dream come true or disgusting. it's a blend of mayo and ketchup. it's only available in the middle east. it's been popular for years in utah it's called fry sauce. >> all right time to go make sure you join us on monday. "squawk on the street" is next be warned. good friday morning. welcome to "squawk on the street." s&p looks to go positive for the year at the opening bell futures are up stocks up around a three-week high earning seasons kicks off with the banks. markets watching washington. europe is looking for 1 to 2%

gains for the week and the tenure up to 8284. the bank boost for stocks. futures rallying after the banks beat expectations. plus president trump asking larry kudlow and other advisors to look at possibly reentering the massive pacific trade deal and elon musk said the company will be profitable and have a cash flow positive third quarter. first, jpmorgan, wells fargo, citigroup beating expectations and jp's earnings released and the bank's businesses are performing well across the board adding that the global economy continues to do well and remain optimistic about the positive impact of tax reform in the u.s. as business sentiment remains upbeat and consumers benefit from job and wage growth 18% tax rate versus 23 a year ago. >> right. >> and they see an effective rate of 20 for the year. >> look, you know, it was a

fantastic quarter. i think that this return on the equity buying for corporate investment bank at 22% i never thought some of these numbers could ever happen. it's a remarkable quarter. someone will find some flaw maybe investment banking give me a break. this is what happens when the economy is on fire why and why people felt if we got to earnings season we can stop focussing on amazon and u.s. postal service. >> there is a dispute 11 cent dispute about mark to market accounting we're going with the higher number. >> right. >> in general between the tax changes and now the trading volatility, up 13. i saw a golding locks reference. >> yeah. look, i mean, how does it happen versus campbell soup which goldman sachs puts a higher price on i know and i know david and i used to discuss this we never thought the numbers could happen. >> the roe in particular and the

corporate investment bank. listen, we were talking about reaching double digits would be a good thing would be a real sign of progress and here we are well above that. >> i think we'll see a strange change in how much we pay for banks versus how much we pay for products. >> right you do. >> you think so? >> yes the reason i mention this is because the goldman note is so jarring. >> wait, what? what are you talking about >> campbell soup can't pay. >> oh. >> i'm saying that's a consumer package good company versus like what i -- cit bought back 7% of the stock it's unbelievable for this division i look at the numbers i'm blown away and i think why are we paying so little for the banks when we know that we're in an interest rate cycle and they have very little loss. you can't tell maybe from the

efficiency ratio they don't have the deadwood which are regulators. >> yeah. wells is a special story. >> yeah. >> because they do warn they might face some hefty payments to the cfpb and the occ. we know they underperformed over the past few months. they might need to revise preliminary results on the cross selling investigation. >> everyone was jumping up-and-down about how great it was. unfortunately if you read the release, it was a hinge to jumping up-and-down. down 86 million. average deposits $1.3 trillion down $2 billion. these are not the numbers you want if you're a bank. these are numbers that say, you know, the government has come down and starting to hurt our business they'll come on tv and tell a good game. they tell a good game. but this is not the kind of numbers. these are numbers which say, you know, it's beginning to get to us people are starting to realize maybe we're not mr. clean

anymore. so i did not like wells' numbers. i didn't. >> you carve them out of your enthusiasm >> i have no enthusiasm about these guys i think, you know, i'm not saying tesla is a better balance sheet, despite the fact that elon musk might argue that. >> yeah. he's arguing with anyone who says he needs to raise capital. >> i know. remember he's saying, you know -- melissa was saying something interesting. he's not saying he won't he's saying i don't need it. >> they're going to be free cash flow positive in the third quarter. >> yeah. that's tesla. >> we get campbell soup in there, too. >> do you see that the fcc will come after him if they're not cash flow positive >> no, i don't. >> i don't either. >> no. >> we're going to get to musk and the ongoing battle with the media. in this case, the economists. >> he called it boring i thought it was electric. >> i know. and to say these things in a supposed quiet period?

right? >> he's showing his tendencies the bankruptcy tweet on april fool's day. >> that was hysterical. >> and the way he structured it. >> right. >> and he's saying certain models like are sold out already that he hasn't created white house said the president has asked his chief economic advisor, larry kudlow, and u.s. trade rep to take a look at whether the u.s. should reenter the transpacific partnership. exiting the tpp was one of the president's big talking points. >> are you opening up the door to reopening tpp >> i'm only saying this, i would do tpp, if we were able to make a substantially better deal. the deal was terrible the way it was structured was terrible. if we did a substantially better deal, i would be open to tpp. >> tpp members today gave an indication they have no interest in renegotiating that deal. >> yeah.

i first saw this i thought it was fake news. no way the president will go with tpp, but many people said it he's heard it from the business community. and i'm sure mr. kudlow, our former colleague, that it was a strong way to actually to isolate china as to -- >> yeah. >> it's very much unclear -- even when he made the comments to joe some months ago what would he want to see changed about the structure? i don't know what the answer is there. >> i was mystified. >> it would be a positive, if, in fact, it were to happen, jim? >> if you had a coalition of the willing that did circle china. >>well, we did we were in that. >> with all due respect -- >> we've been good friends for 25 years. >> yeah. >> chairman xi -- are we going to one day see chairman xi

i see chairman because he's for life oh, no that's the former -- >> the president's tweets about comey today are jaw dropping untruths slim ball, which the market is probably less concerned with than other things but we're watching that, as well here is politico about tpp they talked to mike froman it's designed to incorporate us back in. it purposely left the door open and created an incentive by saying these 20 provisions are particular interest of the u.s. will go into effect if the u.s. joins the agreement. it sounds like there's a path. >> yeah. i guess so one of the things that, i mean, germany is such a stronger position in terms of current trade deficits in terms behalf they sell. i don't blame them. >> you're talking away from tpp? >> yeah. >> the europeans conceivably will benefit, if, in fact, if things even get more heated with the chinese.

that's, you know, and china is making that clear. europe will potentially benefit. >> remember president x circumstance calling for a lower tariff on u.s. importing cars than we have to pay for our cars that we export to europe and that's going to be trade tension. that's actually very helpful for tesla, remember, they're the ones who get the tariff. >> uh-huh. >> pretty interesting. i read it in "the economists." now i want to read comey's book and subscribe to the "economist?" >> yes. >> good. jim, we'll go positive for the year on s&p. >> right. >> yesterday was the lowest volume day of the year how much of this is real >> i think that today is going to be very real. i think the banks are going to have big rally yesterday was. i'm not saying it was phoney but we had a lot of tech stocks up gia huge yesterday it's odd to see them up.

the first hour of trading ten years ago was more than the trading now. even with a stock like intel i do think that something happened here. you look at the atf money coming out. there's just not a lot of interest in equities i think today could be a day you see people come off the fence and buy jpmorgan. >> gold had the worst day in almost two months. some of the worries, obviously, are peeling off. you go along with that >> i think that the president makes it so difficult are they going to tax syria or this weekend? attack or not? is mueller going to be fired there's a lot of optionalty from the president. we don't know. is syria going to be attacked this weekend >> it's exhausting >> i don't think you'll do anything other than watch this i'm telling you, i'm going to be gripp gripped by news flow this weekend. there's too many things he may or may not do this weekend

one has to happen, i think there's too many things. there's so much in the air. >> one of what >> firing somebody >> do you think that's a real possibility? >> i do. >> firing rosenstein is a real possibility according to the wrea"wall street journal." >> he has to polish up his résume. >> yeah. a lot of people in the justice department and fbi, unfortunately, had to do that. >> i don't want to say i worship the justice department, but they're the best people we have. not necessarily with political jobs. >> it doesn't sound like we would see futures down 600 if it happens. >> when they fired cox it went down. >> did really? >> yeah. very big bear. >> so a crisis does mean potential correction >> yes in this case. >> you think so? >> if you use history.

you many a bear market was cox was fired. >> didn't you have the oil embargo in there with the war in the mideast? don't you think that did it? >> i mean, the '70s were a mix. >> i have a feeling the october war in '73 may have had something to do with it. >> i only know what the facts tell me, david when we come back on this, we're going to talk to the former speaker of the house john boehner. joining a board of a company in cannabis look for that at 10:30 a.m. this morning. as we said, major averages going for the second weekly gain in three and the s&p could break out to a profit for the year at the open back in a moment think your large cap equity fund

has exposure to energy infrastructure mlps? think again. it's time to shake up your lineup. the alerian mlp etf can diversify your equity portfolio and add potential income. bring amlp into the game. before investing, consider the fund's investment objectives, risks, charges, and expenses. read the prospectus carefully at alpsfunds.com/amlp when larry kudlow talks about a trade coalition of the willing, how do you see one? >> how that is done. what another one does. that's a different conversation.

we're not quite there yet. >> larry kudlow is wonderful i want for him to be right i worry what the second half of the year is going to look like finally somebody able to convince the president that tpp could be a you know what's awesome? gig-speed internet. you know what's not awesome? when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes.

and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. shares of tesla up in the premarket. elon musk hits back in a story in "the economist" saying the automaker needs to raise $3 billion in capital this year he replies back with a tweet musk since deleted the tweet "economist" was referring to a

jeffreys note. it wasn't to something they made up. >> okay. >> well, what? is he drinking >> david >> late at night what is he doing >> are you giving him the test >> i'm vising against that when you're a man in a position of power like that do not drink and tweet. >> you do not know whether he drank. >> i do not. >> that's unfair unfair >> do you know what time it was? check the time on it. >> i don't know. i got up at 3:30 and started tweeting maybe he was going to bed at 3:30 >> i still see it up on twitter. i'm not sure why we say it was deleted. but still live as far as i can see. >> but, you know, tesla, the goldman sachs note, to me, which said that remember goldman sachs have done a raise for tesla. never going to get anywhere. >> he's on the record numerous times now.

he's, you know, we're going to sit here and say he was dead wrong. >> but he doesn't need to be ceo. remember he could move on to his -- >> yeah. he could move on to his rocket. >> yeah. or so many of the other efforts he has it's incredible. >> right. >> he's exciting, to say the least. meanwhile, he's taken his publicity to broadcast media talking talking to gayle king on "cbs" about production of the model three and the degree to which he's working hard. take a listen. >> it will never be perfect. >> auto pilot will never be perfect? >> no. >> nothing in the real world is perfect. but i do think that long-term it can reduce accidents by a factor of 10. so there are 10 fewer fatalities and tragedies and serious injuries, and that's a really huge difference. >> so full court press. >> yeah. that's the ratio i have affiliate speaking with a lot of people in the antonymous

driving. it saves that many people. right now the world is like a 747 goes down every day in terms of thfatalities i'm talking about worldwide. he's right about that. >> do you think his tweets run afoul? or is q3 so far out? >> i think q3 is so far out and regular fd is a question about enforcement. you say how much the consumer protection bureau is enforcing, maybe you wonder whether it will be loosely enforced. >> it's an fcc issue not just a protection issue. >> no i'm saying the government -- if you look at the bank earnings. i'm saying look at the bank earnings there's not a lot of prosecution. it's regulation light is what i'm saying you bring out the numbers, david -- >> i get that. saying that is not going to result in an regular fd

violation. i don't know. >> no, they are. i think it's good there but i don't think there's a need from the president that say i want a heavy-handed regulation. when the president spoke yesterday, one of the first things he said is i'm rolling back more regulations than anybody. he went back to roosevelt. fdr. >> apparently the post office's finances are going to be more closely examined. >> amazon can't wait to get out of that contract. >> you've been all over this. >> because amazon since then developed their own method of delivery amazon is one of the best customers, maybe the largest customer i predict that the regular stamps that people buy will go up rather dramatically, if they lose their contract. i think that will be a bummer for most americans but amazon doesn't particularly care you know, they've got they're ready. this was also sunday i'm dealing with real facts, which i know are not nearly as fun as other things, but i've done a lot of work on this

contract and they're ready to walk away, if they could walk away. this is amazon they have a million ways to deliver. initially not everybody wanted to do that contract. now anyone would want the contract because amazon is so important. only 3% of fedex is amazon fedex wouldn't mind being in that xpo lo jigistics this is a lot of contract that a lot of people want except the president. the former postmaster general said it was a lucrative contract he could be, what, an untruthful slime ball you don't know, david. >> like crooked hillary? >> well, david, this is the paper of record. you still cling to the "new york times. you untruthful slime ball you. >> i cling to my phone what is the record for me. >> i cling to mine. >> your watch. >> we'll mention apple later today. count down to the opening bell

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welcome back to "squawk on the street" spring finally arrived. it will be gone by sunday. >> supposed to be 80 tomorrow. >> yeah. and 45 on sunday you don't want it for too long. >> tomorrow it's global warming and then sunday anti-global

warming. >> invidia it's up 38 points from sit ron's target price because it's up. you should understand business is going away for me if you're buying on that, you're wrong. >> why is it going away? >> chinese have a better method to better card, so to speak, to mine an invidia is a small business if you're buying it because the theoryum is going up if you're buying it now i'm calling you a chowder head like mo called curly i'm issuing a challenge because jenson wang happens to like what i named my dog okay so puff! i need some puff this is a tv thing a gesture. citron look me in the guy and short me

my dog's name is invidia i named it after the best performing stock of our era. don't buy invidia because of intherium. >> jenson wang was saying it's all systems go for economists driving. they're doing incredibly well on gaming but the major era is machine learning and data center so that's why you own invidia. not because of intherium people have been bidding it up because of the rise of intherium. don't buy it that's fake news we have an opening bell for this friday coming your way after this

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intherium. the opening bell in just under 90 seconds on this friday morning. it will get busier next week, obviously. i was making a list of things we're watching out of d.c. nafta, tpp, any response to syria, mueller/rosenstein, the comey response there's more there. >> yeah. it's exhausting. this really is the yang and yang of the world i think the euro will be good. you have all these things that could go wrong and as long as they don't go wrong, i think we can go higher. the moment i say "go wrong" i should qualify that. i think the head of syria is a war criminal i'm not saying go wrong and take them out the news flow out of washington it as powerful as the news flow out of wall street particularly nafta the president was adamant we're going to get a renegotiated nafta. i'm shocked if that deal is changed radically. i would be shocked >> let's get to the openin bell e s& thetom our screen mcdonalds franchee[ opening bel] rougick and thin, man. >> you bet. >> yeah. and i got to tell you tomorrow the playoffs start this is the year of philadelphia, as you said. it's the happiest city on earth. and i love that. >> oh, investors in netflix might be happy, as well, deutsche bank upgrades they take their target from 240 to 350. >> this quarter better be the greatest single quarter in history given the fact that wells raises its target price. it will be a great quarter i think that one of the stories that is percolating underneath is that you could -- they could have a price increase and it would mean nothing there is just the elasticity of

this is incredible it will be a fantastic quarter if they want to raise prices, i think the world will take it amazon prime and netflix, i think, are the two bargains that are left that are really unbelievable. >> you can make an argument on prime given its the movies and music. >> yeah. >> and, of course, the service itself. >> yeah. >> the journal -- the dow jones has a piece that comcast, our part, will bundling in netflix into cable tv starting thi month. i saw yesterday hulu and spotify are offering a joint bundle for $12.99 we're reversing the al cart movement. >> that's not a bad price. >> i got to look into that. >> $14.99 for the family plan on spotify family that's well below. i would assume that's

individual. >> i'll have my team get back to you. >> thank you. >> i love these. because they're all bargains i think spotify figured out what i want to listen to six months from now i can't believe how right they are about everything i want. it's annoying. >> spotify. >> same thing as netflix netflixpushed three things to me that i wanted so badly. >> spotify uses a technology company. >> yeah. uses ai. i haven't looked how the stock is performing. 150. not bad. >> yeah. >> we don't really have a price to say what public at 132 is that preference price they wanted to use that first it did trade above 160. it's hanging in there. >> yeah. i think it's a great buy i think they can raise prices. i talked about ai and netflix the other day, know what they pushed me? they pushed me the movie about al alan iverson they got it off a little bit

these companies know so much more about you than you know about yourself they should be on capitol hill congresswoman, i don't know whether you're talking about my business model the whole call is devoted to the great business model that was the most disingenuous part of the testimony. >> congresswoman, my business model? >> it was about the business model. >> it is he made it clear it's about selling advertising. >> right i'm saying the congress people were ill informed. it was painful. >> it was painful to watch. >> it was. isn't it often >> yeah. >> when we're well informed about a issue and they're carrying the hearings and we watch the questions. and, you know, other than a handful of senators, occasionally. >> i don't think any of those people know how to program a vcr. >> let's hope they're still not. >> yeah. another morning in which all the dow components are trading in the same direction, in this case, green. >> i think a lot of people must have been getting short betting that one of the things that the

president might do is launch missiles or fire the ag, none of these things have come true. and then the larry kudlow olive branch that threw everybody off i think the bears are struggling they're struggling here. because the narrative out of washington has been okay it. >> so your point would be it is washington that you would cling to, if you were bearish. >> absolutely. >> it has nothing to do with the overall fundamentals of the economy or the earnings. >> dead right. >> or increases in rates that will cause a change. >>well, look, the banks benefit so much. we might see other numbers -- >> right. >> they don't have raw costs going up a lot of companies have raw costs going up. >> yeah. >> but, you know, i'm seeing stuff about food costs actually come down. i guess what i'm saying is that there's a lot to like, if you make the quarter -- if you miss the quarter by pennies, like the case of pnc.

they are absolutely getting hammered expectations are high for some goldman sachs is telling me it moved up so much credit card volumes are amazingly strong that is terrific for visa and mastercard vitamin tech i was talking to david earlier about vintech is on fire. credit cards are on fire there's a lot of stuff that is good i will say that washington as a dwech 2017 was a tail wind and washington in 2018 is a head winter that's how i feel. >> i want to get to a faber report this morning on something we've followed very closely, jim, of course which is the continued anti-trust review from the chinese authority known as mofcom of qualcomm's plan to buy nxp. semiconductors for $27.50. the internal date for the conclusion of that review, as it

currently standards, was april 17th is april 17th. today is the 13th. what is going to happen? well, what is going to happen is qualcomm is going to pull and refile its application for approval on monday and that will have the affect, it would seem, of delaying things yes, to a certain extent they can move very quickly dell emc where they were in phase three. three weeks later they had an approval for their deal. in this case, it appears that for conversations, again, between qualcomm and the anti-trust authorities, that there are no substantiative issues they are dealing with here in terms of an ask from mofcom and anything along those lines. they have been dealt with, and dealt with in my entirety, according to people familiar with the situation but given the overall tentative relations between china and the

u.s., and the increasing rhetoric and potential trade disputes in the offing the timing has gotten pushed so they are going to refile with the hope that in the next couple of months they are going to be able to get the approval they've been seeking for quite some time from the chinese authorities nxp is willing to extent the merger agreement, not for six months, which is the full window of time that mofcom would have to reveal the deal but most likely 60 days is the expectations there we've been waiting for this. they're through the remedies and process. everything that needed to be done it's still hostage to a certain extent to what happens in between the u.s. and china in this trade dispute now it is may we're expected to have something in terms of legislation or at least a signoff by our own body, to a

certain extent maybe things calm down enough that the chinese feel they have enough clearance they can say now it's good. as we pointed out many times, were it to be turned down, by the way, qualcomm said if you're going to reject us, do it now. they didn't. if it were to occur or simply to run out the clock, which seems unlikely, it would send a chill for any technology deal. because any deal of size needs mofcom approval. the chinese are well aware of that they were not ready at this point. by the way, if broadcom hadn't come around, this deal would have been done a long time ago another deal you talked about toshiba. >> what is going on? >> that has been delayed as a result of the larger issues dealing with the higher ups. not mofcom but people higher in the government they have the third week of may and they hope they can close it, as well, before the third week of may again, there's a belief that

everything has been agreed upon. but these are sort of almost held hostage to the larger issues going on. >> boy, are you right. think about broadcom they announced a buy back for 12 percent of their company. >> right. >> it's most inquisitive. >> when you think about the companies in front of mofcom or toshiba, apple, c-gate it would send a chill beyond belief in terms behalf it would mean for m & a. >> it would hurt investment banking and m & a. >> it's interesting to look at nxp on the news we're sharing, only up 1% and still $12 below the price. again, it's going to be weeks, potentially. they are expected, as i said, to extend the merger agreement for a couple of months >> it's important people realize nxpi is not as high level

technology nearfield communications but it's auto motive. >> right. >> it's not like lock box defense. i'm confused with the trade tensions that this continues to be delayed. >> yeah. >> then there's a separate story having nothing to do with this reported by our colleagues at cnbc.com about the continued efforts of paul jacobs, the former chairman to try to put together a buying group for c l qualcomm, as i've said previously, the chances he'll be successful in the effort seem very, very small but he seems to be sharing with people his various efforts there have been reporting from the cnbc.com, all accurate, i'm sure some of the efforts underway i think there are quite a few people that are doubtful he'll be able to put together what he needed not to mention stiff use turned

down the last transaction reliant upon they hated the model that would hurt the ability to make investments. that's one of the reasons. saudi arabia and monies and another reason soft bank is another reason. who knows. >> total agreement with you, david. that's not happening. >> okay. >> jim is right about the banks. jpm down almost a full percent and pnc down 3%. it's focussing on the ib shortfalls we'll find out. >> we got off the call the jpmorgan call. it was short and it was just with the cfo today he's with clients in boston the main headline from lake around the training. trade performance, of course, was up year over year but probably not as good as people had hoped for jpmorgan up about 7% for citi up a couple of percent. clearly volatility up sharply in

january and february it it remains hopeful but hopeful it'll be up all year but in march and april it's a bit below that january and february level a few other take aways just from earnings generally we saw interest-related margins, net interest margins up, but net interest income really flat because lone was tepid we didn't see the pick up driven by the tax reform bill return on equity very impressive for jpmorgan improving for citi a little disappointing for wells fargo. another headline in the wells fargo release. we heard the possible $1 billion fine relating not to cross selling scandal but the follow up issues in auto lending and mortgage interest costs. they alluded to the possibility in that release coming to us around $1 billion with the occ and cfpb, which would be a record fine for them, if it was,

indeed, settled. >> thank you, willfred investment banking loan growth? >> i think people backed out the tax rate the tax rate was 18. citi was 23. but i think these are harsh punishments right now that the market is putting on these these are cheap. i'm sticking by my belief to buy jpmorgan citi was clear the buy back 7%. you're selling them stock at $61 tangible they're buying here but, look, i guess people feel like they rent too much. these are bargains with the exception of wells fargo i think is up or down. i don't want to buy a company with down numbers and then vent netted the earnings per share may be up but that's not what we're looking at we're looking at line by line. i don't trust the market here. >> jpmorgan along with boeing one of the components in the

red. >> a 5-1 advancing declining stocks we're off the highs now. but we're up almost 3% for the week, folks. it's the best week we've had in five or six weeks. take a look at the sectors it's typical for this week, the right stuff is moving. tech and financials there's still up fractionally. energy has been a market leader. most of these sectors are up 3 to 5% this week. these are market leaders you want to see. energy -- we have new highs. when was the last time we saw new high in energy stock we had a bunch this week conoco had a new high and darko petroleum is in a new high the refiners, valero is up at a new 52-week high a little bit of leadership starting to poke out here. ea earnings, of course, on jpmorgan and citi

look at citigroup. whoa jpmorgan 25% increase in trading revenues from equities this bodes very well for goldman sachs and morgan stanley because those companies even more of their revenues are from trading and equities as well as fixed income so gald man is up. morgan stanley is up a little bit, as you can see. it's a good week for the banks, though, overall. sell on the news you shouldn't be surprised it happens very typically on the day jpmorgan reports here. let's keep an eye on what the volatile till means for the rest of wall street it's been good news. the exchanges have been beneficiaries of the trading volume at least in february and part of march here nasdaq had a good year cme had a good year. i.c.e. is up maybe that's understandable. we'll hear more about this market volatility, how it's helping the street out next week the e brokers will

start reporting. charles schwab will be reporting on monday. but they'll had a good year outperforming the s&p, which is basically flat schwab is up 2%. they get less of their revenue from commissions but bottom line we have a number of things that are helping the trading community as well as particularly the e broker age community. we have a lot of market volatility believe it or not, trading in bitcoin-related stocks and marijuana stocks in january and part of february was huge. it was a factor helping things out here we had higher rates, remember, the e brokeage firms more on what is going on with the e brokers and high volatility and whether it will continue i think the important thing here is we have seen increased volatility for the last month and a half we're not seeing increased volume since the middle of

march. now that's very important because these companies are going to rely on that increased volume not just volatility. back to you, guys. >> bob, thank you. when we come back, bob mentions pot john boehner will join us to talk about not just the former -- not just his former experience as speaker but the business cannabis along with everything political today take a look at treasuries with the dow up 96. is the monolithic view of emerging markets obsolete? at pgim, we see alpa in the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry.

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this morning on "squawk on the street," we have an interview you do not want to miss we'll speak with former speak of the house john boehner we're going to discuss that along with developments in washington that's coming up in just about 40 minutes it took some people by surprise,

his tweet this week. >> very, very exciting constellation brands owns 10% of a cannabis company and the stock -- canadian cannabis company. preparing for the idea that worldwide, it is going to be legal and, what can i say. no one smarter than rob sands who runs constellation so i think that it's going to be a good business. not yet in america, obviously, because our attorney general has really been pretty, say, tough on it. i know that constellation does not intend to do anything in this country yet but it's been a huge win for constellation already. so maybe at that point, whether it gets a stake in the company -- >> we'll ask the speak ber this. how do you price out the optsionality of a change in federal policy that would make this business a lot more difficult? >> i think the people are betting on a five-year plan. betting the current regime will be overrun and not able to stop

it at the state level. there are a lot of ways that, look, i'm not familiar with exactly why they're -- why canada is so front and center, but i know constellation doesn't expect anything to happen in the u.s. for at least -- for multiple years because of the current regime >> it's going to be interesting. we hope you'll join us for that. dow up 81. we'll get stop trade with jim in a moment we'll be right back. you know, it's made me think, i'm closer to my retirement days than i am my college days. hm. i'm thinking... will i have enough? should i change something? well, you're asking the right questions. i just want to know, am i gonna be okay? i know people who specialize in "am i going to be okay." i like that. you may need glasses though. yeah. schedule a complimentary goal planning session today with td ameritrade.

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now you can get it, too. welcome to the party. he's here, he's there, this is a question from "jeopardy." was this last week >> i think it was. i got a number of e-mails and texts last friday, i think it was. >> wrote and then the roof caved in how this street's greed and stupidity brought capitalism to its knees. >> wall street >> the answer doesn't require you to have any idea who i am or the book because, let's be honest, nobody probably knew the answer to either one of those. >> i just say congratulations. >> but i did get a lot of -- nice feedback saying you've made it now >> let's get to jim and stop trading. >> starbucks really cuts numbers dramatically and the stock hangs in there a lot of disconnect between the

research today and what's going on in the market but this was, i felt, a very negative note comparable stores rebound. competition intensifying they're making the number with cost cuts. a verynegative call and yet th stock is up. either the news flow is not being digested right or people don't care can't figure it out. >> they don't care about jpm either >> the market is being a little erratic. slime balls. >> although volume continues to be low >> i am surprised. i thought that today people would come back to work. they're just not coming back to work they're watching a lot more sports because the mets are 10-1. >> yes, they are >> congratulations >> thank you i had everything to do with it i love when people congratulate the fans >> it's all on you >> it is all my rooting. >> what's tonight? >> the under the raisar cybersecurity. this is still the hottest area david introduced it to us.

cybersecurity is north korea it's russia. and it's china state-sponsored cybersecurity. three of our really great allies chairman xi is a great friend of the president. president putin was at one point a friend of the president and north korea, i don't know about that dennis rodman spent some time there and he spent time on "the apprentice." see you tonight and monday "mad money" 6:00 p.m john boehner is with us to talk about the business of cannabis, politics and a lot more dow up 62. pnc leading the s&p down today back in a minute nobody's putting their money into equities. they're not investing in commodities or fixed income. what people are really putting their money into is what they hope to get out of life. but helping them get there requires a real refusal to settle for average. because when you approach investing

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looks like he hooked it. we'll do anything... takes after his grandad. seriously anything, to help you invest for the future. ally. do it right. ♪ welcome back to "squawk on the street." i'm carl quintanilla with david faber and sara eisen market trying to hang on to initial highs but the banks are selling off as they post q1 earnings results we'll watch that closely our road map begins with bank

earnings earnings season officially kicks off. >> and then trump tariffs and tpp. why the president is changing his tone now on trade. >> and finally, former speaker of the house john boehner is with us on marijuana legalization, paul ryan and, of course, you can imagine a lot more >> first up, it's a big beef for the big banks. citi, jpmorgan and wells fargo out with better than expected first quarter results. on the phone this morning, gerard cassidy, rbc's head of u.s. bank equity strategy. good to have you withous this friday gerard, why the less than enthusiastic response. we know they're not always rewarded on the print. >> very good question, carl. i would suggest to you that what we're seeing is there's some concerns about the deposit maybe moving up faster than expected this year but the quarterly numbers that we saw were very good today particularly for the capital market players and trading --

equity trading numbers for citi and jpmorgan were strong wells fargo's numbers had a lot of one-time gains in the numbers. back them out and wells' numbers are being impacted by the regulatory problems they're experiencing >> can you just elaborate a little bit on what the problem is what investors seem to be worried about and who is most at risk of that >> i would say that the net interest margin most people have the net interest margins for the banks moving higher this year. and if the deposit baiters which are essentially the amount of money that the banks pass on to their depositors every time the fed raises the fed funds rate and that percentage goes up and impacts the revenue growth if we don't see the loan growth accel raerate from here, you'lle pressure on revenue. that's where some of the concern might be coming in even though at the start of the trading this morning, the stocks reacted very positively to the numbers that

came out so far. >> yeah, fred, also some who thought there was discussion of things on the call we didn't see in the slides. things like charge-offs. how acute are gerard's potential concerns for you >> i don't think the -- i think the margins are behaving very well this quarter overall. we got a benefit from this libor movement we saw. my bigger concern is what gerard mentioned as loan growth it continues to be quite stagnant for these big banks without loan growth it's hard to get other up side to the bank stocks i think that would be the bigger concern. credit remains an exceptionally positive backdrop for the bank stocks that can't last forever. >> why do you think -- we've been asking this for several months now, but in a deregulatory -- with this deregulatory tail wind, why is loan growth less than some

expected >> the big picture you think, wow, the economy is picking up everything should be good loan growth when you start to break it down and look at mortgages. rates are up commercial real estate, that's slowing. when you break it apart you start to see that we don't really have a sector where you'll see a big bump in loan growth >> you think it's more a demand issue? >> absolutely. demand the only way it can change on the supply side is if the banks loosen up on the credit standards. i don't think any of them are willing to do that >> it does raise a question about those tax cuts we saw go into effect. on one hand, the big banks seem to benefit from paying lower tax rates. but shouldn't that increase the demand for loans among small businesses and everyone else the bank deals with if they're getting better tax rates >> i think it will what we're hearing on the calls that we've had so far this morning is that pipelines are building up. we heard that earlier in the quarter and a number of different bank conferences when you think about it, going

into the fourth quarter of 2017, i'm not certain many people were confident we were going to get tax reform as a result, companies already set out their capital spending plans for 2018 tax reform came in it takes a little while to change your plan so if we're talking in the fourth quarter of this year and loan growth remains subdued, then we'll have a real big problem. but i expect it to accelerate as the economy accelerates later this year. >> i assume you do not expect volatility to return to levels of last year and that's going to continue to help trading >> i think so. i think you put your finger on it, carl this year, the volatility has, obviously, picked up we saw that in the equity numbers. jpmorgan's equity trading number at a record level. citi's was over a billion dollars which was a strong number for them.

if the volatility keeps up we're seeing the derivatives trading and prime brokerage have benefited from this increased volatility >> how does this set us up for the other banks. bank of america, morgan stanley, goldman sachs? >> we like morgan stanley at this point in time equities are especially strong if you want to play the equity strength move into morgan stanley we like that setup a lot b of a will be fine. we continue to like jpmorgan and b of a and the stronger bank are going to continue to get stronger i would say b of a and morgan stanley are set up quite well. >> gerard, what are your picks >> we concur with that we're certainly big believer in bank of america. not only the merrill lynch business but they are a very large consumer bank and we saw some good numbers out of citi's consumer business. jpmorgan's consumer business was strong particularly in the credit card area on the processing side. so i think bank of america could

benefit from both the merrill lynch strength in equity trading and other types of trading activities, plus the strong consumer franchise and they also should benefit from a bigger chargin. morgan stanley very strong in the equity trading area. so we anticipate we'll see good numbers from these banks when they report next week. >> fred, one last question on wells. does it continue to just have to stand in the corner with the dunce cap here how does it -- how do people look at it relative to its rivals >> well, i mean, it's cheap but it sure feels after this quarter that it's cheap for a reason and it feels like a value trap to a lot of folks at this point in time. they continue to struggle with these regulatory overhangs and seem to be in that dunce cap relative to the fed. it's tough to get excited. at some point the stock price will respond but right now, it just feels like it's a bit snake bit as a stock >> yeah. fred cannon, gerard cassidy, a lot more on the way.

thanks, guys talk to you soon >> thank you meantime, president trump changing his tone on trade and tpp. our kayla tausche is in washington following this story. >> for the first time we saw the president issue a clear directive. this time to its new national economic council director larry kudlow an outspoken supporter of tpp. to study whether the u.s. should get back in. here's nebraska senator ben sasse after a white house meeting on trade yesterday >> definitely the big headline coming out of this meeting is that the president said he was deputizing larry kudlow and ambassador lighthizer to look at re-entering the tpp negotiations i'm sure there are lots of particulars they'd want to negotiate but the president multiple times reaffirmed in general to all of us and looked right at larry kudlow and said, larry go get it done >> president trump first fuld the possibility of rejoining tpp in an interview with cnbc in

davaos steve mnuchin reached out to his counterparts of the 11 countries that are now part of the deal, but allies have been skeptical the spokesperson for the japanese embassy this week told reporters that it was already working to ratify that deal that was negotiated without the u.s and given that it was what he called a matter of fact that the u.s. re-entering the deal at this point would be difficult, especially given that no one knows exactly what trump wants to make it a substantially better deal. but those allies would welcome u.s. participation which would make the deal an even heftier counterweight to china which was its original purchase. australian diplomats are preparing a strategy session with ceos later this month to discuss the deal and potential u.s. involvement, but it's safe to say that even if the u.s. gets back in or studies getting back in it will not happen overnight. back to you. >> kayla, it's an interesting story. thank you for your time today watching that. kayla tausche in d.c the former speaker of the house john boehner is with us at

post nine. why he's championing the legalization of marijuana. we'll get his thoughts on speaker ryan, his take on trade, tariffs, tpp, all coming up this hour dow session high up 163. and it's gone. we're down 4 sentiment came in lighas wl.t el more "squawk on the street" in a moment ergy infrastructure mlps? ergy think again. it's time to shake up your lineup. the alerian mlp etf can diversify your equity portfolio and add potential income. bring amlp into the game. before investing, consider the fund's investment objectives, risks, charges, and expenses. read the prospectus carefully at alpsfunds.com/amlp anyone can get you ready, holiday inn express gets you the readiest. because ready gives a pep talk. showtime! but the readiest gives a pep rally. i cleared my inbox!

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stocks have turned negative here at one point up 163 at the open. now down about 19. we first saw technology turn the nasdaq went negative looks like financials, tech and consumer discretionary are all in the red joining us is jonathan, credit suisse chief u.s. strategist came in a bit light. and that sort of feeds into this debate right now on wall street. is this as good as it gets for the u.s. economy >> probably is as good as it gets i'm not sure this read is going to -- the market is going to care that much about it. but if you look at the earnings trajectory, what we're looking at is expected to play out the whole year which is really terrific u.s. results and u.s. economics all year if you look outside of the u.s., the data is already beginning to roll over. there's really a disparity between the domestic market and everything else. >> contrast what you're seeing

on earnings and that rosy ou outlook you provided with the nice and new missile tweets and potential trade war with china how do you line them both up in terms of market risk >> if there's anything we should have learned over the last nine months or so is to stop paying attention to tweets and news headlines. you are seeing today a discussion on, are we going to be going back into tpp if stocks are going to be trading on this kind of news flow, we're going to be all over the place. but i -- >> why a trade war is a real potential threat to the global economy, isn't it >> if you think we're going into a trade war, then it's absolutely a threat. >> what are you supposes to think when the president threatens $150 billion of chinese imports with tariffs >> this is a guy playing tough on negotiations. he's a guy who is thinking -- i'm not normally someone out there defending the president's position, but it isn't a level playing field on taxes we are paying higher tariffs on our goods than they are paying

to import into the u.s and so he's playing tough on this we may be better off for having fought this fight. i know that's -- no one wants a trade war but no one is talking about the fact we may be better off at the end of the deal >> the journal posts a story that china is holding up deal reviews that could clear the way for companies like qualcomm and bain to make acquisitions of semiconductor companies. the president said there could be a little pain and this is an example of how we could experience it. >> but if we're really going to attempt to address, you know, this nonlevel playing field on trade that we're going to -- that the president was going to push on this and then say, great, let's give you everything you want so do i think that this is going to end up in a global trade issue? no, i don't. do i think these headlines are going to stick around for a while? of course they are while they, do the market is going to not like it and the vix is sticking around be 20 instead

of where it should be which is 14 or something much, much lower. >> why should it be 14 or much, much lower wasn't last year more of the aberration we just went up every day by 0.3% a day >> love that, right? >> we all loved it or a lot of people who were in the market loved it but it's not normal either >> what is the vix average over this whole post prices period? it's been much lower so right now, if recessionary risks are low, that weighs the vix down you still have, you know, accommodative monetary policy. companies are spewing out large amounts of cash. the economic data is less volatile than it's been historically because of better inventory management and things like that. there's a whole bunch of reasons why the vix, not like last year, but also not a vix at 20 something in between >> you mentioned monetary policy do you think the trimming of balance sheets that we're going to start to feel it? you don't think liquidity has become a headwind rather than

tailwind >> it's the most common objection i get on my bullish call here's what's been happening the fed printed this money it went into the banking system that deposited back with the fed and velocity this is going to sound technical. and the velocity money fell. when they reversed this, vel velocivelo velocity money comes back up gerard cassidy was talking about loan volumes if all this extra liquidity wasn't being used anyway, wasn't league lent out, it didn't have the impact people thought it would. so, yes, tightening is going -- is never a good thing. that said, i don't think it's going to bite us as much as people fear. >> if you look back at history it's hard to find a tightening cycle that didn't wind up in a recession. >> first of all, i'm not sure that that's true but if you look at -- but in general when the fed -- when policy becomes restrictive, it's a problem. right now we have a funds rate

well below 2%. even if you were to get the funds rate to 2, 2.5, you're looking at something which historically is quite accommodative. and so if i had a concern, it would be the wage inflation data is becoming tighter. that not only squeezes the fed to move more aggressively. if we see that, that would make me more concerned than the fed renormalizing from an obscenely low interest rate. >> stocks are back up. >> i'm doing what i can. >> 3,000 on the s&p? >> i'm at 3,000 on the s&p about 12% up side. >> jonathan golub, always good to see you when we come back, google, facebook and other giant tech names under pressure from lawmakers across the globe amid concerns about data security and antitrust. the woman of the moment. european commissioner for competition margrethe vestager

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let's get to that etf spotlight. mike santoli looking at chinese etfs as president trump considers rejoining the trans-pacific partnership. it's always hard to -- really, reconsidering? >> whatever is being considered or reconsidered there are china etfs to play whichever side of it you think may or may not happen the export data was a big shortfall. the china markets are backing off today. you look at the whole suite of etfs out there you can play, different aspects of the chinese market good divergence in terms of where you look overall, fxi is sort of the domestic chinese large cap stocks that's the one that ishares puts out. down about 1%. it's really tracked the s&p 500 on a day-to-day basis.

it's not distinguished itself that much. what i find interesting is the subsets of the market, such as the china x state enterprise cxse is a wisdom tree etf that's up 53% in the last year compared to 25% for the fxi why is that? it doesn't have big things like china construction bank in it. fewer banks. fewer construction companies it has a ton of fang-like tech stocks this is an interesting thing china has become really a big cap tech trade when it comes to the amount of market cap and much more specific to that, the korean shares, china internet fund, this is all internet 21% of this fund is ten cent, alibaba and baydu. you are investing in china because you have this emerging market dependent on exports. the market cap in china is much more skewed. looks like the nasdaq. that's why it's a little different in terms of how the

game is played today >> mike santoli, thank you when we return, more on what mark zuckerberg's testimony means for the future of facebook's stock the president's attacks on amazon and zillow's house-flipping play. mark mahaney will be with us later this hour. next, former speaker of the house john boehner is here at post 9 he's going to join the board of a cannabis company and we'll talk about that after this break

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welcome back to "squawk on the street." as always, live from post 9 at the new york stock exchange, we're about one hour into the trading session. stocks have been back and forth around the unchanged line. positive and neck atigative financials are negative despite what was seen by many as better

batch of bank earnings reports technology and consumer discretionary also negative. that seems to have flipped the market back into negative territory. also a little disappointment in terms of consumer confidence from university of michigan. let's get to sue herera with a quick cnbc news update >> good morning. president trump reacting to the new book from former fbi chief james comey that depictss mr. trump as unethical and untethered to the troop. the president tweeting that comey is a weak and untruthful slimeball who was a terrible director of the fbi and it was his honor to fire him. russian foreign minister sergey lavrov says a suspected chemical attack in syria last weekend was made up with the help of an unspecified foreign intelligence agency. russia has inspected the site and found no traces of chemical weapons. bill cosby arriving for the fifth day of his sexual assault

retrial. his primary accuser andrea constand is expected to take the stand today. she says cosby drugged and molested her and then paid her $3.4 million in 2006 to settle a civil lawsuit. and a wildfire in northwestern oklahoma has burned more than 120,000 acres and forced hundreds of people to evacuate their homes more of the same is expected today. so far, luckily, no reports of injuries that's the news update this hour sara, back to you. >> sue, thank you. jpmorgan, wells fargo n citigroup reporting earnings this morning as earnings season officially kicks off interesting to see the negative stock reaction wilfred frost has been following all the calls this morning what are some of the headlines >> all three banks had comfortably beat the headline eps estimates, but as you said, share prices are declining higher rates including the rise in libor did deliver net

interest margins for jpmorgan and citi wells fargo's was flat tepid loan growth meant overall net interest income didn't impress. loans up year on year but roughly flat quarter on quarter. therefore, not delivering a big tax reform related boost credit risks, though, do remain low. jpmorgan stood out in terms of returns with returns on tangible equity at 19%. citi improves to 11.4% while wells fargo's fell slightly to 14.75% trading was up but less than expected citi only up 1% year over year behind the 7% growth for jpmorgan kwee equities drove the gains jpmorgan's cfo was hopeful volatility would remain elevated for the rest of the year but suggested march and april had settled from january and february investment banking for jpmorgan and citi fell year over year the efficiency ratio showed

improvement for citi at 58% and jpmorgan, 56%. but worsening for wells fargo to 65% above the 60% to 61% target it stated last may wells fargo saw expenses rise 3% year over year in part due to regulatory issues and could be more to come the bank hinted it's close to settling on a fine related to auto insurance and mortgage interest rate issues saying the cfpb and occ have collectively offered to resolve for an aggregate of $1 billion in civil money penalties. that would mark a record fine for the cfpb while wells fargo estimates did beat in terms of eps, it's worth noting their revenue fell year over year. the bacnk is adamant it can stil grow despite the fed's punishment down sharply, particularly for wells fargo. guys >> wil, thanks for that.

longtime critic of the marijuana industry is now getting on board john boehner joining the board of directors at acreage holdings, an investment company in the cannabis market he's explaining his change of heart on twitter saying i'm joining the board because my thinking on cannabis has evolved. i'm convinced descheduling the drug is needed so we can do research, help our veterans and reverse the opioid epidemic ravaging our communities joining us is the former house speaker and kevin murphy with us here at post 9 good to see you both >> good to be here >> your tweet took some people by surprise. >> i would say >> when did this evolution in thinking occur how long has it been going on? >> you know, like most americans over the last ten years. people's opinion on this issue have evolved and i found myself like any other american, my position evolving over the years, but never really thought much about it until kevin and i began conversations four or five, six months ago

and i thought to myself, you know, this might be something that i can lend my voice to that makes sense. >> and the fact that you are joining the board, does that mean now you see a path in which either state regulations spread like wildfire or the federal level begins to embrace this >> either referendum or their state legislature voted to legalize the use of cannabis in some form. but there's a big conflict with the federal law where it's a schedule 1 narcotic. congress over the last couple of years has pretty much stopped any real enforcement but federally funded institutions cannot touch this, captain do research. most university takes federal funds. yet the banking system that is scared to death to take this money so there's a lot of cash rolling around and so it's time for the federal government to take another look at this.

and i think descheduling this drug allowing for the research would be very helpful to the american people. >> hasn't the trump administration moved in the opposite direction here, especially under attorney general jeff sessions? >> well, the attorney general decided he was not going to abide by the letter that eric holder had issued where they said they weren't going to enforce it i think what sessions is doing is basically pushing the congress to act. >> you think there will be any actions, mr. murphy? any chance -- it seems hard to imagine we're going to see any action on this particular issue. and mr. sessions is being very aggressive, it would seem, in terms of pushing what many say is an antiquated view. still calling it a gateway drug, for example, and things like that >> at acreage, we're trying to change the conversation and having john, the speaker and governor weld joins us in that conversation is changing that

conversation 29 states today have medical use cannabis in those states, and those states are growing states are also coming online for adult use. candidly, because states need the money. and given the size of the market today, it's anticipated it will be a $75 billion market soon >> the speaker mentioned this idea of banks not doing your business a lot of these places still have a lot of cash on hand. is that still an issue >> that is an issue for some we bank at a lot of local banks so it's less of an issue for us. it's our job to prove that this money has not come from illicit activity, and that's really the issue with the banks >> now this morning on the "today" show, you made clear you're talking about medicinal use. and you were asked about recreational use you said i'm not advocating for

that >> that's not my position. my position is the states under the tenth amendment have the right to create laws for their own citizens let the people in these states decide what it is they want to do my point is the federal government ought to get the hell out of the way >> is acreage working -- if referendums come up on recreational use, you push for it >> we have participated in medical states to start. those states have since voted to make those states recreational and we have gone along with that and the reason for that is we are medically focused at acreage. we don't discriminate against people who want to use the plant recreationally because we have found that more than 50% of people using cannabis recreationally are self-medsicating they just don't want to go through getting a card or a prescription >> so speaker boehner, are we going to see you lobbying some of your old colleagues on this

sn issue? this is your issue now >> i don't lobby, but i think adding my voice to this discussion elevates the discussion and maybe a few people in washington will notice >> what about the hundreds of thousands of people if not millions who are put in jail for selling marijuana over even -- certainly during your tenure and the millions who got arrested for possession. >> it was part of my evolution because i got into the criminal justice reform movement and began to see we've got all these jails full of people because they use them or have some small possession of it it really is just -- it's not a wise use of our society's money. >> and there did seem to be consensus building to change that but now we've got a justice department that feels very different. >> i'm a little surprised the broader issue of criminal justice reform hasn't moved further than it has. and there's some -- really a large bipartisan group of members in both the house and

senate who want to tackle this issue. but, you know, they get hung up on a couple of issues and it seems like it holds up the whole process. >> do you think you'll be alone on this or are there former politicians going to start speaking out the way you are >> i have no idea. >> you're not getting any sense of -- >> welcome to the party. >> literally sara mentions policy and your former colleagues. how much does ryan's retirement affect the midterm calculus? >> i don't think it affects who is going to win or who is going to lose. each of the members when they go home, they are the ones on the ballot paul ryan is not on the ballot most of our constituents didn't know who the speaker was so i don't think it's going to have any impact on the election itself it may have an impact on how members feel about what they are signing up for, but i don't think it's -- >> that's what paul ryan said

when asked that question >> when you look at the people who have announced retirements or looking at other races, are you willing to make a call on the house or the senate? >> i think the house is 50/50. when i look at the number of retirements, especially on the republican side, lack of retirements on the democrat side, on the senate side, though, i think the chances are probably 75% the republicans hold the majority. there's so many more democrats up for election. ten of them in states that were won by donald trump. and so i think the senate is in a lot better position. >> how do you think the trump presidency has affected the republicans' chance to retake the house and senate >> any time you have a new president, the party out of power gains seats. it's just a fact over 100-year history of this. having lived through 1994, 2006, 2010, i've seen these waves. and so it's going to be what it's going to be now the president has the most

unique style of anybody we've probably ever had in the white house. but we'll see how it plays out >> we spend a lot of time at this desk a number of years ago going back and forth with your back and forths with the obama administration trying to hammer out a long-term budget, a long-term fiscal plan, and there was a lot of concern then about deficits now we've got a trillion-dollar deficit, a tax reform. the omb came out with numbers that were even more than that. where do you -- when you see these numbers, what are you thinking >> i have to believe it's paul ryan's biggest disappointment as speaker because paul ryan used to be the chairman of the budget committee. paul ryan had a plan to balance the budget over ten years. unfortunately, donald trump took all of the entitlements off the table during the campaign. i continue to believe that you can't spend money that you don't

have you can't do it in your home or accident and the government can't do it either my biggest disappointment of my entire political career is after president obama and i came to an agreement on a $5.2 trillion deficit reduction plan over ten years, and two days later, he walked away from it. it has to be dealt with. and the sooner we deal with it the better off we'll be. >> is tax reform a mistake >> oh, no. the only way to solve our spending problem is to control spending and to have an economy that's producing more jobs, more earnings and more revenue. you have to have both if you'll balance the budget i said the same exact words in 1990 in my first election to congress >> we're going in the other direction right now. >> i know. >> you recognize that. >> and what's really going to become a problem is that we still have abnormally low interest rates and as interest rates continue to get to a normal level, it's going to have a huge whipsaw

effect on the deficit, and it just -- mark my words. give it about six months, and this will become the number one issue. >> you think so? >> oh, yeah. >> you think people will care? because they never seem to focus that much on these long-term deaf sits. >> if we have a bump up in interest rates, it's going to crowd out other things it's going to happen >> it's going to surpass military spending in a few years the way cbo sees it. >> no question >> mr. murphy, i can think about one area of revenue people want to tap into. >> we encourage that >> it can become significant for the states in question >> it can, and it is and that is why states are transitioning to recreational. people are going to use cannabis either way it's just a fact it is estimated the black market is $50 billion to $100 billion in comparison, we're trying to capture that illicit market and make it legitimate

this business today is a $7 billion business we anticipate ten years it will be a $75 billion business. and we as the largest footprint in the country as acreage want to capture that. and then we want to spend on research we want to go beyond and really take this to the next level. >> what does that mean >> well, we, today, it's a schedule 1 drug. but there is a state, the state of pennsylvania, that has welcomed eight university hospitals to do clinical research on the plant. we couldn't be more thrilled to be a part of that program. and the reason we are is we want to transition the anecdotal stories you hear every day to clinical stories we can take the nonpsycho effect of this plant and treat a 6-year-old child with epilepsy and that child will go from 70 seizures a day to one a month. and there's nothing anecdotal about that for the parents of

that child and to deschedule this drug affords the va the opportunity to prescribe 90% of the veterans in this country want to have cannabis available for medical use. 22% of this country, or the veterans of this country, essentially use cannabis putting their veteran status at risk and to me, that's a shame. and we want to change that and with the speaker and with the governor, we're going to change and control the conversation in the united states, and we can do it because we are the largest player in the united states. >> it's going to be interesting to see if financing and security and all of those ancillary businesses around cannabis really start to mature >> today it's an advantage for us that there's not a lot of financing because we

self-finance this business, and that gives us a head start if it was schedule 2 or schedule 3, you'd be interviewing a guy from merck, pfizer or anheuser-busch it's a fact. it's a land grab for us. >> can't let you go without a couple more policy questions this morning on "today" you said you thought the president firing mueller would be a bad idea. did you comment directly on rosenstein is that any different? >> it's not any different. they're both longtime public servants great track records, and they've got a job to do. let's let them do their jobs there are either facts or not. there's either crimes have been committed or they haven't. and i have no reason to have any doubts about the outcome of the investigation. >> do you believe congress needs to support legislation that will prevent their firings? >> i don't think congress -- congress doesn't have a role here so other than an oversight role, which they've been trying to do. they are having problems with the justice department and the fbi in terms of turning documents over, but they don't

need to pass a bill. >> i wanted to ask you about trade. we're hearing the president is looking at rejoining tpp you know, the republican party used to stand for fiscal conservativism and free trade. does this president have it wrong on trade, or do you want this negotiating style >> no, as i said this morning, i have a different style i would have reached out to our friends and sat down at the table and looked them in the eye and said, listen you're taking advantage of us. we need to fix this. we need china and japan and south korea more today than ever if we're going to solve this problem we have with north korea. and i don't know how we expect to get their support when you're beating the hell out of them over these tariffs so -- but step back. the president is bringing these people to the table. not the way i would bring them to the table, but they're coming to the table and i'm frankly feeling good about the fact we'll get this e

resolved without a trade war >> why why are you feeling good about that >> because it's pretty clear people are coming to the table but the tactic that the president has used all these threats, this is a pretty dangerous thing. we have an interdependent world. the world detends on trade the u.s. depends on trade. and to take one piece of the trade picture, manufacturing goods, is really not a very accurate picture there are a lot of other things involved in trade. services, financials, that should be part of this discussion as well >> you think we're underestimating or overestimating the chinese ability to respond to threats? >> well -- i just never thought you got very far threatening people >> think we should be a part of tpp? >> i do. i do i've always been a believer in tpp. i think the obama administration when they got to the end caved on five big issues that were

important to the u.s. that eroded the support in the congress but tpp is critically important to us if we're going to counter china and if we're going to be in asia being a player and so i think we need to get back to the table. >> the president of the united states today on twitter calls the former fbi director a slimeball. what do you make of the trump tweets, statements speaking to the american public via tweet and often conducting diplomacy and trade policy that way, too >> well, i've made pretty clear that i wouldn't be tweeting the kind of things the president tweets but as i said before, he's the most unique president we've had. >> do you think republicans should stand up to him more? >> he got elected by the american people with all of his tweets and all of his faults and he is our president. if you get past the noise and look at what's actually happening, deregulation, silly

regulations are gone the new tax codes. the economy is doing well. unemployment at 30-year lows he is actually getting things done, in spite of the nose >> after the election, you told us you and he were texting buddies. you sent him a congratulatory text still happening? >> once in a while we play a lot of golf together if i was having a bad week when i was speaker, donald trump would call me and pat me on the back and cheer me up i never thought he was going to be president, but he is. >> we can talk about cannabis forever, but viewers will want to know if you use >> no! never. i've never used it >> never >> never, ever used it i don't expect to. cigarettes and red wine are my creatures of habit >> cigarettes we know about. red wine you know about. >> mr. speaker, thank you so much it's good to have you.

>> it's been a pleasure. thank you very much. >> kevin murphy and speaker boehner. a lot more "squawk on the street" when we're back in a moment dow down 32. n research. n research. it can take more than 10 years to develop a single medication. and only 1 in 10,000 ever make it to market. but what if ai could find connections faster. to help this researcher discover new treatments. that's why she's working with watson. it's a smart way to find new hope, which really can't wait. ♪ ♪

. jpmorgan, citigroup, wells fargo kicking off big bank earnings this morning. which name one trader is betting could be a major buy here. that's on tradingnation.cnbc.com in the meantime more "squawk on the street" right after this. nobody's putting their money into equities. they're not investing in commodities or fixed income.

what people areally putting their money into is what they hope to get out of life. but helping them get there requires a real refusal to settle for average. because when you approach investing with a tireless desire to beat the status quo, something wonderful can happen. those people might just get what they wanted out of life. or maybe even more. we are keeping our eyes on internet stocks. amazon shares slightly lower as president trump issues that executive order to examine the u.s. postal services after accusing amazon of not paying its fair share of postage. the nasdaq negative this morning. we're watching shares of zillow, shares are down more than 10% as the company plans to start buying and flipping homes. that's the news of the morning on zillow. let's bring in mark mahaney at rbc capital markets. we were going to go to facebook

but should start with zillow down more than 10% is that a reflection of investors' attitude towards this new business zillow is going to get into, buying homes and trying to flip them? >> yeah. that's exactly what it's a reaction to. this is a business model that to date has been all advertising revenue driven, high gross margin, 80% gross margins, 20% eebitda. and the pivot into the other category which has balance sheet risk and it has much lower margins and in an uncertain housing environment. the market is skittish, jittery on all three of those things i look at this as an interesting pivot. the kp has considering being more than the ad and reach end for business real estate interesting experiment on the company's part there are data points in the market that show that on demand real estate is starting to pick up in the phoenix area we've seen it 1% to 3% of homes being

sold by open door in an on demand sale by environment and i think what zillow is doing is going to play in that market and i don't think that's where the majority of the market goes by far. it could be a sizable segment and zillow has a large base in real estate with consumers and real estate agents it's a logical pivot. >> we talk to spencer all the time and i'm wondering why they're making this move right now. as i understand their business model depends on real estate brokers to advertise on their sites, actually getting into the business where they buy and sell homes themselves doesn't that displace some of the brokers that they depend on for revenue? >> it could. if they don't handle this right it could why are they doing it now? because they've reached the point of scale with real estate agents and consumers because there are data points in the market that suggest that this way of buying and selling homes is starting to gain traction and then the challenge for zillow will be doing it in a way that's agent friendly they can still do this behind sell to homes and use agents on

the sell side of that transaction if they do that well, there could be a win in here for agents. that's the -- that's going to be the balancing act for zillow my guess is they can pull it off but there is extra risk no doubt about it. >> let's move on to facebook, mark, because what a blockbuster week of testimony from mark zuckerberg on capitol hill the markets seemed to like it. you like the stock, have it as an out perform going into this earnings season the week after next, is it a risk because those user engagement numbers will be under a big microscope after the delete facebook movement and all of the political scrutiny, how do you see it >> i think zuckerberg accomplished what he needed to this week in terms of showing contrition, accepting responsibility and being open to regulation check, check, check. and now what the company needs to do is to show that it's really a pr issue, not a fundamentals issue our survey work indicates no negative inflection in terms of ad revenue growth. i don't know what's going to happen with the daily average user metric. the street expectations are pretty muted on this metric.

i think the real surprise to watch out for, this is our favorite stock in the group. i think this is the most -- the best entry point you've had on facebook shares in four years. almost back to its ipo days. the six months after its ipo when it became interesting and our guess is that the one issue to watch out for is the guide they give. i think they will say we got it to 45 to 50% growth, you the street expect us to get higher than that and we're taking platform security very seriously and could cause estimates to come down a lot of that is priced into the stock, however, and i don't think you see a major correction on that. >> we will see it's going to be interesting they have warned about the costs before we'll leave it on facebook there. thank you. >> thank you >> interesting market action going on regarding financials and now retail let's get to dominic chu for a sector sort. >> those two sectors check out what's happening, stocks are erasing early gains but energy one of the sectors trying to hold up so far in

today's trading. one of the best performing groups this week up by about 6%. oil prices higher for a third straight day amid the rising geopolitical concerns in the middle east. among the names pushing the sector, marathon oil, apache and oxidantal all up 2% or so. energy in addition to the sectors you mentioned, carl, a big focus for traders given the market weakness in the last hour or so. back over to you >> all right dom, thank you very much when we come back, how t fix facebook the former design emphasis, tristan harris is with us, on what needs to change to go forward dow session lows down 54 as the bank got sold after the earnings today. "squawk alley" is next

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