lot in developing kind of an anti-drone strategy. and it's only a matter of time before we see weaponized drones in europe. and north america. we're seeing them in the middle east. we're seeing them in parts of europe and we need to be prepared. >> what does that entail? >> well there's all kinds of anti-drone technology. some of the technology we've looked at is setting up a virtual wall of a mile or two mile radius where the drone comes in, it recognizes drone-ish behavior, doesn't allow it in and sends it back to base station. >> is there a way, though, to actually take a drone down? >> absolutely. you know, in the middle east they're using falcons and eagles. i think we have some more sophisticated technology here using not broadband jamming equipment, but jamming equipment

that looks at drones and recognizes the drone-ish behavior and takes it down. >> i want to talk a little bit more about soft targets, given that that's where we started this conversation. but the other piece of news over the weekend came from the head of homeland security who said he's considering eliminating laptop computers from all international flights, not just from a couple different countries on a couple different airlines. what do you make of that? >> well, i think it's -- i think it's the adversary doing a lot of r&d in developing bombs in personal devices. and i think that's what we're looking at trying to defend against. >> but does it make sense to you? meaning when you think about someone's going to have to balance the commercial interests versus the security interests. >> you know, i got back from afghanistan 15 days ago and they took my ipad and my computer. and they offered a loaner, but it didn't do any good. so, it's a challenging situation, especially for business executives. >> and then the other question,

though, is can we get to a point where our security is good enough to allow laptops on planes, and everybody feels comfortable that the lap tops are security? >> i think so. i think there's, you know, some strategies you could do where you actually have bomb techs looking and reading scanning devices for these types of things. and i think you can get to the point where you will be able to. but it's obviously not there yet because they're trying to sneak them in on the planes. >> and we're talking about laptops but at some point do we even talk about phones? >> we talk about phones. you talk about printers. you talk about printer card ridges. you know, all things internet is coming very quickly. so it's relatively easy to put anything in any kind of a device today. >> and going back to the sort of soft targets topic, when you think about concerts, when you think about athletic events, what has to happen, and what is changing, even in the past couple weeks, in terms of what stadiums are doing or should be

doing? >> well, after manchester we had a conference call with all our alliance members to talk about what actually happened, and also what are some counterstrategies that could take place. not only technology, but you know, investing in the human capital, and in the training on countersurveillance operations, eyes in the sky with zoom, high def cameras that do tracking and have analogs connected to data bases, the use of vapor weight dogs. certainly the intensity of the security needs to be the same at the beginning, at the middle, and at the end. i've run security details at the coliseum and sports arena for many years, and it's intense at the beginning, it's okay in the middle, and it tends to drop off in the end. but i think that we have to rethink that. >> so, what was the lesson from manchester? in terms of if it could be done all over again you think it could have been avoided how? >> look, manchester and the united kingdom is the best counterterrorism practitioners in the world in my opinion.

and manchester has been the focus of a lot of work and effort for many, many years. so if it could happen there, i think it could happen anywhere. but we do have to maintain an advantage, we do have a lot of work to do. in terms of our security operations, no plan to be done in final form. you need to look at how the threat's evolving and those plans need to evolve with the threat. are we using the best technology? do we have the best training for our people? do we have enough people? do we have a good relationship with our state, local and federal agencies? and are we leveraging those resources to do this? and for years we've seen the electronic magazines of isis and al qaeda encourage supporters and westerners to focus on soft targets like stadiums, and malls, and train depots, et cetera. and those need to be shored up. we need to look at not only the inner core but the outer core. >> mike, final question in terms of money. it's always a money story. who's going to pay for it? how much should be devoted

towards it? there's federal money. big discussion obviously, talk about the budget. the federal budget, and what's going to be put towards homeland security or not. and then there's the state budget. who should be paying for this stuff? >> well, i think that you know, there is, in the united states there's money that we use to harden critical infrastructure. and i think some of that could be used in that regard. i don't think it's going to take a lot of money. i mean keeping up with technology will take a lot of money. but redoing the plans, taking the stadiums through the safety act, where they become certified by dhs so that you have penetration tips and red teaming and auditing of the plans and looking to see that you have the proper technology so you can maintain that position of advantage. >> okay. we're going to leave the conversation there. mike, we appreciate it. thanks so much. >> thank you. >> you bet. coming up, we're going to have some stocks to watch in the next hour the outspoken ceo of ryanair michael o'leary on earnings and the recent pr problems in the industry. plus brexit and much more as we

head to break check out the futures, which are in the red. which we haven't seen a lot recently. dow indicated down 31. "squawk box" will be right back.

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tthat's why at comcast,t to be connected 24/7. we're always working to make our services more reliable. with technology that can update itself. and advanced fiber network infrastructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. take a look at a couple of stocks to watch this morning. video gamemakers are under some pressure this morning after new figures from data gaming firm super data showed that digital video game sales pulled back in april. they had record levels, and high levels in march.

and chipmaker amberella was downgraded to overweight at pacific crest which says the stock's price already reflects the potential for participation in the autonomous driving market. and royal bank of scotland, settled a shareholder lawsuit for $257 million. the lawsuit involved a capital raise during the financial crisis back in 2008. when we return, ryanair's ceo michael o'leary will join us. that's right after the break. we're going to talk quarterly results, airline pr problems and brexit. and a shortened week on wall street but we still have a big jobs number coming out on friday. we have a preview of what the markets will be watching later this week. "squawk box" will be right back. g to be a nightmare! does nobody like the future? c'mon, the future. he obviously doesn't know intel is helping power autonomous cars and the 5g network they connect to. with this, won't happen in the future. thanks, jim. there's some napkins in the glovebox.

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it's job week in america. stocks trading near record highs ahead of key data leading up to the friday payrolls report. ceo call in session. ryanair chief talks earnings, the brexit threat, and british airways technical chaos. first on cnbc. plus start your engines. takuma sato is the new king of the racetrack. >> at the 101st indianapolis 500 is won by takuma sato.

>> he will be on set fresh from his victory 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. good morning. welcome back to "squawk box" here on cnbc live from the nasdaq marketsite in times square. i'm joe kernen along with becky quick and andrew ross sorkin. the futures this morning, uncharacteristically are down. we had seven straight days of upward momentum in the s&p 500. looks like that could be at risk. the s&p is down about 5. the dow jones is indicated down about 40. and the nasdaq down 11. check out the dollar. earlier it was more of a story i think. i've done some comments, and from draghi about, you know, not really ending the punch bowl any

time soon. but 1.11 is where we are on the euro. >> by the way we had tough talk earlier here from dallas fed president about potentially raising rates twice this year, and continuing to -- starting to shrink the balance sheet. being able to do two things at once. >> let's get you to some of the top stories of the morning. dallas fed president rob kaplan speaking out on the rate hike time line. he joined us in the last hour. kaplan is a voting member of the fed in the 2017. so let's show you that right now. >> my own base case is two more rate hikes for the remainder of 2017. we've already done a third rate hike in march. i think that any removals of accommodation should be done gradually and patiently. in addition, i think in the near future, we ought to be announcing plans, and our specific plans for how to let the balance sheet begin to run

down, and i think we should begin the process as early as sometime later this year. >> okay. and also german chancellor angela merkel signaling tensions between the u.s. and germany may be increasing. the campaign speech she said that europe could no longer fully count on others. she never mentioned president trump by name but the blunt remarks came after trump did not explicitly promise to protect america's nato allies if they came under attack. and we should mention that president trump tweeted this morning, quote, we have a massive trade deficit with germany, plus they pay far less than they should on nato and military very bad for u.s. this will change. also on the economic agenda we're going to get april figures on personal income and consumer spending in just about 30 minuteses. then at 9:00 the march case shiller report on home prices will be out. ryanair calling out british airways on twitter after an i.t. outage over the weekend forced british airways to cancel hundreds of flights. ryanair tweeting a photo with the caption, breaking news, b.a. appoints new head of i.t.,

#should have flown ryanair. let's bring in michael o'leary the ceo of ryanair, the company out with earnings this morning reporting a 6% bump in profits despite falling fares. and michael thanks so much for being here today. >> thank you, becky. good to see you. >> let's talk earnings first. 6% increase in profits. this is coming despite lower fares that are out there. and you see even more profitability throughout this year. what's happening? is that a resurgence in the economy in europe? >> i think it's been a very good year, 6% earnings per share. remember it's a year when there was a number of significant terrorist attacks in european cities last summer so we're growing strongly. we're forecasting 8% profit growth this year. we've been at 600 million share buyback this morning that runs through october generally speaking -- over every other airline in europe we see ourselves growing strongly across europe particularly as l alitalia and air berlin restructure. we expect to be able to exploit opportunities there.

>> british air has talked about how they think they're fares will increase this year. will yours increase as well? >> god bless them. there's a chance in hell that their airfares -- in europe this year fares down. it will be cheaper than ever to fly across europe. airlines hoping that fares are going to raise in europe are, i think, engaging in what we call irrational exuberance at this time of the year. >> how are you able to take lower fares and still improve your profitability? >> because buying aircraft from boeing, taking 50 aircraft this year from boeing, the 737-800s. in 2019 we start taking the game changers which have more seats, better fuel consumption, and which means our aircraft counts are falling. we have airports competing against each other to win our growth. and so we have all of the major unit costs are falling. fuel is falling and we're passing it on in the form of lower fares to our customers. that's why we're taking market share from british airways. we've seen a big surge in

bookings the past few days following the foul-ups at heathrow and gatwick. which to be fair could happen to anybody. where the hell was the disaster recovery program. >> just the idea of having backups among backups and making sure -- >> we have our i.t. has five different centers, we have disaster recovery centers. one could go down, there are still other four. what could have happened to b.a. maybe a power outage. >> it sounded very suspect, right? >> it sounds like somebody is covering up something. we have power outages all the time. that's why you have disaster recovery. you don't have all your eggs in one basket. >> do you have any pressure to buy airbus? >> no. we're irish and we don't succumb to pressure from anybody. to be fare we'll buy whoever has the cheapest aircraft. >> you'll pitch in the eu type stuff couldn't you? >> we would if it was cheaper. boeing make great aircraft. they've consistently been able to undercut airbus. the difference is if you take the 737 -- 800 has 189 sets.

the a320 has 129 seats. >> so you never get in trouble with the board, with the board of ryanair? you said and i'm quoting climate change is rubbish. you don't get in trouble? you can't say that in this country. >> oh, you can. when you talk about climate change now because they can't stand up global warming. the globe hasn't warmed for 15 years so now they're talking about climate change. the climate was changing in the world long before we started burning -- >> but you called it -- a her tick, in this country you can be an atheist, a devout christian, you cannot deny climate change without people asking to be fired. they don't want you to be able to run for office. there's some people that want jail term. >> i'm one of ireland's biggest farmers so i'm making a significant contribution to the carbon footprint in ireland and in europe. >> and that's good for -- >> that's why we're buying more and more boeing aircraft,

burning less fuel per passenger so actually if people are really worried about the environment in europe and this hocus-pocus about climate change, fly ryanair, you're contributing lest. >> part of the comment is that trump is not following along with her views on climate change. >> you've got to be careful. merkel is engaged in an election. like trump over here said lots of crazy things in an election. i think the relationship between europe and the u.s. is a tight one. before people start messing around in the balkans angela merkel will discover who her friends are and they're going to be here in washington. >> let me ask you about customer service because we've had lots of conversations about united, people complain at least in the united states, and i think in europe, about customer service constantly. and yet there was a fascinating article in "the new york times" over the weekend that talked about the fact that customers don't buy tickets based on customer service at all. they buy based on price. that all of the examples where

american air has expanded their seats, they didn't pick up any market share, what is going on? so we all complain about it, but for some reason, with the exception of business travelers, when it comes to paying with our own money, we actually usually go after the cheapest flights. >> i fly out of wherever is the easiest airport to fly out of. that's -- >> becky, you're a rich rock star. >> exactly. >> most people we carry 130 million passengers a year. we're the world's largest international airline. average fare is 140 bucks. beam have a disconnect between the idea of air travel which in the '50s and '60s was stylish and elegant but it was only affordable by the top 1% or 2% of the population. now everybody's flying it's a commodity. and 99% of people when they're making a booking still first question is what's the cheapest fare, too. and as long as in our case it's cheaper than anybody else, it's more on time than anybody else, you're in a brand-new boeing aircraft, and it's not an offensive experience, they'll come back. >> which is harder and harder to find your price point because

now they split it up so you're paying one way and you only see one way at a time it doesn't tell you about the baggage fees. >> the great thing is the airlines used to mug you in the past because you had to stay a saturday night. now, the baggage fee is discretionary. we don't want you to bring a checked in bag. bring two carry-on bags. our perfect passenger is no checked in bag. it's your decision. in the old days in europe they'd charge you 500 pounds. >> can you weigh in on this issue? i don't know if you saw the news over the weekend in the u.s. about lap tops and what may happen for international carriers coming into the u.s., and our ability to secure laptops on board. what do you think should happen here? >> i think we've got to be very careful on the laptop situation, because you know, people do things on laptops you have an effective security measure. the danger, the problem is going to be, you know, there's a real issue where you can't take laptops off people and put them in the hold of an aircraft. you have too many lithium batteries in the hold of an

aircraft and you run a real risk of fire in the hold. i think we've got to be careful -- >> what's the answer? >> and who should be paying for that answer? >> is it safer up in the seats? >> no. but they're not jammed together in one place. there's a risk there. >> there's two issues. there's the lithium-ion batteries themselves. and then there's somebody doing something much worse. >> but storing them in one place is dangerous, true. >> i don't have a fix for you. we're still -- we live in an issue with the legacy, of you know, doff security information. they've taking lipstick off women like it's -- >> what would it cost to do it right? and what does doing it right even mean? >> we really don't know what doing it right even means because the terrorist threat keeps changing and morphing and therefore as a industry we spend literally billions every year. 100% hold bag screening -- >> do you pay or do we pay? >> no we pay in >> you pay? >> yeah. >> not tax dollars?

>> well, in europe it's not tax dollars. we don't have a tsa in europe. the airlines pay for everything in europe. we pay for all the security. we pay for all of the airport infrastructure. the tsa at least in the states is subsidized over here. you don't pay for either. ultimately the consumer will pay. the difficulty is going to be if you're going to start removing laptops or tablets, where is the line between the smartphone and the tablet? and they say battery size. okay so it's -- >> the physical -- there's a physics story here which is if you can actually put a bomb inside your phone, or a bomb inside the laptop, the bomb inside a laptop ostensibly should be more powerful. >> yes. but i mean technically if you're now going to ban the laptops at what stage do you say smartphones at that size, smaller size. i think you're going to get into real trouble with people -- people will be willing to travel without laptops and tablets. they won't be willing to travel without phones. there has to be a balance in

secure. you're driving down the highway it's not secure. you're at far more risk than you are flying. but with flying, you know, people it's got to have -- there's a balance to be struck between security and protecting people's security, and having some kind of reasonable experience. >> michael before you go, on brexit and how that may impact business? >> i really worry. i think brexit's an impending disaster. it's quite clear the british have no idea what they're doing. in our industry it looks like they don't want to obey european courts of justice rulings which means they leave open skies and there's no way in my screw that britain can negotiate bilateral with europe to allow flights to operate for 12 or 18 month period. we may well have a period of weeks or months after march 19 where there will be no flights to and from britain. and this is the kind of crazy scenario we're dealing with. you talk to british ministers. have you got a plan "b"? no. europeans are absolutely foursquare going to do as much damage to britain as they can. just to discourage anybody else

leaving europe. >> you looking at real estate in malta? >> no. i'm big on real estate in dublin, joe. >> richest guy in ireland, richer than you, i think, moved to malta to avoid taxes. you're going to stay? >> i'm staying in ireland. the weather is better. golf courses are better. and i've got young children. they don't want to go to malta. >> malta's nice. >> but ireland is better, joe. >> it is? >> michael thank you. >> becky, thank you. >> always great to see you. >> you, too. >> rubbish. rubbish? climate change is rubbish. unbelievable. watch yourself walking around new york city. a lot still ahead on "squawk box." including new details about what board members knew about the embattled start-up technology. plus date tat on the state of small business in america we're going to run through the numbers with paychex ceo marty mucci and later making money on the rise of the millennials. bill smead says it's not about

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welcome back to "squawk box." futures right now down all morning tinge to show some weakness right out of the gate down a little better than it was down 24 on the dow jones, down 4 on the s&p and the nasdaq indicated down around 6. let's get to our trading block. joining us now to talk oil john kilda founding partner of again capital and covering gold mike vog vogelsang chief investment officer at boston advisers. hard to talk about these two things in a vacuum. they are related. john, a lot of sound and fury last week. nothing happened. >> no. and i think the agreement was notable for what it didn't achieve, joe, rather than what it did. they extended the current deal for nine months but there had been a lot of hopes within opec, at least saudi arabia, that it

would be extended twelve months. it would be bigger, deeper cuts, that there would be production caps for nigeria and libya who are rushing production back online. not to mention getting iran on board to do something. yeah they signed on to the agreement but there's nothing expected of them. so that's why there was a fierce reaction to just what they announced. we sold off and it was really kind of fun to watch the saudi oil minister try to say anything he could, knowing full well that oil prices were collapsing as they sat there in their post-meeting press conference trying to talk up the market, and extol their agreement. >> so if you do this for a living, watching oil prices, we've been fixated on almost de moves with global economies, et cetera. but at this point, do you ever see renewables, or alternate sources really damaging the oil, and the hydro carbon infrastructure? i mean will it supplant that?

>> i think we have but it does nibble at the edges, if you will, in terms of pricing -- >> the demand? >> that last barrel, yeah. the other big notable thing that i didn't realize myself the average new car gets 36 miles to the gallon. i got to double-check this report but i think that's the right number. that's a big development. because one thing that's been curious in the energy market this past now six months i'd say is that gasoline demand has been down about 2%, 3%, depending on the week. that's in the face of some strong employment data that usually argues for record -- >> fracking and it's still a supply story. we need to watch supply? >> most definitely. most definitely. we always have to worry about it's not going to happen now. seems like the saudis are sticking to this plan to try to reduce oil production enough to drain the swamp. but, if they ever turn tail, and reinstate the former oil minister's plan of action, which is to flood the market with oil,

then you'll have an abject collapse and i don't know if our industry can withstand that again. >> okay, mike. so another missile. what -- gold, is it anything other than i guess black swans, global black swans, shouldn't that really be what dictates it? isn't north korea something to watch? or do we look for the fed typing? i mean what really is controlling gold's price now? >> well it can -- gold is controlled by what people want it to be controlled by today, right? so sometimes it's an inflation hedge. which we don't see any sort of long-term inflation burgeoning anywhere. sometimes it's a, like the safety. so if you got a problem with north korea, the biggest issue we have is where's the marginal buyer. unless you have some big virian coming along like a big sociopolitical issue where is the large nal buyer? when you have global gdp growing

and corporate profits around the world getting to work why should people sell things that pay dividends and growing earnings to buy a lump of shiny metal. it's find to hard that marginal demand. >> when it was getting close to 2,000 people had a million reasons why you should be buying gold. >> yeah, of course. >> that didn't work. down 30% from there. >> right. >> you know we've been basically in a really pretty wide but reasonable trading range over the last five years. right? since the super cycle broke there's really not much else been going on. i mean it's -- it's not -- it's not a supply situation like oil where john just laid out the oil issue pretty clearly but this is -- this is where is the marginal demand going to come? you've got to have the big allocators around the globe decide they want to sell something like fixed income or equity or real estate and put it in the gold market. it's pretty tough to find that at the moment. >> so let's say we do tax reform and don't pay for anything. let's say we just blow out the deficit -- let's say it's even worse than that. let's say we run up the same

kind of deficit that obama ran up in eight years with this tax reform. then what does gold do? >> well, the question then you're talking about inflation, you're talking about global inflation, again the giant sucking sound still remains incredibly low interest ratings around the world. i don't know how you're going to get there. that's almost like the yankees winning the american league east joe, i just don't see it. >> i think that's going to happen, isn't it? >> that's fighting words. >> price is back under 600. the reds i'll give it to you. they lost 17-2 yesterday. >> baby bombers can't be beat. >> no. >> all right. kylduff, thanks. and mike thanks we'll see you. >> you bet. >> coming up when we return, what theranos board members knew about the embattled technology or maybe the lack of it. that story is next when we return. plus, takuma sato makes history on the racetrack. the winner of the indy 500 is going to join us at 8:30 eastern time.

welcome back to "squawk box." new documents shedding some light on how members of theranos' board responded to controversies. according to new court records by "the wall street journal," former u.s. navy admiral and a former secretary of state george shultz did not follow up on public allegations that the blood testing firm was relying on standard technology.

instead of the much typed proprietary device for tests. schultz testified that he, quote, didn't probe into whether the firm's technology was working. he also said, quote, it didn't occur to me since i didn't know -- i didn't have anything to look into. the men left the board shortly after reports about the company's operations in 2015. and if you remember, one of his cousins was theranos -- one of shut's relatives actually worked at theranos and was one of the original whistle-blowers in this operation. another fascinating part. >> those are always the questions about the board. weren't people necessarily scientifically, very respected people on the board but not necessarily people who had scientific background. >> which is true of a lot of boards. >> the mother of uber ceo has died in a boating accident and her husband remains in serious condition. bonnie and donald were boating on pine flat which is near

fresno, california, when their watercraft hit a rock and sank. rescue workers found bonnie unresponsive, and flew donald to a nearby hospital. uber's spokesperson called the accident an unspeakable tragedy. when we come back, some breaking economic news. personal income and spending data about to hit the tape. plus the state of small business hiring in america. we will bring you the numbers. stay tuned. we'll be right back. fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

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welcome back to "squawk box." rick santelli here expecting some important april data. personal income and spending. and they are hitting the wires. exactly as expected. up 0.4 on income, up 0.4 on spending. expectations were pretty much spot-on with those numbers. if we look in the rear view mirror there was only one revision. that was to the spending side. originally released unchanged. now stands at up 0.3. a healthy revision to be sure. and if we look at real spending, that was up 0.2. and a 0.2 revision up to 0.5 for last look. here's interesting number. deflator month over month. last look down 0.2. it's up 0.2. if we look at the deflator year

over year, up 1.7. and last month revised up 1.9. that gets ever closer to 2%. we still have some important data out, especially conference for consumer confidence. we could try to see what the psyche of investors is at this point. it was running high up to the election. equities still down. yields did tick up a bit on that data. a basis point, basis point and a half or so will continue to monitor. joe and the gang, back to you. >> all right, rick, thank you very much. let's get more reaction on this right now. bring in steve liesman. >> i don't know where to start. there's two parts of this report that are very important. let's start with the good news here. income and spending, up 0.4. look at this pages and salary number up 0.7. now unchanged in march but that's a very healthy number. consumption up 0.4. the nice revision of march. what this tells me i think is that we're going to be on track for this around 3-ish gdp number in the secretary quarter and there was some doubts about that, because the data was a

little squirrely. a good number in durables up 0.9. nondurables up 0.6. there's the savings rate, which even though you have this nice 0.4% increase in personal income, and 0.4% in consumption you still did 5.3% on the savings rate which is higher than it was before the crisis. but, it's still a healthy number. 2340u we've got to talk about the inflation number. robert kaplan talked about that earlier. he was concerned about weak inflation. and the trend is unmistakable here. here's the head line. 2.1 in february, 1.9 in march, 1.7 in april. those are progressive steps down. here's the core, 1.8, 1.6, 1.5. so this is the fed's favorite inflation metric. they want it to be near 2%. it's going away from 2%. >> didn't kaplan say that he thinks the inflation is out there? >> he thinks it's out there building. you have tight labor markets 4.4% unemployment rate. the expectation is that this will cause wages to rise.

you did have that nice wage number in there and that these wages could potentially put a floor or even increase the inflation data. my point is that it's not happening. you have a roll-off of some higher prices last -- a year ago. that's not helping here. it does -- it has to give some members of the fed a little bit of pause in this march to hike rates, and i mean march as in stepping stones. >> as in stepping stones. >> it's june to hike rates in june. >> if we're going to see two rate increases this year do they have to do one in june? >> they don't have to. what we know is that they like to move on these press conferences. you have june, september, december, so you have three. so you could do two out of three if you wanted to do that. you could wait until september. you could give a pause. you could come again on a nonpress conference meeting. i think the fed wants to see this inflation data firm in order to hike rates. >> okay. steve stick around. we have some news just crossing right now on the state of small business in america.

job growth declining for the third consecutive month according to paychex small business employment report. joining us right now is marty mucci paychex's ceo. the increased pace of small business employment growth that we saw following the election of donald trump has slowed. small business owners now seem to be taking a more wait and see approach to hiring. what's happening? >> well i think what we're seeing is that optimism that came with the election and the new administration is now kind of wavered a bit. there's a lot more uncertainty with health care reform not getting through, tax reform not moving forward right now. and i think small businesses tend to see the impact of that first and they're taking a little bit of a pause there in being careful. good news is, wages are up about 2.9%. and as steve was just talking about, that's a strong number, particularly given low inflation. >> let's just sort of take a look around the country what's going on. looks like the south is the big winner? >> yeah, south is still the strongest from a job growth rate

percentage. and you're seeing it in florida, tennessee, virginia. that southeast corridor still strong construction still doing well. the highest wage increase tends to be on the west side. and i think they're probably getting a little more toward full employment, job growth there is decreasing. and the wage rates are coming up stronger. the good news on wage again, 2.9%, and if you look at the last month or three months, annualized it's over 3% so it's actually accelerating. >> you attribute some of this to what's going on in washington, and i know you attributed some of this, some of the original to what's going on in washington. is there any argument to be made this is actually what's going on in the economy? >> well, sure, i think we're getting more toward full employment. so the job growth rate is going to decrease as you get towards full employment. also, the wages are going to go up as you get there, as well. because it's harder to find certain people and get them for their jobs. and so certainly there's a piece of the economy there. but i think generally our surveys indicate that there is

some real uncertainty about how much was going to change in reform, tax reform, health care reform, et cetera. that makes small business be more cautious. >> is it uniform the 2.9%? are there some industries and sectors where wage growth is faster than others? >> yeah, steve, the biggest wages that are going up the fasters, obviously, you know, leisure and hospitality other services, where minimum wages in particular -- or minimum wage increases are pushing that pretty high. so you're seeing some of those industries, those sectors growing much faster. >> okay. marty mucci, we appreciate it. thank you, sir. >> great. okay. thanks. >> talk more about jobs in america. ahead of friday's payroll release, joining us seth harris, former u.s. labor secretary during the obama administration. it's good to see you this morning. what -- we're on a 200, 180, 200, more of the same, seth, and that's pretty close to full employment in your view? >> yeah i think we're going to begin to see the kind of

slowdown that you get as labor markets get tighter and tighter. there's still a little bit of slack in the labor market but until we see those wages numbers accelerate like we just saw out of the commerce department data we have to say that there's still a lot more room to grow. but, as the labor market gets tighter, there are fewer workers to find, hiring gets more expensive. you've got to deliver skills to workers, and we're beginning to get towards that point in our economy. >> you figure it's demos? it's retirement on the participation rate? you think that this is just the new normal? >> i think about half of the decline in the labor force participation rate is folks in my generation retiring from the labor market. some of it is people who just got discouraged and were looking for jobs and they couldn't find jobs. you know, those folks will respond to meaningful increases in wages, if they have a deficit of skills. they'll respond if they can get

skills opportunities, educational opportunities, so i think we can get more of those folks back in to the labor market. labor force participation has flattened out, which is very good news. it's not declining anymore. but there's nor we can do. tightening it up and raising wages will make a big difference. >> thank you, joe. seth, interesting ideas here. this idea that 180 to 200. what's the steady state? what should we be used to here? because everybody i read talks about a 75,000, to 100,000, is the right number for job growth that would keep the unemployment rate basically steady at this low 4.4% rate. and why do we keep doing 100,000 more than what most think is the steady state? >> well, it's because the economy is growing. at a moderate rate. it's not as good as we'd like. the reason people talk about 75,000 to 100,000 is that's the number of jobs you need to employ the average number of people who are entering the

labor market every month. so, if you're above that, what you're doing is, you're putting people who are underemployed or unemployed or out of the labor market entirely to work. we still need to do that. i mean, i think it's a little premature for us to say we're full, we can't take anymore. there's plenty of room in the labor market even with the tightness we've seen, remember the unemployment rate depends upon the labor force participation rate. and so if we can get that labor force participation rate up we'll stay at about 4.4, a little bit lower, perhaps. >> hmm. >> all right. seth, we'll see. you have a number -- you're not in the numbers business. steve liesman is the master of nailing the numbers. what's your number for friday? >> i haven't done it yet. i'll be sure to tell you -- i had a lousy month last month. >> it's tuesday. >> it is tuesday and everything's a little weird. i think we get adp on wednesday. on thursday i mean. >> you have a number, seth? you don't want to do that. >> no. it's too early in the week.

>> oh, too early in the week. all right. >> too much rain. anyway, all right. >> you never know. >> when we come back, a bear call on grand tech companies like snap, facebook and google. we're going to talk to bill smead about the names he's betting on and which names he's avoiding, too. as we get to a quick break a quick programming note don't miss lee cooperman live on the halftime report today. his first interview since settling with the s.e.c. that's at noon eastern time. "squawk box" will be right back. there's nothing traditional about my small business so when

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>> welcome back to "squawk box." it is time to take a look at what is working. our next guest is betting on millennial trends but not companies like facebook or snap. joining us is bill smead, ceo of smead capital management. has more than $2 billion under management. so bill, what is working? for millennials that's not the stuff we think of? >> well, first of all, the long duration investors like us are interested in what 35-year-old couples with two kids are going to do. because as wayne gretzky said, you got to go to where the puck is going to be. so right now, we're a society dominated by 28-year-old single people, and in seven years we will be a 35-year-old couple with two kids. so the composition of spending is about to change drastically in the next seven years.

simultaneous to that, andrew, is the fact that there is what john kenneth galbreath in a short history of financial euphoria called that pervading sense of excitement and futuristic high out there. i think the folks shared last week that tech has only been a larger percentage of the s&p for about nine months out of last 30 years. so, what you've got is a powerful urge to conform on the part of investors. so, warren buffett saying well if rates stay low, stocks are undervalued here. but he was invest nervous in 1999 with 6% 10-year treasuries, and 7% of gdp in profits and now we're at 2% interest rates and 10% profits. >> right. >> jeremy grantham on the same subject says gee it looks like we're in a permanently higher state of profitability. and then lastly when robert shiller came out last week, who's been bearish for eight

years and said he thinks the market can go up 50% because of these glam techs i thought oh, my goodness circle the wagons. >> grantham? did he -- he's been -- he finally turned? >> no, no, grantham is saying he's looking back at 15, 20 years of profits as a percentage of gdp at levels of around -- >> he scared the heck, i read something five years ago and the world is already supposed to vended by now. i think we're supposed to be at like zero on the dow. >> but what you have to understand is the -- the willingness to conform to this. right? for the value people to buy that glam techs, the pressure is high. because in the last two years, that's been 80% of the gain of the market. >> okay, bill let's just talk about some names, though, because i want tounder stand. i don't you don't like the glam tech stuff. you talk about millennials and american express. you used to say american express is your father's credit card.

you say no i'm assuming. >> it's the number one card for 40% of the millennials. what's your number one card. we like lennar. we've got to build a lot of homes in the next ten years. we're drastically under-home and it's showing up in the way people, 12 people bid for a home when it comes for sale. we've got to build a lot of new once. we like lennar. they hold more buildable lots and options on more lots than any company in the united states. we like bank of america. if the millennials become 35 with two kids they do a lot more mortgages, a lot more car loans, a lot more everything related to using the bank in a way they haven't before. and ironically the big banks have control of the millennials because they have better technology because they can spread their customers. >> so you like berkshire hathaway? >> yes. >> make the case and why is it different than owning the s&p? >> oh, that's simple, there's a number of ways they get at the

home building and the household formation. first of all, they own clayton homes the largest maker of homes in the united states. they own the railroad. if you watch the railroad cars now, you're seeing wood that's finished, it's going to build homes across the country, and five years ago those same railroad cars had logs that were going to china. so the wood is moving the opposite direction now to build the homes we're going to need to build. you know, the -- insurances, the higher rates from borrowing money. buffet would love to have higher rates, and higher spreads for bank of america, for wells fargo, for a wide variety of insurance aspects of his business, higher interest rates would make them much more profitable. >> okay. bill smead great to see you, sir. >> thank you. >> thank you. when we return we find out what jim cramer has jim fired up this morning. he'll join us next. then later thrilling finish to this year's indy 500.

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jim cramer at the new york stock exchange, "wall street journal" says the most important parts of tax reform are doa or on life support and the winner is the stats yo but grover norquist said something is going to the go done. does it matter, jim, to the market? >> i think it does. something has to get done even if it's to go down to 25% on the rate. there's plenty of companies i deal with 35% to 40% and you need to see that, the domestic guys who have been hurt because of slowdown in retail. they're still taxpayers so not losing money. i listen to grover and i thought wait a second, if everybody thinks it's doa it's better but they have to get something done. otherwise what happened this year and there's enough momentum among people to give a nominal rate, not a gigantic decline but something to make it so that they feel they did something

this year on taxes. >> that would justify 2,400 or justify something much higher on the s&p? >> no, justify a little bit higher from here. i wish we weren't so narrow. i come in every day and it's nvidia and lam research up. the same tech stocks over and over again. we need to see transport rally and industrials that are rolling over to come back to life. the financials you're talking about rate hikes. they are so necessary but in the end if we get some tax reform there's something to look forward it. other eyes it will happen in 2018, that's not the end of the world but wouldn't it be great to have something done? i mean, something? >> you know what else is up every day, jim? not for nothing, comcast goes up every day. i've got this -- you see my screen, one of the screen with 1,000 stock quotes and i don't have any, because we don't -- >> he's lying. i see mondolese, mcdonald's,

costco. >> i'd like to see that. >> comcast is up with mcdonald's but comcast is not expensive on earnings. it's of the top five stocks in the nasdaq, it's the cheapest. >> watch it, though. i do see it i happened to glance not on purpose but it opens up and it usually goes up during the day, recently. >> it's got cash flow and profitable growth. lot of companies have growth and no profits. i like profitable growth. >> all right action jim. >> thank you guys. >> parent company of our network, in case anyone doesn't know. >> indeed. >> thanks, too. takuma sato makes history on the racetrack, the winner of the indy 500 will join us on set, right after the break.

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that's real etf innovation. flexshares. built by investors, for investors. before investing consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. takuma sato taking first place in the indy 500 this weeke weekend, the first japanese winner in history marking a milestone for the race, joins us now and ringing the opening bell at the nasdaq in a couple of minutes. this was, doesn't always happen this way. you passed the previous winner, castroneves. >> he won three times and going

for the fourth. >> he was going for four and he was leading. >> he was leading. >> five laps left out of 00. >> yes. >> you passed him then. do you remember the instant you passed him? >> yes, i remember exactly what happened. >> how'd do you it? did you downhshift? >> no, it's always acceleration, scrubbing the corners the speed will reduce. when you have a big tow, it's the drag so you get in the stream and acceleration and you overtake. >> because i wouldn't have let you pass me, if i would have been him that would have been a good time to not let you pass, right? he didn't want to let you. >> he didn't but the thing is though it's a big cornering and we are on the absolute edge and if you basically are leading you have enough downforce but if you are following, you have a less drag whereas you have less downforce so it's very difficult to follow. >> this makes up for 2012. what happened in 2012?

do you remember what caused the accident? >> 2012, franchitti leading the race, lap 199, the final lap, going to turn one, i was on another big tow, i slipped inside of him and i go to the corner and obviously he defend his line and i was going very low and putting on the tire on the white line, which is a lot slippier than the asphalt and i started to slide. >> god almighty that's incredible. >> congratulations on the redemption. it's amazing. >> becky asked a great question before we started, so you were a formula guy for seven years. >> yes, seven years in formula 1. >> you go to the windy series and you won in long beach. >> yes, 2013 long beach grand prix, that was a special moment for me. >> that must have been good, too. >> the indy cars it's more about the driver than formula one. >> basically the formula one every team has to build their

own car design so the big manufacturing teams become the strong team and the small team is just the difference is enormous but indy car is two engine manufacturers. other than that, the team has to tune in the same equipment. there's a lot more strategy. >> who was the guy whose engine blew and he was in the lead? who was that? and when a guy's engine blows, they were applauding but he might have won but is that his fault or can it just happen if you. ush it too hard -- >> nowadays the driver cannot break the engine because the electric controls. used to be the stick shift and you downshift over the revving engine but if you try to force them it's canceled electrically. so it just happened. >> how much does everybody pay to be on your shirt, does firestone turn more? >> bigger ones pay more.

>> how many you have, about a dozen? >> well the biggest one is the honda and the panasonic, yes, and this is the indy car series, verizon is for the seires is league sponsorship and i have a personal one here, too. >> you got to go home because you're going to be mobbed. >> it will be ghmega, international news for japan is huge especially japan has been suffering from 2011. >> right. >> the tsunami and earthquake. >> thank you. and concongratulations. we'll see you doing opening bell. right now time for "squawk on the street". ♪ >> good tuesday morning. welcome to "squawk on the street". i'm carl quintanilla with jim cramer and david faber at the new york exchange