♪ live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin joe is out today mike santoli is here we will tell you why we're playing that lots of ch guests here today including our first two market guests jim chanos is our guest host today, too we're watching u.s. equity futures this morning yesterday the dow ended higher it was helped out in large part by gains from boeing, which reported better-than-expected earnings this morning looks like the dow is indicated to open up by 52

points s&p opening up by close to 10 points the nasdaq opening 70 points higher there are a lot of earnings reports to get through look at what happened overnight in asia. the nikkei closed higher up by almost a half percentage point. a gain of over 100 points. the hang seng was down by 1% the shanghai was also down by 1.35%. there are green arrows across the board in europe. modest advances for the most part, the crack is up by 0.43% the treasury markets, yields have been the story all week long the ten-year yielding above 3%, just barely. 3.005% it was that initial move about 3% earlier this week, that's the first time we've seen the yield that high in over four years that's caused consternation in the markets this week.

earnings, front and center this morning. pepsi out with its quarterly results. pepsi with earnings of 96 cents a share. street was looking for 93 cents. that is 3 cents better than expect the r the beverage and snack giant reaffirming the full-year forecast 3.2% organic revenue growth. we heard from coke earlier this week >> which was a bit better on the organic revenue line >> and the mix between the drink business and the snack business where they did pretty well. >> coke at a 52-week low yesterday which surprised me we will look closely at pepsi, and a programming note for you, pepsico's cfo and vice chair,

hugh johnston, will be on squawk on the street today at 10:00 a.m. eastern. facebook's first quarter results blew away estimates. and facebook continuing to add users. on the conference call mark zuckerberg says facebook is investing heavily on safety and security >> beyond the investments we're making to secure our platform, we're going to invest even more in building the experiences that bring people together on facebook in the first place. >> we will talk more with a facebook analyst in a few minutes. worth noting those earnings that just came out yesterday, they were unaffected by all of the cambridge analytica scandal and the delete facebook campaign if there were negative effects that might have happened, we have not seen those in the

numbers yet. >> yeah. >> there's been a raging debate on this set and across the country about whether people are actually ultimately deleting their accounts based on that >> no. no i have not said people would delete accounts. my question is should regulators get involved >> we'll see if that hits the business model deutsche bank says major job cuts are coming after the company reported a 79% drop in first quarter net profits. we will talk to jim clhanos. and another apple supplier with potential bad news on the iphone x samsung warning about a slowdown in the panel segment the latest results were impacted

by lower demand for those panels, and they expect the same weakness to stick around samsung had better than expected profits, which helped its memory chip division. but there's been a lot of comments lately about the iphone x and whether it's selling as fast as people think plenty more earnings still to come. among the other big names we'll hear before the opening bell, bristol-myers squibb, conocophillips, time warner,he , south korea announcing plans for a landmark meeting with north korea. kim jong-un will cross into south korea to meet with his south korean counterpart

the market getting tested again. professor mike santoli -- steve is the professor you're magic mike. >> and i don't have tenure >> you have a grade on the markets. >> i do. if you look at how the stock markets perform, it's passing, not with flying colors if it ended now, maybe incomplete yesterday again the s&p 500 backed off to basically the uptrend line to this 200 day average. yesterday's bounce was minimally acceptable to say we're still in this trading range look at this six-month view of the s&p 500 and this line across the 2600 level which we almost got back down to yesterday we have visited this three or four times in the last couple of months each time we rallied off it. unimpressive rallies we are still in a correction process. even though the s&p 500 is down about 8% off of its high, the

average stock is underperforming. you have had a lot of damage a lot of severe corrections under the surface. >> so some strong performers masking that >> basically a quarter of the s&p 500 is down 20% from its high. there's two-ways to look at that the tape has softened up, the other is you have already taken the pain obviously along the way valuations, sentiment, it all cooled off and has come back into a more normal zone. the big question is what exactly gathers up more buying momentum. i think people in january, late january, when the market fell apart, they felt they were too exposed to equities. right there you said too much. >> you think it's a fair point we hear from our market guests all the time this is a stock picker's market now.

>> it definitely is. there's some evidence to that. here's what a stock picker's market is. it's just as easy to pick the wrong ones all that means is there's variation between the stocks within the index you can kind of make your bets, and those bets pay off or they go against you, as opposed to everything moving at once. so i think that's fair >> let's continue this conversation for more we'll bring in the global chief market strategist from canter fitzgerald and steve chevron. thank you both for being here. peter, you have an unusual take when it comes to the earnings outlook. most people say this will be a great earnings season. you think it's trickier to calling. >> the last time i was on the show i said that i suppose it was a nonconsensus view at the time mike and i have talked about it. the expectation coming into the season have been high.

we have a rates back drop that is changing. earnings are important, cost to capital is equally as important. with expectations as high as they are, once you meet them, if there are no future catalysts and those are in the rearview mirror, my view is investors are looking for the next thing, and that next thing wasn't there >> that's something we heard earlier this week on the conference call for caterpillar. the cfo saying this could be the high watermark do you think that's what he was referring to not that you won't see demand or a good economy, but all of the things -- >> i think it's about acceleration and momentum. if we print gdp at 2% on a year over year basis, that's not stellar. talking about expectations for earnings growth in the low 20 rz what will they be for '19. the impacts of tariffs the fact that the dollar is

starting to rise as rates rise mij w mike was talking about the 2600 level on the s&p 500, that's the level i'm looking at the difference is on this test or this retest of that level, the dxy is above 91. >> the dollar index. >> we have to look at the dollar if the dollar starts to strengthen, it will be harder for equities to main thain their level. >> a lot of earnings reports have come in where foreign currency has been a big boost. the quun question ione question, interest rates pushing higher. we're still talking about 3% on the ten-year >> that's the key. we're at a part in the cycle where nuance matters inflation is building. rates are rising, but pace matters. in our work, multiples expand until you get a 3.5%, 4% ten-year yield

we think 3% is still constructive for equities. we're paying 17 times earnings growing 20%, with inflation under 2, and interest rates 3% or below i fail to understand how that's a recipe for disaster. >> the 17 forward builds in that 20 so it's kind of like now on that 17 at the end of this year's earnings, where is it going? >> we came in with expectations that we would grow 17% year over year, we're on pace for 24 we think q2 and q3 will be better still i think there's more surprise to come we're crafting a bumpier ride to the same good place. that's okay, as long as fundamentals remain supportive >> do you think valuations have to come down as a result >> no. at 17 times we priced in a lot of this. the markets are not used to yields at this level we're in a mode where we shoot

first, calm down later i was here in january, joe was beating us up for being too low at 3100. it's easy to beat us up for being high at 3100 >> i think it's the rate of change and rates that matters, the direction of rates that matters. we have had 30 plus years of a secular bull in the rates markets. those tailwinds are now headwinds. rates are moving the other direction. we have a yield curve 50 basis points from 2s to 10s that does not bode ill for equities. as the yield curve flattens, it's not good for banks. the short end is more inverted than the curve libor is close to 2.40 that has an impact on the cost of capital for companies, how they fund operations, commercial paper market, same thing i think all those things create a headwind that investors have

not had to take into account for quite some time. does it spell disaster immediately? absolutely not we're constructive for another 6 to 9 months. >> you would be buying stocks at these levels >> on this dip it's a close call we like buying the last bounce this is different because of what the dollar is doing >> you're constructive which means what >> it's a range-bound market for the most part. from 2500, i'm a buyer at 2500, seller at 2700 i would like to see a push lower. >> do you recommend people keep it in cash do you like bonds? >> i do like the bank loan market now i think rates will continue to go up. you can get the benefit of that variable rate impact that i don't like on stocks, you can benefit on that if you own bank loans. >> steve

>> we agree with the analysis, just not the timing. we talk about 50 basis point spread on the yield curve. on average it takes two years to go from 50 to flat or inverted, two years from inverted to recession. markets could be up 50% during that period. >> what do you recommend >> small caps. we think there's a lot of reasons to like those. we think we have a buying opportunity in international with this little bit of under-performance here, and cyclical sector the. financials, a bit on energy and other cyclical sectors. when we return, facebook shares are surging after the company posted a beat on earnings revenue and active users. at the top of the hour, ou best host will be jim chanos we'll get his thoughts on tesla, the energy market and maybe a new short call "squawk box" returns in a moment you know what's awesome? gig-speed internet.

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facebook's chief technology officer appearing before uk lawmakers. they're questioning him on the spread of fake news on facebook. he defended the policy on political ads says he understands the ad practice to be legal we'll bring you any headlines as we get them. facebook reporting better-than-expected profits and revenue. the company posting a solid quarter despite the fallout from the cambridge analytica scandal. joining us now is daniel ives. how much are we supposed to take away from this report given everything that's happened since that quarter ended and everything else that we've been talking about began? >> it's been the darkest chapter if facebook's history. this quarter in terms of advertising growth, user growth, didn't see what i would say are dings in the armor at this point it looks contained in terms of what the damage is to the platform. it's just the first victory in a

long winding road over the next three to six months. not just regulatory but also on the advertising >> how much of a bet at this point for you has to be on what regulators do in the u.s., what that looks like, and whether that changes the business model. and now this european policy is going into effect and seeing what that does >> regulation is the main variable if you believe it's going to be more draconian regulation, gdpr on steroids, ultimately the stock, you will buy here our view is that it's more light so modest regulation in our opinion, that is going to be something that will take time to sort of play out. if that happens, the model stays intact that's the big worry for shareholders here. you saw it in the beltway. that was called the first stop last night was huge, teflon-like

initially from the model >> teflon-like in regards to you were going in your head, where were we in the quarter it seems like engagement stuck around in a much better way. >> you saw an increase in the u.s. it's one where advertising increased 50%. you take a step back, yeah, 2 billion users on the platform. we view this as the first quarter of a four quarter -- >> if you could put money in twitter, snap, facebook, which is the better one? >> to me it's a no-brainer it's facebook, given the risk-reward.

this is a stock that could have a 2 in front of it once they navigate through last night no red flags. a knee jerk reaction here. it's all about regulation and gdpr >> going into the number last night, it seems like facebook will little incentive to max out the profits. they did not want to seem like a jugger thoug ege egernaut you c and they did they almost have not been able to have it slow down i wonder ftd mif the market wilv them that credit because facebook is in the mode of showing all these emedies. >> cambridge was a game changer.

it will take more to get that stock moving higher to show the sustainability on advertising, the content engine and user growth will not be significantly hurt over the next year. what was your take on twitter earnings yesterday >> advertising which has been the achilles heel for years, getting sea legs here. you have to give dorsey credit we'll talk about moderate guidance going forward that's more of a sandbag situation. i wouldn't read too much into that a bunch of competitor upgrades twitter is one after many times of one step forward, two steps back, we're moving in the right direction. modernization has been the key you are starting to see twitter

gain a toe hold of advertising share from that. >> what ever happens with how they can use customer data, i just wonder if it matters ultimately if everyone is under the same rules, and unless something makes facebook less targetible for advertisers than television or nonsocial media, how does that change things? it's like goldman sachs with regulation as long as everyone is on the same rule, they will probably do something with less. >> the big question is europe. a lot of those softball questions we saw zuckerberg navigate through, it's gdpr, this is in the uk, europe is the one stepping up their game how facebook navy gates thigated if gdpr affects user growth more than expected, that will be a focus of the street. let's tell you about more stocks to watch.

paypal's first quarter profit was up by a third fueled by increases in mobile payments and first quarter trade. and venmo handled more than $12 billion in the first quarter that doubled from a year earlier. >> visa beat second quarter forecasts and it's raising its full-year guidance they have seen card payments grow thanks to higher spending in the u.s. and higher oil prices >> shares of at&t this morning, the company reported earnings and revenue missed wall street expectations as they lost traditional video subscribers. at&t says operating margins were hurt by higher wireless equipment costs. when we come back, australia's trade men center, steve ciobo is here to talk

tariffs, tpp, and doing business with china. and later why chipotle are sty rocketing up more than 10%. as we go to break a look at yesterday's winners and losers ♪ still to come, two hours with short seller jim chanos we'll talk about his bet against tesla, his energy shorts, and weathering the bull market runup. that starts at 7:00 a.m. eastern on "squawk box." trust that we do what's right for our clients, without the constraints imposed by the traditional brokerage houses. transparency in the way we're compensated. our philosophy is one of service, not sales...

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning on this thursday a quick look at equity futures already had some earnings reports this morning we have a lot more to come dow opening higher by 63 points. nasdaq opening up 72 points. the s&p 500 looking to open about 10 points higher ford's first quarter profits topping estimates thanks to continued suv purchases.

shell rose 42%, thanks to rising oil prices and production the company planning to buy back $25 billion in stock in 2020 the european union and australia are gearing up for free trade talks as the united states weighs tariff exemptions and the eu threatens retaliation against president trump's trade policies weighing in is steve ciobo, minister of trade and tourism for australia. let's talk about how things have changed over the last year and a half it's not just the united states, but a lot of different nations that are looking at things differently. certainly the united states is leading the way in terms of

trying to change trade policies that have been in place for years. what do you think about this >> i was saying what i would call headwinds on the trade environment. australia has been focused on making sure we open up trade opportunities. perhaps that's best exemplified by the fact we pushed ahead with the transpacific partnership we have done that deal now, h e hopefully that will come into effect next year president trump has been clear about the recalibration taking place and his strong desire to rein in the trade deficit. we understand that there's some policy differences in terms of australia's approach and the united states' approach. i have a good relationship with robert lighthizer, and we will continue to work through it. >> president trump said that he was considering, it ing, iing to

get back into it, but that situation looks bleaker after last we're have there been talks between the united states and other tpp nations? >> i think on its core, the challenge -- the president said before the election that one of the first things he would do is to withdraw from the tpp >> to be fair the other saeds said the same thing. >> sure. when they said that, we were disappointed but not surprised the challenge is given the 11 of us v. spehave spent a lot of ti energy making sure we could do the deal and lock it n we now can't renegotiate big chunks the market access whether it's good, services investment, all of that is in place. it's a comprehensive deal. there's other issues that could be incorporated as well. there's a lot of momentum. we want to get it done make sure we can have this come into effect as soon as possible. ultimately that won't be put on

pause to have the u.s. come back nfrmt. >> does that meecan you and the other ten nations get closer to the chinese orbit? >> not at all. we would love for the u.s. to come back into the tpp 11, not only for australia but more broadly, there's a lot of benefit for the u.s. and the other countries if the u.s. is at the table my observation is that there's not an appetite to renegotiate vast tracks of the deal. >> so take it or leave it for the united states. >> the deal is the deal as agreed now it would be a new deal if we renegotiate all aspects of it. that would take a long time. >> back to my question about china. chose in the united states who

have been in favor of tpp said we need to do this in order to ensure that those 11 nations don't wind up in china's orbit and become closer with china, this is against china in the region and entry into it is that the case or not? >> no, it's not. i think it's a false construct, it's not that binary it's not trade with china or trade with the usa we do trade with china, we run a trade surplus with china. >> you run a surplus with china? >> sure. >> and we run a trade deficit with the united states the reason we run a trade deficit with the u.s. is because we buy caterpillar equipment and boeing aircraft. so i don't get too caught up on the deficit/surplus scale, because what matters is the

composition of the trade and what you're able to achieve overall. there's strategic benefit if the u.s. was to come back to the table around the tpp 11. a lot of this is academic now. the president made his position clear. all i can say is we want to press ahead with the tpp 11. we would welcome the u.s. to come back. ultimately that's a decision for the u.s. >> does that imply -- you said caterpillar equipment and such, that you have a goods-based deficit with the united states focus on goods versus services, is that something the trump administration -- >> yes, we do. by the same token, if you look at the australian economy -- it's like this with most economies, 75% of our economy is services based services exports account for 22%. i see services exports as being the rife industry for australia and where we're putting focus and emphases, which gets back to

tourism and ed ways ucation in particular we can do a lot in that space. we have the most active trade agenda in australia right now, at the core is what we can do on the services side, as well as resources, energy. >> so what would you like to be telling the united states right now? if tpp looks like that ship has sailed, not something that happens, where do we kind of have common agreements where would you like to improve the relationship >> the relationship with the u.s. is strong make that point. we had a free trade agreement, bilateral fta with the u.s. for over a decade. that relationship is strong. ultimately we want to avoid at all costs an opportunity where you may have action and retaliation in relation to trade. >> is australia going to be permanently exempted from some of these tariffs

>> that's the deal reached by the prime minister and the president. we'll see may 1st when that rolls around we recognize that the u.s. administration has to make -- put in place policy tools that reflect what they're doing with all countries, not just australia in isolation but having that agreement reached between the prime minister and president, we're working closely with the u.s. administration on what that looks like >> if china is your biggest trading partner, are there repercussions when these negotiations with the united states and china get so tense? >> it's not just confined to china. these are implications that are global in context. i look at some discussions between the u.s. and europe. i look at the discussions taking place between the u.s. and china. i look at discussions between the u.s. and canada and mexico as part of nafta from my perspective, there are some headwinds the best thing i can do to help

mitigate against downside risk is continue to diversify that's why we're forward leaning on the most active trade agenda. we have trade negotiations with the european union, mexico, colombia, chile, peru. that speaks to a huge appetite to diversify as much as we can >> which areiest of those negotiations >> they're all tricky. they're all fraught with challenges the hardest thing is to get the quality deal that you want, which does produce a win-win outcome. one of the biggest narratives on trade, especially in terms of joe public, is they'll often view it as a win/lose. one side wins. one side loses. >> it's changing the narrative

around that. >> when you say you're looking to diversify with these different instances, is that because you don't think you can count on the united states down the road >> it's not a reflection of the u.s., it's just we need to ensure we continue to open up our export opportunities for australian business. whether it's goods, traditional strengths, resources, energy, what we're doing now in services the more we can open up export markets -- we've seen this -- we concluded a number of high quality fta's with china, japan and korea and singapore. we've seen off the back of that a huge surge in export growth from australia that's helping to drive economic growth and also driving jobs surge in our country >> mr. ciobo, thank you very much for your time coming up, jim chanos will be our guest host starting at the top of the hour. he'll reveal four new short

positions for the first time publicly. then general motors out with earnings we'll talk with its cfo about that. and later, ohio senator rob portman will join us to talk trade and the economy.

♪ all right. southwest airlines just out with quarterly numbers. the airline beating consensus estimates by a penny with a profit of 75 cents a share revenue was shy of street forecast southwest says it was benefitting from a lower tax rate ceo gary kelly says the highest priority is safety and says that southwest continues to cooperate with regulators looking into the recent accident that killed a passenger. also seeing headlines on this, the second quarter view reflects some softness in bookings after that accident on flight 1380 that stock down by 1.5%.

the u.s. equity futures have been indicated higher. let's look now and you'll see the dow is indicated up by 71 points that comes after a gain for the dow yesterday, though it was a mixed day for the markets. a swing of a significant amount. at one point the dow was down 2 200 points ended up around 50 points. >> 59. >> so this morning up 70 at this hour a lot of news still to digest. s&p up by 10 points. the nasdaq up by 72. time for the executive edge. the ecb set to release the latest rate decisions. the central bank expected to hold rates steady. investors will be watching for sign that's ecb could delay its exit strategy from the massive easing project mario draghi will have that speech at 8:30. shares of nintendo are falling overseas

the video gamemaker expects to post the highest full-year profit since 2010 but that forecast was lower than analysts expected nintendo says it expects to sell 20 million switch consoles in the financial year that started in april it sold 17.8 million since march of last year also the company announced its ceo will retire in june. when we come back, chipotle shares are soaring after the company posted a big earnings beat kate rogers is in chipotle's hometown what's going on in denver? >> becky, good to see you. we will speak to chipotle's new ceo, brian niccol later this morning and recap their earnings for you next on "squawk box. at&t provides edge-to-edge intelligence,

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. chipotle beating the street with quarterly results kate rogers is in the hometown of chipotle, denver, ahead of a big interview she has got. >> chipotle stock up after a strong earnings report eps had a nice beat. revenues in line

comp store sales came in at 2.2%, much higher than the 1.3% analysts had been projecting there's a lot of investor and analyst excitement over the new ceo, brian niccol he took over for steveniccol. he took over back in march he came from taco bell he had a reputation for marketing. he introduced breakfast when he was there and invested in mobile and digital technology on the calm, the company and niccol said they would continue to invest in employees and digital marketing and they didn't say what changes are coming we will ask him for about that this morning we are going to talk about their plans for opening new stores they said they will open 150 new locations this year the company announced they authorized a $100 million stocks buy back plan we will speak exclusively to brian and hear from him on his new role on "squawk on the street" streets at 9:30.

we'll ask him about the lesson changes and i know joe is a big taco bell fan, it would be curious to hear what questions he would want to ask since brian was announced on the 13th in february the stock is up nearly 50% guys back over to you >> let's talk a little about the earnings part of it was price increases he managed to put in what itself the magic? all of a sudden to have investors buying in, in is up a big way that stock was up on the announcement he was coming in, the excitement around that now, seeing very early results, what is really happening >> reporter: becky, that's right. there were pricing increases completed earlier this year that began to be phased in last year. those price increases in average ticket prices offset the declining foot traffic as you said, there is investor xooimt excitement. is only thing i shaerd she taking over -- i heard he is

taking over. this seems to be brian's show. he got control of this company he has a lot of good ideas people are excited to hear what he is going to do. >> okay. thank you. >> thank you, kate. all right, let's get some parting sho itself from mike santoli. mike watching what we've seen in earnings yesterday was the antithesis of the day before boeing out with numbers. that held throughout the day none of the pullback like we saw in caterpillar earlier that give and take where basically the pendulum swings from over reaction to under reaction what's interesting this time, i don't think this earnings season is that unusual in that seldom instinct, that churning. except the market was down a good deal. it seemed people thought there was a setup, it hasn't worked on a market wide basis. we're holding in there >> that brings me back the warmth you brought up repeatedly over the past several kwooex

weeks, which is if that's not it, what is it the rest of the year >> it's summer, then mid-term election, on the one hand i get that, because it doesn't seem there is a rush to be doing buying on the other hand, people are more cautious. it's the opposite of january where everybody was chasing this huge rally logically, potentially >> hey, mike i want to talk a little bit more about what to anticipate with some of the big names coming out tonight. >> first of all i want to see facebook, if it can hold this game you see the nasdaq up. >> what was it >> it was up to 7%, it's to a $170 level i this allot of people have been waiting for this chance to maybe lighten up on it again so i think it will be a battleground for a while, facebook so that decide if the whole fapg group can be a leader. >> it's not just facebook. >> apple has been a big under

performer as well. that's one of the areas, few think the market can pull out of >> if we seen these big technology stocks get through the stricker privacy laws in europe that kicked in last month and the potential will die down, zuckerberg made it through washington what happens then? >> i think you want to see the mark's verdict if that's what this is all about. the reaction to alphabet was discouraging i think >> things that they're investing in aren't a surprise or unusual. >> it's a little i'm in a bad moot i'm going to sell the stovenlg that's been a bit of the piece for a few weeks now. >> we will talk to you again soon when we come back, our guest host, jim chanos, we will get an update on his short positions that we know about those are tesla, china he has been a long-time bear on

china, energy stocks, we will get his new calls. he has at least four short positions. he will unveil them right here on "squawk box." we are live with jim chanos right after this [ music playing ry, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. evaluating patients remotely is where i think we have a potential to make a difference. (barry murrey) we would save a lot of lives if we could bring the doctor to the patient. verizon is racing to build the first and most powerful 5g network that will enable things like precision robotic surgery from thousands of miles away as we get faster wireless connections, it'll be possible to be able to operate on a patient in a way that was just not possible before. when i move my hand, the robot on the other side will mimic the movement, with almost no delay.

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the earnings parade continues. from facebook, general motors, we got your portfolio covered the names, numbers and market reaction is straight ahead get ready for the news making interview with famed short serial jim chanos. the founder is here to talk china volatility, his holdings, his comments minutes away. >> americans are feeling good

about finance, we have details ahead. the second hour of "squawk box" continues right now. >> live from the beating heart of business, knock, this new ys "squawk box. >> we are live at the nasdaq markets in time's square brian sullivan is hanging out with us this morning our news "squawk" interview of the morning, jim chanos. we will speak with him on a million things >> we need more than an hour. >> i imagine there is news to be make listen up. u.s. equities, take a look nasdaq up about 75 points. s&p looking to open about 12 points higher. a couple big headlines, pepsi is

out with quarterly earnings, the snack and beverage giant, forecast to sales improved in developing markets we should tell you the cfo, hue johnst hugh /* -- hugh johnston will b on after 10:30 it's hard to understand. they did well both on the beverage, particularly on the stack side it's a busy morning on the economic front two key reports 8:30 eastern time we will be getting durable goods orders and the weekly initial jobless claims the u.s. central banks will be out with his decision this hour and followed by mario draghi's news conference. >> it is earnings season, gm already rolling out its results.

phil lebeau joins us. >> reporter: they are earning ar there 1.43 per share, revenue coming in at $36.1 billion, well ahead of the estimate of $36.6 become in terms of where general motors made its money in the first quarter. north america, $2.2 billion. here in china, record profits of $600 million that's a record. gm finance also a record of $443 million. in terms of what the company did with its operating margin 7.2% pre-cash flow, negative $3w78 the company said we're not changing our pre-cash flow guidance for the remainder of the year or the whole year it is expected to come in at $5 billion. especially in the second and third quarter. they wrap up production. no changing guidance for the remainder of this year we will be talking to chuck

stevens the cfo. again general motors beating the top and bottom line for the first quarter. back to you. >> all right thank you very much. a couple of stocks to watch on the move this morning shares of chipotle, we have been talking about this they are soaring after the burrito chain beat forecasts we also saw increases in menu set drops in customer visits the new ceo brian niccols says they have begun a turn around. >> that stock is up by $11, a gain of more than 11%. we will hear more from the cfo at 9:30 eastern time. visa second quarter profits beating forecast and the company is raising its full-year guidance visa's seen card payments go because of rising oil prices,izing oil prices means higher gas prices, that translates into a higher dollar volume in transaction fees that stock is up just over 2%.

u.p. s. out with its earnings, a buck 55 per share, that stopped estimates by a thenny, average package volume 19.4 million that is united parcel service. you see the pre market the stock up 1.5% right now. coming in revenue even better $17.11 billion versus $16.46 billion. my suspicion this amazon.com this startup is helping package volumes perhaps. >> i don't know about them >> yeah. but 500 on my street alone every single day >> how about at my doorstep every single day >> in the meantime, we should get to our guest host of the morning, jim chanos, sources say t that kynikos is short only, the ursus fund, i don't know if you

are about to say one way or another zplu know i can't comment. >> i know what you can comment on, which is 100 issues. i want to talk china, elon mosque, all your new short positions. let's just do elon first because tesla. i know this is like the thing you think ab every single day. there has been a slew of relatively tough news for that company over the past month. >> i've noticed. >> you've noticed? >> yeah. >> is there anything that's changed, though, in your calculus about the company >> well a few things and it's great to see you all you keep moving sets on me, so i can't find you but -- >> we haven't changed channels, though >> no, that's true so one of the things that's sort of stunning and i think there was a piece of news overnight the head of auto pilot left. he is the accelerating rate of

executive departures and one of the things that i've learned in my zillion years of selling short is that probably the number one sign of impending problems is mass executive departures i don't mean one or two people i mean 30 or 40. >> you are talking about rats leaving -- >> i'll let you say that, not me yes. this is, this is becoming a torrent at tesla we keep this sort of list that is somewhat well known the tesla executive departure list it's now two pages. >> for a long time, investors have given elon musk license to effectively lose main i mononeye tries to build market share. that's been the model if you will >> right >> investors might have expected certain things to happen sooner than they did. they clearly have lots of production problems along the way. >> right >> you've gotten caught up in

this obviously because you thought it was going to fall much sooner than it has. >> tesla has been an okay short relative to this market. it's gone nowhere in four years. >> how long have you been short tesla? >> we have been short four years. so this stock as the market kept moving hire was in the high 200s in 2014. it's been volatile, but it really hasn't made any progress. so that's one interesting little observation. number two, when we started shorting tesla the 2020 earnings estimate was $20 a share it's now down to about $4 or $5 a share. so the problem is, is that this has been pushed out and pushed out and pushed out, but the bigger problem has is that porsche's coming >> how -- say that again >> horsh is coming >> with their car? >> with the missiney and audi

with the etron these are amazing-looking cars what tesla did was made these sexy i've always said that. elon got the model s out >> electric vehicles >> right, electric vehicles the modem s is seven-years-old now the big boys are coming. they're coming with sexy-looking cars at the same price point, faster cars, great features, great styling. what was unique for tesla is no longer unique. >> the question is when does the market decide they're no longer going to provide capital under this business model which is we provide you capital for this long-term thing we think is going to happen? what's the end point >> i have no idea. at some point investors will see the capital being incinerated. they're providing capital. he has to come back to market and provide capital and it's gone. >> you don't think, is there anything encouraging when you say they might be getting closer to your turning point here >> i think it's getting worse.

they talked about being a leader in auto pilot. they're a laggert. their technology is behind everyone else's. they're selling. >> mine too. >> they're behind gm, for example, who will be on the show shortly. we can talk to jim about that the cruise technology is well ahead of tesla's they're behind audi, bmw they're buying waymo >> what's the cost of carry, though, when you are short the cost of borrow is it extreme on tesla, short perspective? >> from most short positions you earn income. tesla is now down to negative 1 or 2%. >> it's not egregious, no. >> is there -- there's 180 almost million shares here >> when we look at also the shown ownership, elon musk as andrew said, it's like cult company and has a larger than life history when you look at your history, in your shorts, you think these

are bad stories or something funny going on is there a headline risk for you in that you have the cultive personally behind the company where you can pull a rabbit out of a hat at any time >> well, of course again, the only two companies i've ever seen in our history with an executive department cure like this was more recently valiant pharmaceuticals and a company in houston called enron. >> okay. so you -- go ahead finish >> so both of those were lead by cult-like leaders who had changed the paradigm in their industries valiant pharmaceuticals and enron in energy. right. >> let's be careful here, both of those companies ultimately there was another word involved, which was fraud. >> yep >> do you look at tesla and believe it's a fraud >> i think that mr. musk has crossed the rubicon in terms of making statements to investors

that he might rule later >> like what >> well, for example i don't think either of those are going to happen. there was a lawsuit filed recently which actually took testimony from 11 former executives who said in the lawsuit complaint you could finds it that they all told elon that there was no way that they were going to make the production numbers on the model three. they told him this he went out and made public statements >> these are kind of big things. >> that's kind of what his m-o has been all along torque do things people say are possible. >> when the stock starts going down people actually sue you >> it's not the f word it's not fraud you didn't say fraud >> i didn't say fraud, i said you may be making material millions statement, maybe

misleading investors remember, when he does these things, he raises money, he raises deposits. you cannot raise money -- >> just to be clear, you are not taking issue with the actual numbers you are seeing on a quarterly basis that investors actually can see >> well, there are some problems, for example the way they report gross margins. they report gross margins in a way that no other auto em does, they include r&d expense, certain things like warranty costs in their gross margin. tesla does not so it inflights tesla's margins ten full points. when they say our margin is 25%. it's apples-to-apples with other auto >> they don't have the dealer network. >> that's the problem. >> so you can't make the apples-to-apples comparison. >> of course, you can.

r&d is still r&d and warranty is the same they have to provide a super new yorker which others don't. >> how does that work with accounting rules that dictate that one way or another? >> there is latitude, industry standard is everybody does it the way i indicated and tesla zven doesn't. so it means their kq & a are higher than others they point to the more gin as the holy grail having thed e said that, their margins is 15% as reported, so it's lower, by the way. >> you have a theory, by the way, the theory is you think elon musk is going to leave the company? >> i think he will lead as ceo and move over to spacex. i think that if you read his conversation package approved by the shareholders, it specifically said he keeps the compensation package if he remains as non-executive chairman and someone else becomes ceo. >> he has to remontana the chief

products officer >> he better be, because everybody else is leaving, andrew >> don't you think it would be very hard for him to leave the company? >> i think it will be very easy for him to stay as non-chairman and chief products officer i think his desire is really to go over to spacex from everything i've seen you saw the "rolling stone" interview with him in november, all the glossy picture were at spacex, not tesla. besides, mars doesn't have an extradition treaty with the u.s. >> we can do two hours on you and elon musk. we promised the viewers we would tell them one of your new short positions before we get to the next commercial break. so let's do that i happen to like some, you know what i like on the set >> what do you like to eat on the set? >> donuts. i love donuts. >> i hope you are not eating dunkin' donuts >> i love dunkin' donuts >> i think they reported just

now. >> they did. >> same store sales were down, revenues were up this is a part of a broader team we will talk about, which is the franchise owners versus the franchisees. the we'll idea that this asset light idea in restaurants where everybody wants to sell the restaurants and not own them, but basically clip the coupons of checking royalties. and we've had this dichotomyno of restaurants, restaurant stock multiples going higher and higher and higher as restaurants, themselves have struggled. the boxes. i think at some point that has to come to an end. >> you are short duncan? >> we are short a number of these asset-light models so i think that they're representative of one in the coffee space, but in the burger space, we're short a number of companies and so - >> which ones? >> we're short restaurant

brands, qsr. they're a good example they have a publicly traded entity, affiliate, that is the largest burger king franchisee called carole's restaurant symbol taft. if you look at carole's restaurant which owns hundreds and hundreds of burger king and the fms of the parent qsr, it's night and day. >> that carole's is growing revenues but profitablies are floating higher labor costs higher commodity cost, all these things that affect the businesses but don't affect the franchisors. sooner or later you can't have a situation where the boxes are struggling and the parent is prospering >> that just doesn't work over time >> i want to run through the duncan earnings, they did report the street was looking for 52 cents. came in with ref view of 301 vs. the 303 million the u.s. was

anticipating comp store sales were down 0.5%. they're looking for 2018 adjusted earningsf $2.69 to $2.74. that is higher than the street is expected it at $2.63 zblchl >> it's down from last 84. >> last year i have ha 2.43. >> that'sed a judd it's none an adjusted basis because that's what thompson reuters looks at for the street expectations this is something that you think comes home to roost when can you put a time on snit >> again, as long as your restaurant same store sales are flat to declining, in an innationary siermt, your franchisees are struggling. >> i want to point out stocks were in the green until you started talking. >> well, let's source only donuts >> it was little i literally up 3% when it came out. you are used to an 8% swing. the bull case on duncan, though,

super simple which is this is purely still a northeastern brand this is a massachusetts company. they've got all this literally room to run west of the mississippi. they're going to do what duncan does by growing big. they will take over california that's the big bull case >> that's the bear case as well the problem is and bank of america did some great work on this recently. >> are you complementing analysts >> i'm complimenting a self side an litanalyst. they tookd at the return and pointed out the northeast restaurants the legacy, i was talking to one of the producers here before this segment, are north of 20% in the feanortheas. where people are used to duncan, it's a part of our culture in the west and elsewhere, where they're expanding the returns are as low as 2% cash on cash returns to the franchisees so this is not again a very economic deal for their

expansion. this gets back to the heart of the problem, that the boxes by and large as more and more of these franchisors grow by increasing units as they're not the same store sales as we saw this morning aren't growing. so how do you grow you increase the boxes out there or your royalty rate you can't increase the royalty rate because the franchisees are already struggleing at the current 5 to 7%. so everybody is growing units 5 to 10% we went to the orlando consumer conference in january. i think you guys were there. every restaurant concept we saw was planning on growing units 5 to 10% >> let's talk about chipotle they came out with strong earning, that stock is up by more than 10.5%. a lot is due price increases can you do it if you have somebody that comes in and changes things is this >> if you change the menu, people are excited we have no position in chipotle

about the ceo. interestingly, that's one of the few restaurant stocks that owns its restaurants. so they have control of the box. so it's a little bit different and so it's a completely different story. what we're concerned about is the dichotomy between the valuation of these asset-light companies and the franchisees, themselves one other interesting point, qsr is in a dispute with one of its franchisees. coincident ally the donut company tim horton's business is hurting the rollout has not been skechl the franchisees are suing tim horton's but tim horton's actually now has embarked on a renovation project to try to improve the look of the austrian andrestaur is going to foot almost half the bill on that what's interesting on that, if you look at the money they will put out for the renovations, it's equal to two years of the

royalty the whole story is we take money out of the boxes from the franchisees may now be getting to a tipping point where actually some of the franchisors will have to help the struggling franchisees. and that's a change. >> to be clear, restaurant brands international, are you short? >> we are. >> you have been short these positions for how long >> we have been short these things for about a year. >> but coffee is so hot, jim a lot of people don't realize, how can you be short duncans and tim horton's coffee is not going away, it's growing. >> no. >> qsr is in some ways a coffee brand. where is the volume going? >> it's not as much in the u.s it's mostly still burger king. >> but you get my point. you are short almost two coffee makers, in a way in. >> the problem of course is mcdonald's they've become the behemoth in breakfast and coffee and there is a resurgence. mostly again in urban

environments, but they have been declining for a while. now they're growing again. but it's a tough space right the breakfast surfapace ad coffee space is a tough space. a lot is being priced on the margin by the 800 pound gore rim la, mcdonald's >> staryou, be, what position? >> no position >> either way. jim, we got a lot more to come from you we should saywe reached out to this comment e company for comment. if and when we get them, we will bring them to you. coming up when we return the number of facebook users fighting back against the recent data from cambridge an lit ka. we will run you through the quarter and find out if it's a buying opportunity or not. later, we will go under the hood of general motors, a first interview with cfo stuck cheech

stevens. we hope mr. chanos gets in on that action. [ music playing you're gonna do great! thanks, dad! break a leg! aflac?! not that kind of break. oooh! that had to hurt. aflac?! not that kind of hurt. yeah, aflac paid us cash in just one day to help with our car payments and mortgage. aflac! perfect timing! see how aflac helps cover everyday expenses at aflac.com. he gets the best deal on the perfect hotel by using. tripadvisor!

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facebook out with a strong first quarter, ad revenue up 50% year over year operating income up 64% year over year. stock is on the move this morning following that number. here's mark zuckerberg last night on the call. >> i know that a lot of people have had questions about the business model and this is something i think we at facebook are very proud of. we think it is the right way to build a service that connects everyone around the world. >> joining to us break down the report and zuckerberg's comments on the call is michael graham from canacort community. i seen people says facebook

shrugs off the scandal and it struck at the end of the quarter st most has been this month this quarter. his last quarter will show any read on the fallout from this scandal? i can't imagine it will. >> not in the short term over the long term if regulators get a lot tougher on data use and privacy, it is going to limit the ability of facebook and google and others to target ads. so there might be a little bit of pressure. we probably won't notice it over the long term. for right now, google is powering ahead with its business model. it's growing its user base in the low teens, even though it has over 2 billion users ad pricing is going up steadily. all the advertisers we talk to say facebook is one of their best if not the best channel >> even now? so we done know about users. we'll know next quarter after all this delete your facebook. in europe. but your read on advertisers

shows despite the backlash and the media headlines, nobody cares? >> advertisers are still very much engaged with the platform you bring up a good points on users, in europe, where there will be deregulations going in at the end of may, we are going to see a little pressure on users. >> on the other side, that, small businesses haven't abandoned these platforms, what about the biggest advertisers? >> so far, no when you saw around the time of facebook's ipo a lot of the big advertisers, you know, had some backlash last year when youtube had some difficulties around content and objectionable content, a lot of big advertisers abandoned the platform but with this current situation with facebook a lot of large advertisers have stayed right in there. you know, they really formed sort of the core of the revenue outlook for facebook, but for small businesses which come on and bid on ads in a self service platform, they really can sort of move the needle one way or the other in the short term.

they're also right now showing a lot of loyalty to the platform >> you have any thoughts on facebook or the privacy issues surrounding these companies? >> i'm not on social media i got off u off twitter last year the stock is up 50% since then no, i don't. it seems like consumers continue to prefer as someone said utility over privacy that still seems to be the case. remember equifax, that was supposed to implode. they gave away our data. >> everybody uses it >> applying twitter? >> new sec rules, ces rules on our adv means any screen names you use on 26th i was posting under it. >> you remember it >> and it has to be disclosed. so we decided to move on him but it was fun while it lasted >> you know, i think that jim does bring up a good point which is that if you look at a lot of companies where there is a

public backlash, whether it's equifax, facebook, social media screams, i'm off, i'm quitting this and that's dead, this is doomed, it tends to not happen i think we are seeing that here. there is no indication, i'll repeat my question that you are seeing that all this stuff cambridge analiticca is facing facebook >> not so far. you can definitely see an instance where it could happen in the future. for now you see it in the numbers, facebook's users are still engaging with the platform >> so is it off to the races has all the stock been completely overblown in. >> i think for now it has. typically, we get in a situation with facebook, after q4 they tell everybody they will spend a whole lot of money and margins will go down what you see is they can't hire that quickly or spend that much money. >> operating income rose 64%

>> and they did on the quarter last night they usually would have given us a lower outlook for expense growth they raised it it's the first time they've done that very quickly, what is the price target >> 240 we haven't change thad for the last six months or so. >> okay. thank you, michael >> thank you >> we will get you caught up on today's top stories front and center i want to check on the numbers that reported earnings, homeowner dr horton beat quarterly profits. new orders increase by 13% in terms of units sold and dollar volume, hershey, a hershey kiss, beat estimates by a dollar 41 per share. now, hershey said it's the sales at the lower ends. coming up with everyone, at 55 cents per share, they're raising ear quarterly profit by strong

demand in european and asian markets, when we return, more from jim cramer? it's early this morning jim chanos is here we will talk carolina chihina, positions. much more on these memes and long as well take a look at u.s. equity features as we come back dow up 62 points [ music playing i was a c130 mechanic in the corps,

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still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. >> our guest this morning is jim chanos we have talked about duncan brands and qsr let's talk a bit about an old short for you. that's china >> i am. >> you have been bearish for china for a long time. >> forever, since the middle kingdom. >> i feel as long as i have known you, you have been bearish. >> eight years. >> what do you think right now about what's happening >> so we are as least short china in our global portfolios as in eight years. not because we are raging bulls on china we're not.

basically the rest of the world has galloped ahead as china, can the exception of the chine east internet companies, has gone sideways we shorted china the etf the index biggest companies, banks, state-owned enterprises the kind we were short was $41. it's now 45. up a whopping 10% in eight years. >> has that been profitable for you, those shorts? >> yeah, by and large we have been trading around, i think we basically made some money china in eight years on the short time, that's been hall of fame the markets have doubled and tripled everywhere else around the globe. if you were basically a china investor eight years ago, you haven't made a whole lot of money as everybody else made tons of money in the u.s >> for our viewers out there who may be short sellers, either hedge funds or by themselves, there are those out there. >> both of them? >> there is a few of you out

there. seriously, if you are looking at little trading advice i get here, if you are looking at shorting, how much is absolute performance -- you keep mentioning it's down this, versus that. how much is shorting success relative versus absolute performance? have well, again, relative reception is financial engineering, right if you hedge your portfolio, you are looking for relative performance. if you are not, you are looking for absolute performance i run a hedge fund, so most of our portfolios, 80% are hedged right? we're long independent cease but we're short. so for us, china has been a huge winner in terms of -- that's important. >> as we point out, being a short seller has been an impossible task over the last eight years or so as global marks has surged >> just on the short side. thus you are hedging, we have been long to markets since 1996. >> right >> so, you know, i'm not trying to predict the market. judgely we think marks over time

go up. >> broadly, you see a headline about either ali baba or ten crept or any of these guy, you think what these days? >> i think, and we were short ali ba bat we no longer are we covered when their attorney became the head of the sec >> that should tell you something. so i think that again when i hear people talk about china, making money in china, i always say where? they always say, i own ali baba or ten cent. i say you own one sector the internet companies those have become the mania in china the chinese high-tech companies, basically the big on ones >> dd may go >> there was a flood of ipos at crazy prices i would poipdnt out one interesting factoid about ali

baba which is amazing. ali baba's tangible equity, tangible equity, which is equity fine us their good will intangibles is actually per share lower now than when they went public. that's despite their investments, the profitability they made. why is that? ali baba and the others are financial engineering platforms. they're buying and selling companies to each other to affiliates, whatever it's head spinning >> but it's not a game you think you can win? >> i think at this point people got excited as a way to play china. every single hedge fund dinner i went to everybody was saying, i'm buying ali baba. do you know about econi? >> no. >> i don't care. it became amazing people were bike these things as plays on the chinese internet and not

understanding what they were bike so we stepped aside. >> your over all view, is that why are you the least bit short on china in eight years? >> really the u.s. markets, european markets and some em markets are much richer than china. there is more things to do >> more opportunities. >> more things to do in north america than chosen. >> you are saying that from a short perspective? >> yep but the china debt problem is very much there. >> so where are you short in china? >> we are still short a few real estate companies, second tier banks and odds and ends. but in terms of our global short portfolio, it's about 5% it used to be 25%. >> is there a country out there that just looks stupid to you? in valuation, everything >> i worry about two companies where we have some spec positions where the macroand the politics just look terrible, would be nigeria and south african. i think south african has had a huge rally on the back of the

new president, but it's a country with really really really kind of big structural problems and i think that, there's some issues there, the same as nigeria. it's very dependent on oil revenues and afferica has some major issues >> jim chanos is our guest host. we talked about two-his shorts, dunkin' donuts and qsr restaurant brands. we will talk more about them later this morning coming up, the ecb keeping the exchange in europe and a new poll shows that the new tax law is cushioning the blows from the bottled stockmarket. we'll take a close look at the results and volatility as we go to break, equity futures are indicating a slight jump at the open about a 63-point dump? dow at the open.

"squawk box" returns after this short break. [ music playing

>> welcome back to "squawk box." a new poll released showing the new tax law is cushioning the blows from the volatile

stockmarket. >> reporter: good morning. there has been a lot of angst over that volatility in the markets. but is it really making a difference in the way households view their bottom line the answer is no, at least due to answers out today, that's in part from taxes. they future together personal sanction out today for years the stockmarket has fueled a lot of those gains in the index, but not that reversed during the first quarter the market actually weighed down the index for the first time since the third quarter of 2015. the news is that it was all offset by the new tax cut the group's calculation of household tax burden dropped 4.2 points from the fourth quarter of last year >> that is a big swing it shows lower taxes are helping households whetheather the blow. tax cuts aren't the only thing

bolstering finances, that incorporate data on inflation, under employment, loan delinquencys it's pushing american's satisfaction to another record high becky, back to you >> okay. thank you very much. we have been waiting for rate decision from the ecb that will hit any moment now take a look at futures this morning. a mixed day in the markets yesterday, we did see the dow up higher by about 78 points because of help that we saw from boeing that was the big earnings report yesterday. let me el e tell you right now the ecb is leaving rates unchanged. not any surprise to the market ecb futures is up by 13 the nasdaq up by 75. our guest host today is jim chanos another stock i want to talk you about is one to cause big problems for the dow after looking leak it will be a big performer, caterpillar, that was another one of the shorts you had for quite a while. caterpillar saw a rough run.

then this week when earnings came out they talked about how demands was up in all mark, they saw a pretty bright future >> that worked until the cfo on the calm said, this could be the -- >> high water mark. >> what do you think about this? you are not short the stock anymore? >> so we haven't seen each other in a while so one of the things a year-and-a-half or so as i recall caterpillar said when the stock was quite a bit lower and we were still short, caterpillar said things remember gettiwere . this was in '16. we continued our order books continued. they had a number of quarters terrible after that rate of change had changed and perception had changed so we said, okay, things are getting better >> they were short around the '80s >> somewhere 90 the 100. >> okay. >> and stock doubledch now the company is saying basically well maybe rate of change might,

things are still good but rate of change might be peaking that's how i read that not that profits were going to fall apart, but the best is behind us in terms of year over year growth most likely. >> that's what i understood, too, which is why i was surprised the rest of the markets peeled off. >> however, there is a dealer survey they put out, which is a rolling three-month survey of dealer caterpillar does. >> that peaked a few months ago and has now rolled over. so i think those, that coupled with what was said has the people who were maybe buying the stock a couple years ago, when they said things are now starting to improve, is this the analog analog >> you don't have any position >> i have no position. >> jim chans so our guest host this morning we will continue to talk to him about a lot of positions in the market in the meantime, when we come back, cfo chuck stevens on the quarterly result, he will be

joining phil lebeau after the break. don't miss gary kelly with the "squawk on the street" gang. a lot to ask him about the accident from last week on southwest. stay tuned "squawk box" will be back after a queb a quick break. [ muc ayg siplin ♪ slap on some cologn ♪ i'm 85 and i wanna go home ♪ ♪ just got a job ♪ as a lifeguard in savannah ♪ ♪ i'm 85 and i wanna go home ♪ ♪ dropping sick beats, they call me dj nana ♪ ♪ 85 and i wanna go don't get mad. get e*trade, kiddo.

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all right, let's talk gem motors, gm beating estimates on the top and bottom lines and cfo chuck stevens joins us now to talk about it. by the way, i should know our colleague and friends phil le beau in choep. he will join us in a couple moments when he is ready let's start on china, your chine unit sales look good 9 ex-000 or so units, despite all the trade talk, have you seen any slowdown in sales into china? >> thus far, no and we had, you know, an outstanding quarter in china, record equity income of 600 million. we continue to perform very, very well. we are excited about our portfolio there. boat in our local brand by june as well as our foreign brands, kev ro lay, buick and cadillac so we expect to see that's strong year of equity income in china. >> cadillac sales world wide up 10%.

but your gmc brand, the trucks up 21% how long do you think, chuck, that big truck, big profit trend can continue >> well, the truck market continues to be strong i think that, you know, we're very, very well positioned, given our product launch cadence and we're coming out with great new products both silver ra do and sierra really excited about that the launch is very much on track so we're excited about the continued strength in the market but our positioning as well. >> we have a guest on, jim chanos, short tesla, you may have heard about them. they make electric cars, so do you. we spoke with mary barra last month in houston, very bullish on the bull, vis-a-vis the electric car market. how do you see the bolt do is it meeting expectations is it surpassing is there any indication that you through the bolt may be taking mark share from tesla?

>> well, i would say in the first 12 months of sale of the bolt, we sold 25,000 units it's the number one electric vehicle at least from a main stream perspective it is the architecture for which we will deploy autonomous vehicles it's building the renovation for our zero zero zero strategy on a go-forward basis we will continue to launch electric vehicles. we like the success we had so far. that's the first in many electric vehicles that we'll be launching over the next quarter of years >> you see your market marion, you laid out zero, zero, zero, based on the all electric future what would be the biggest stumbling block in is it the availability of lithium and cobalt for the batteries the charging stayings? just consumer ret sense? what's the hindrance to that shift? >> yeah, i would say the biggest issue, you almost have to look at it market by market the

biggest issue in the occupation, for instance, will be the regulatory environment and consumer acceptance on a go-forward basis obviously, zero emissions, all elect trek future is way down the road internal combustion engines will be here in significant volume for a long period of time. but you know, clearly, we're milwaukeeing towards that zero, zero, zero as a investigation. that's why we've got the product launch cadence that we've talked about from an electric vehicle perspective. so we're ready, so we can compete so we can win as the market continues to grow >> hey, chuck, i was really impressed when i saw the sales for cadillac were up 10% i was imsfrpressed until i sue buick sales were up 17%. who is buying the new buyers of these things >> well, i think what you are seeing is a significant shift in both of these brands to crossovers and you know in the first

quarter, for instance, our new crossover lineup, including the gmc terrain had record performance kind of across the board, both the chevrolet the gmc and in buick with the enclave. that's where we are seeing strength with cadillac, we are very encouraged by thes performance and crossover perspective. we are up 10% year over year but we will be launching all new xt 4 later this year we will build up the crossover lineup in cadillac over the next couple years we are excited about the pros pe prospects there as well. >> chuck, great to see you we have more on the latest news. >> reporter: rear admiral ronny jackson withdrawing from his nomination to be the new head of the department of veteran affairs. ronny jackson had come under fire over accusations that he had literally dispensed medications, perhaps been

intoxicated on the job in a statement, jackson says those allegations are completely false and fabricated and that he did not expect to have to dignify baseless and anonymous attacks on his character and integrity. he says he is regretfully withdrawing his nominations, saying that they have become a distraction for the president and the department ronny jackson withdrawing as a nominee for the department of veteran affairs. back over to you interest elon, thank you very much. when we come back, for rob portman, a member of the foreign relations and homeland security will talk about foreign affairs the president i -- president's agenda on trade. stick around, "squawk box" will be right back.

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the busiest day of earnings season under way peps so the biggest numbers. investor jim chanos live >> i think that many muck has crossed the rubicon. he may be making material

misstatement, may be misleading investors tmts short seller renews the stocks he is betting against right here on "squawk box." breaking news the ecb out with its latest raise decision the president will speak we will bring you the headlines for the news conference as they happen the final hour of "squawk box" begins right now. [ music playing [ music playing >> live from the most powerful city in new york, this is "squawk box. >> good morning, everybody welcome back to "squawk box. we are live in time's square our guest host this morning is jim chanos he is the founder and president of kynikos associates. in the meantime, though, i want to let you know about the ecb, moving interest rates unchanged.

the central bank also making no changes to its ongoing bond-buying plan all expected news to the markets. america is taking it in stride with the future still indicated up 78 points on the dow. is s&p up by 13, nasdaq up by 7. europe the green arrows are up, you see in early trading it looks like the kak is the big winner, up by half a percentage point the dax up .2 of a percentage as well take a look at what's happening with the dollar. we talked earlier this morning habit how that could play out the dollar, if it strengthens, what that may mean it looks like it's up against the euro, it's down ago ens the yen and the pound. president mario draghi is set to speak in the next hour. a very busy raft of earnings coming in. big one, pepsco reporting 93

cents per share. the beverage and snack giants reaffirmed it's four-ier forecast a programing photo, you don't want to miss this. the cfo hugh johnston will be on at 10:30 eastern team. also, gm earning $1.43 in the second quarter beating the consensus of $1.24 talking forecast and made record revenue in china and for gm's finance unit and ups quarter earnings $1.45 per share, beating estimates. southwest airlines had a profit of 75 cents per share a bit shy of the forecast. southwest says it is benefitting from a lower tax rate in its earnings release they say the highest priority is safety and southwest continues to cooperate with regulators, looking into that accident that

killed a passenger we will hear more from ceo gary kelly at 9:00 eastern time today. meanwhile, american airlines reported 75 vents cents per share. revenue below forecast it has nothing to do with american, just a passenger they found a dead rat in her checked bag. >> what? >> her bag was checked it smelled it's not american. i thought you'd appreciate the dead rat in the bag story. >> did they charge the more for that >> it depends on what it ate i don't think it had free drinks in cargo. >> people are at home eating breakfast. >> not anymore let's get you caught up on news out in the last few minutes, white house director ronny jackson withdrawn to head the veteran's affairs department this comes amid allegations that he suspensed drugs to after is

thater and that he wrecked a government car while intoxicated. he says in a statement this morning those allegations against him in his words are completely false and fabricated. however, he is taking himself out of consideration he thinks at this point it has become a distraction treasury signature steven mnuchin is scheduled to visit china in an effort to ease trade tensions joining us about that is senator rob portman of ohio the former u.s. trade representative and omb director who serves on finance, budget energy and foreign relations committee and senator portman, thank you for being here today >> becky, thank you for having me on. the last time we were on you announced secretary tillerson is leading. and this time ronny jackson is leaving. thank you for having me on, on thesemomentous occasion zpls what do you think of ronny jackson's decision to leave the

va >> i think it's right for him. he w06d a bruising confirmation fight. it wasn't cheer he had the votes. there were 50 foet voting with john mccain can't be, i think he probably made a right decision the va is the second biggest agency in our government it's a huge, complex organization i'm looking for a manager, somebody who is veteran and a doctor would be great the most important thing is the person knows how to manage a complex organization. >> does that mean you are not going to support jackson if he had gone forward with that >> i was going to follow the confirmation process as i always do, i do think a management person is really needed. >> speaking of nominations, mike pyeongchangio, his nomination made it out of the foreign affairs committee that you serve on yesterday what do you think? will he be confirmed by the full senate >> he'll be confirm. it will be a narrow vote i'm not disappointed in. that it may be 53, 55 votes for

him. john kerry got 94 votes. hillary clinton got 94 votes you know, it's typical forring iss of state, you looked at the qualifications and if a person is qualified, then you assume that are you going to allow the president to pick the person who he thinks is the best, if at all. that's not what people have done in this case he is clearly qualified, graduated top of his class at west point, army officer, magna cum laude from a local high school the guy is bright he's capable he's done a good job at the cia the state department needs a moral boost right now. he knows the issues with north korea, so i think he's the right person i'm disappointed we don't get more bipartisan support to give him more momentum as he goes into the job he will got confirmed today. >> are you the former u.s. trade relationship we know thatting is mnuchin is headed to china in the next few days, according to president trump. talk through those tough trade issues and trade negotiations that we have been hearing? >> well, it's good that he's

going. we talked about this issue before, but there are four outstanding trade issues the korean free straid tratrade was renegotiated that was a success nafta got to work quickly on that as you know, by next week if we haven't done that, the steel is in place for korea and mexico. we need to modernize it. we can't walk away from it and we have the 232 case is i case the steel one the one senator mnuchin will focus on the intellectual property issue in china that itself a big issue. we talked about this before, china does not play by the rules, whether it's a requirement that chinese companies have a majority share in a company and they take the technology or whether it's the hacking or whether it's simply the requirement that companies provide intellectual property, whether it's intellectual processes or traditional i.p

it's not fair. we don't require that over here. i think we should look for reciprocity. >> let's tuque about nafta we are down to the final hours of when a negotiation can be reached or when a deal can be reached before mexico's elections. if we don't see something before that, we are going to have a potential new president to deal with in mecca, potentially one that doesn't look too kindly at the u.s. where do those negotiation stand out? how confident do you feel there will be something that's reached? >> my sense is they are furiously negotiating right now. as we talk, trying to finalize some issues. i this i they are very close, canada and mexico would both like to get this behind them for their own purposes, their own elections, it's certainly in our interest not to have this dragged on the president is now not suggesting that he's going to withdraw, but he is ug ising that he wants a better deem and i think there are opportunities to improve it and upgrade it you know, it's been 20-some

years. the world has changed a lot, including electronic commerce and standards for labor environment and so on. so i think there is an opportunity to get something done in the next week. i hope they'll do it. >> we have the foreign minister from australia join us this morning. his point is that australia is looking to diversify as much as possible they have a lot of trade talks coming up. forget about the tpp he says the 11 countries are looking to firm that up. not to negotiate all of it to bring the united states into it. his point is they are looking to diversify with a lot of countries so no one countries can hold them up for ransom. i just wonder if the united states continues to hit our partners so forcefully, are we going to be in a warthogs where they diversify and they don't rely on us quite as heavily? >> that's the danger this is a ricky business

but i do think with regard to australia, it's an exam of a countries that one we have ha free trade agreement with them although we're not a part of this larger 11 countries agreement, more than half of the countries in that agreement, we have a free trade agreement with we are taking advantage. second we have a surplus, by the way. we have a surplus area owl u e our free trade partners. yet 47% of our exports got 7%. we have a surplus, barely but a surplus. third, australia has become i think increasingly dependent on china particularly for its natural resources. i think that is a potential issue for them i would hope the united states would not go things that would make it more difficult for countries to rely on us and withdrawing from nafta obviously would be an example that canada and mexico would have to look for other sources, other places to get what they need.

it it's tough to call back that it's a level playing field for american workers no question about it we have to fit for that. we have to be sure other countries don't look elsewhere america already exports under its weight we need to export more that's good for economy and higher wages, better benefits. >> senator portman, thank you. i want to thank you for being our go-to breaking news senator. >> we'll see next time, becky. into is to talk, see you andrew. >> coming up, when we return, news out from snapchat sfe spe spectacle 2.0 is here. roundup for lawns has arrived to put unwelcome lawn weeds to rest. so draw the line. roundup for lawns is formulated to kill lawn weeds to the root

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you know what's not awesome? gig-speed internet. 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. welcome back to "squawk box," news breaking in just the last few minutes, snapchat sticking with shades, julie boresen has the details on spectacle 2.0. >> reporter: these are

spectacles 2.0 they're the latest version of the camera-equipped dallass that living to your snapk you can start a video or take a pick so what do you do for effect e extra 20 bucks they're water resis tant can you take photos and videos, they're faster transfer fees and come with the option of prescription or polarized lenses last november snap took a write down on spectacles due to unsold units. the company says it's a failure of the business model around the glasses, not the product, itself this time the company is selling them on spectacle.com. none of the retailers, i poke to the vp of hardware, mark rand him, they are committed to hardware over the long term. it was nearly all of 3.5 billion snap captured every day on the phone the company wants to take

a leadership role as its camera technology evolved so with lackluster results from the first version spec cal and failure of google glass, there are still big questions about whether investors will seek profits in connected eye ware. snap shares are down about 15% from their ipo price then the company reports earnings after the bell on tuesday. so when we talk with folks at snap, we have to see if they are noticing people start took weic. i think i like these ones. >> they definitely look better >> i don't know if they were such a fad at the time to the extent that people even bought them. >> reporter: a fad it mate be a little more like glasses people will wear all the time they figure if they can treat them like a pair of raybans him they cost about as much. maybe people will wear them when they're not taking photos or videos they will get into the groove of

taking them more on occasion interest great to see with you your glasses on. we will see you, in the meantime, i want to get back to our guest host, jim chanos founder. he says he revealed in the last hour, he has been short duncan brands and tim horton's and burger king. he has two more shorts to talk about in the health, what we ka ul the health care arena >> yes >> tell us what's going on >> so we have been talking to clients for a while now about a theme in our portfolio called wipter is coming ability the u.s. health care system. >> #winter is coming >> #winter is coming basically our view is that deflation is starting to take hold in various areas of health care in particular we have been really concerned about the rent seekers the people who have been on the margin, ripping off the system >> what do you mean? >> well, basically, their business models involve in some

way either deception or aggressive use of reimbursement. for example, emergency rooms, there was an article about a company called envision health, which we are short one of the two companies, we're going to discuss, in the emergency room doctor business right. hospitals farm this out. groups of doctors. and the "new york times" had a study from the professor at yale talking about surprised billing. you go to the emergency room you sprain your ankle. and you get two bills. one from the hospital. a separate one from the emergency room, with i is out of your new yorker. you have to pay $8,000 or some crazy amount people are upset about this. they're so upset about this that the largest payer of envision health unh is suing them and put up an anti-evhc website basically putting out how bad these practices are. so it's not good when your largest payer is suing you >> why >> again unh customers are being

surprised by finding out their i they're going to hospitals out of network >> i don't know if that's the insurers responsible for tr the customer's patients? >> the customer, patients are responsible for above the carriage >> unh puts itout of their new yorker because they're so expensive? >> for whatever reason they explain it open their website. this got us to delve a little deeper because oun one of the things being a grey beard as myself you have muscle memory on the short side we were short a company in the late '90s called ficor it was the first company that got into rolling up doctor practices, meaning buying up practices and taking it public the idea being they would do back office billing. all the stuff doctors don't like to do. >> which we hear a lot about today. >> exactly >> the two companies are in vision health and a company mednacs. both publicly traded

interestingly, both companies put themselves up for sale in the last handful of months there is a reason why. it became in the late '90s, eight of the nine went bankrupt. >> wow >> including ficor the reason they did, they were based on a silly and misleading premise, they would pay the doctors up front cash payments for a management contract. typically seven years and hire the doctors for below market salaries and the reason that doctors did this by and large was older doctors were getting ready to retire, sell their practice anyway, they could convert income into exam gains all right. what enabled the publicly traded companies to do was capitalize salaries it's anking game they're paying the salaries up front calling it an acquisition. >> all right let me explain something that mooipt moo it be pointed out to

be different this time >> yes. >> that would be obamacare and all the regulations that got put down on doctors. i talked to every one of my doctors. they can't keep up with all the bureaucratic red tape they were expected under obamacare some there is a big incentive for doctors that may not have beened in past. i need to roll up, i need somebody to take care of the front and back office. >> there are some that can do that without selling your practice at the end of the game this is an accounting game it's simply, let's pay a lump sum up front we'll keep the doctors for five-to-seven years the reason we know this, is i have in my hands, mednacs sued a group of north korea anesthesiologists at the end of their contract and are going directly to the hospital they deal with and negotiating themselves for the next set of years. >> because my up front lump payment is done and i'm out. >> mednacs was paying them $400,000 according to lawsuit. what is creative about this lawsuit, it gives you the entire

roll-up position business plan right in this lawsuit. all the dispelosiiers. they were paying them $400,000 after they hired them in effect, bought them out for a lump sum and at the end of the term, they offered the doctors $850,000 a year and a $50,000 bonus for resign zblk they said it's not enough if i can go directly to the hospital >> so what these companies are doing is they're basically saying, they're hiring doctors for seven years and providing services for them, but here's the fun part they're writing off these contracts on the balance shoot mednacs over 50 years. >> 50 years? >> 50 years. envision is writing them off over 40 years. so this is just simply accounting nonsense. >> it's not illegal? it's an incredible depreciation.

>> it's legal but it's silly right. >> what's the rational for that? half a century right there? >> you have to ask them. this is exactly what ficor did in the late '90s, okay, when the doctors rolled you a, they had to re-up envision took a half a billion charge for these contracts, a writedown of good will while they're buying, yet they bought another 750 million of contracts out. the whole thing is insane. both companies have put themselves up for sale hoping private equity will buy them out. but private equity, win has been active in this space has got to now be seeing what we see. >> i'm saying this is a dangerous position for you to be in to some degree or a new investor to get into you believe nobody will buy these companies? >> well the companies are already trading at what they call their ebitda. it's not ebitda, because they're not factoring in obviously the

payouts. >> but, basically, this is a gamble on no take overor take under? >> i'm betting they're worth nothing. the previous incarnation they were nothing at the end of the day, owl u all of the assets walk out the door, yet have you them open your books for billions and becomes of dollars >> right >> you have to re-up >> if they think those positions will be working there 40-to-f50t years. >> physicians in their 40s and 50s. that's the problem anybody interested in this buyout story has to look at the ficor his to irfrom the late 90s. this happened before this was silly, how did we fall for this 20 years later, they're dock it again. >> this by the way is a new short position, how long have you been been short in stocks? >> we have been short in vision since the middle of last year

and mednacs this year. >> are they both down? >> thing tos are down him we're up >> wow okay take a look at the stocks right now on this news, envision health care down 5.5%. mednax down 30i7b 5% >> i want to be clear, we need to reach out to the companies. >> which we have >> which we have i knew we did with duncan and qsr if you are just joining us, you think it goes to zero? >> the visual equithe i is extremely negative both companies are leveraged >> just to be clear, because these are such sensitive issues, we are take e talking envision and mednax, not duncan and qsr >> both have put themselves up tore sale. both appear to be profitable we believe economically they're not close to being profitable. all you need to do is look at

the cash flow statement and see the amount of doctors they have to buy out that's in the capital section in the investing section and those contracts are basically like maintenance capex. they've got to replace the contracts rolling off. once you had just for that you see there is no cash flow. this is the inherent problem and they're already levered. so the ability to lever them up for the first time is over both companies are leveraged >> i do want to say, we disagree, because are you coming on, envision health care, there's 16 analysts, overweight is the average rating $45. seven above it mednax has a hold but a slightly higher target as they frequently do would disagree with you >> i bet you they weren't even born in the '90s to see the collapse >> jim, thank you. we are reaching out to those companies. coming up, morgan stanley,

we'll talk market strategy, global market, everything there, you see him getting prepped and ready. we'll be right bacwi me k thoras well as our guest host jim chanos stick around people said it just made a mess until exxonmobil scientists put it to the test. they thought someday it could become fuel and power our cars wouldn't that be cool? and that's why exxonmobil scientists think it's not small at all. energy lives here. when it comes to travel, i sweat the details. late checkout... ...down-alternative pillows... ...and of course, price. tripadvisor helps you book a... ...hotel without breaking a sweat. because we now instantly... ...search over 200 booking sites ...to find you the lowest price... ...on the hotel you want.

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all right, welcome back here to "squawk." we will get more with jim chanos, unveiling two new short

visions. seeing those companies going away, short tesla as well as duncan brands and qsr the parent company of burger king meantime, we are seconds away from the march durable orders and the weekly jobless as well, the future is indicating a higher open for the dow up 75 points, gaining team all morning, let's get those numbers and rick santelli right now. >> all right, 209,000 on initial claims a drop from 233,000 continuing claims, rise, on a revision but they drop from 1.866 o1.867 let's get to the durable goods numbers, shall we. we are expecting a number less than that and last final look wasup graded from 3 to 3.5%, pretty solid he could see the number fall off. it moves to senior. >> reporter: less than we're expecting. if you look at capital goods

orders, non-defense, proxy for business, capital spending what you see is a negative number minus 110, now, if you look at last month, which was a nice number initially at one point before that gets downgraded to.9. if you look at shipmentings, versus orders, same scenario, minus 7 10s. look at trade balance, which is a deficit for march, we're expecting minus 75 become. a lit less of minus 68 so in a sequential fashion, considering trade and the foreign exchange dollar relationships on trade is big under the magnifying glass that's a big drop from last look at minus 75.9. so a whisker shy of 76 billion moves to 68 billion. are we done? no real inventories. retail inventories dropped .4. wholesale inventories month over month increase .5.

all those inventory numbers can figure into retweaking gdp number, we get a first look tomorrow ecb, maria draghi didn't do anything, a press conference coming up. we see going into the second week of january in fave of the dollar, weaker on the euro and rates 303. >> that one day at the last trading day of 2013 still stands at an inter-day 303 303 coming into our time zone. we dip slightly under 3% him brian great to see you back to you. >> rick good to see you from afar thank you very much. joining us the chief strategist ahead of global markets morgan stanley investment, thank you for joining us what itself the number one global theme have you right now with emerging marks or anywhere

else it seems to me central banks dominate in our headlines forever s. that still the case >> i think the money is changing i think this bull market at least i believe is very liquidity driven if the price of main i money is driving when the allocation of most people is you see the bond and retail investors, this is the lowest levels they've had. the fed made the cash track due to interest rates. just this change coming i think a major portfolio adjustment that people have to make out >> is that dangerous let's not call it cash let's call eight margin of safety a pad if you will, something that can cushion the blow of protection >> right >> is it scary that cash levels are this low globally? >> i think so. this is a yield which we have spoken about here on this show

before, there many peaksco incrieding this year, peak economic growthing peak liquidity and peak [ inaudible coming into this year. therefore, you are seeing this short of marketplace change, that price of main has been wrong over the last decade >> i assume you must agree with him 100% >> you always aseoul these things >> am i wrong? >> i would certainly say particularly in marks pegged to the dollar, right the fed is leading the charge so putting pressure on those economies to raise rates, to keep their currencies in line, yeah, the price of money is changing, for the last 30 years, 35 years, rates have been coming down by and large. i started rates were 14%, money mark was 10% it went to zero. >> that's only sort of slight cushion for the international markets here the dollar really hasn't reacted

many up to this change because this is very much a u.s.-centered event in terms of what's going on. so few look at the dollar, it has barely budged, like even for the past few months as interest rates have gone up this i think is something that should help international markets a bit, the dollar is still in a bear market few look at the history of the dollar the dollar svend tends to move in long cycles in five to seven years in a range two years, after havinged a ha bull market for five to six years. so i think that is something that provides some cushion i think to international mark. but there is no doubt the u.s. is the most expensive market out there and the place of money is changing out here, at a time when economic growth seems to have peaked globally >> if we go up 3, 3.5% i think most u.s. debt holders can withstand that it's a shift >> that's what i'm trying to say, it's so low >> it will ends how? >> i think people will up their

cash holdings. >> by selling what you need to either a find a pot of cash in chanos' back yard or b sell something to raise that cash, what are they sell something. >> we're seeing slowdowns him we haven't seen massive selling the stocks and bonds barely budged i think that at least. therefore, this is more by a thousand cuts. it's not something in terms of an instant fall. >> 5,000 basis points. >> i think that's what's going on >> first of all, i love you think i not only have a pot of kark, but i have a back yard, but in any case, one of the interesting things that you bring up, as a corollary, is how the dollar by the way has helped these first quarter earnings and a lot of people haven't kind of pointed that out, back when the dollar was a head wind, you have companies talk about the currency effect. >> i have heard a couple companies, big companies that mentioned it's a part of the

help after the demand and tax cuts. >> i've only looked at some of the big guys, companies leak ibm and coca-cola, it was 300, 400 basis points keep in mind, when it's a currency effect for a u.s. company, it hits revenues, a couple hundred basis points. it goes right to the operating profit line. right? you are converting revenue, costs of goths goods and all that stuff is in dollars so it has been a meaningful part of the profit growth in, if 84 over year because the dollar is meaningfully weaker first quarter than first quarter a year ago will investorsgive a multiple of that? maybe that's one of the reasons we're seeing diguess in the multiple earnings? someone will say the tax act we knew about the taxes him i didn't realize currency would be half of the problem. >> it's been tough to be short you pointed this out yourself over the last eight years, where

uma ache lot of money is the hall of fame of short selling. do you think it will get easier as interest rates rise it has been so low, it has not been gravity on prices. >> one thing that brian will allude to earlier, it's been no rebate so when i started my fund, before anything happens, we were earning six to 9% on our short rebate, either cash proceeds and short sale and so that was a meaningful part of short both absolute and relative return. >> that rebate went to zero. in effect it was negative for a few years when rates were close to zero. >> i didn't want to get mechanical on it a lot of shorting what people think, oh, i ha at this time company the stocks will go down. there are so many other costs associate. the mechanics matter this goes to it. >> it's a way to raise money, shorting to hold cash, which you are naked short or buy stocks or something. right. >> right >> short sales actually generate

cash and so not having an interest rate component on that has hurt hedge funds and short sellers. >> i think the other thing to keep in mind the margin is high as far as the mark is concerned the way the snarkt, it's been really high. i think that's one of the things we also have to sort of keep in mind i think the big sort of issue here is the fact that we have had this massive bull mark, but there are three bs, which have always been a concern, which i think are going to come back into focus for me those three bs basically are demographics, deglobalization and i think the place that those bs will come back into focus into the conversation over the next few quarters i think that this demographic point is still so misunderstood. why can't economic growth ba back to three, 4%, when your labor force is growing at a pace, it's hard to get back to the growth base and you still have actist iive pliers. >> richar, thank you for joining

us we have more with our famed investor jim chanos. he told us in the last hour some companies he is voting against, duncan brands, envision and mednax envision off by 4.8% in the meantime, we are monitoring mario draghi's news conference, we have the highlighting up next "squawk box" will be right back. o to their retirement savings. that's because they have protection in down markets.aif so they can focus on new things like exotic snacks. talk with your advisor about shield annuities from brighthouse financial- established by metlife.

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welcome back to "squawk box. mario draghi the president of the central bank giving his press conference, right now in his remarks saying that growth is subdued, of course the ecb leaving rates unchanged and keeping with its policy of quantitative easing. that's supposed to run through september. draghi says it's a moderation in dpret after strong growth late last year. he says those are temporary factors that have dampened activity on under lying innation, he says it's subdued, looking for 1.5% the ecb is driven by an inflation mandate not both inflation and employment like this u.s. federal reserve. he expects growth to remain solid and he says he remains conversation that inflation will come back. still an ample degree of a combination or monetary stimulus is needed. he said to get that inflation

back guys, there will be a month he comes and says what happens after qe winds down in september. this is not that month, guys. >> all right steve, thank you very much, steve leishman let's get back to steven chanos him he is appearing next week in new york city the future of financial draud. definitely a specifically guest. >> like the guest. >> are you the guy that took down enron you found out what they did before they did. you will be talking to the former enron ceo, i cannot agree he's agreed to talk to you >> ucal merkley law is the main sponsor through someone we know, i know brian knows and herb greenberg, a friend of cnbc and "squawk" and we're doing this in

new york at the auditorium next wednesday and we were able to get with a little bit of pressure andy fastow as our keynote lunch speaker. after he speaks, anthony mcclain, who did smartest guys in the room and i will be questioning himch kind of exciting >> how did they agree to this? i can't understand >> they didn't send me out to ask him. but he did agree >> do you guys know each other >> i've never met mr. fastow just by history. >> does he know you are interviewing him smr yes, he does know schnot giving away the store, what is one of the things you want to know, all these years later? >> you have to come to the conference, we will be asking at one point do you think you crossed the line this wonderful theory i teach in my fraud class at yale of legal fraud. she makes the wonderful point, it's where corporations do every

single thing by the book as said before, this isn't fraud lepule, yet there is an intent to deceive. this is how most companies do it they check all the book, it's okay by the auditors and the external lawyers the entire pattern was deception. >> that wasn't the case when ron. >> it kind of was. they were not prosecuted for accounting fraud everything they did in the rafters. >> they thought things were going to turn. >> well. >> they're like the family at home who keeps rotating credit card debt figuring they will strike it rich at some point not all of it. i'd love to get fastow's insights as to how he saw that and whether he thought that at any given time he was either breaking the law or economically

misrepresenting things this is important. >> maybe to andrew's point, you are not feeling well you are powering through it. is and beth any has done spectacular work on this as well i wonder, is there a time fastow or others, any other company, not just enron, when they look at each other in the board room, guys, we've gone from creative to crooked do they look at each other and realize, now we're breaking the law? >> yeah. the answer is probably not but on the other hand, you know, you can get, obviously, prosecuted for this stuff. enron, the ex executives were prosecuted basically for lying to investors that's what they went to jail for. so often we have to draw this distinction. it's an important distinction between that's not fraud legally to, yeah, except i lost all my money. >> sorry go ahead >> when this was supposed to be different, i remember having a

conversation with you unfortunately years ago, i don't think they pros skewed and sarbains >> i got a call, a famous journalist said, they were outlawed we know how that worked out. so really was sarbanes did is codified things that are illegal. you can't misrepresent yourself to investors they made the penalty stuff. they made people sign documents. all that stuff was basically illegal anyway you be what we will explore at the conference is various ways investors and business people get defrauded, which they may or may not go to jail fraud >> you think there has been a fundamental shift in the way these frauds get prosecuted? >> i'm not the only one, jessie eason berg one of our guests wrote a book about it. government loathe going after

these things because the cases are complex and they do have to say my auditor signed off on it. my lawyer signed off on it that's bethany's concept being so important also there has been a general reticent for prosecutors to avoid losing cases >> the hard case you may not come out with a win. >> right >> and in fact in the gfc, we didn't see them try. it's a minor exceptions. so that's kind of what we will talk about, right? we will talk about societal impact what externalities does this bring to our economy when people feel fraud has not been prosecuted does it make people want to do less bring down multiples does it ra iz the cost of capitals for companies >> do you think everything is against you as a small investor? >> correctly maybe not politically. >> absolutely. >> these are sort of broader aspects to what's go to jail fraud and what is it

what is the impact on society as a whole. that's where we hope we go with this conference. it's our first year. >> can somebody go ahead mednax on the phone here? or eninvestigation health. i don't know if they're around for poor andrew over here? andrew will sign the rest of the show it will be spectacular jim, we'll see you in just a second when we return, we are counting you down to the opening bell on wall street. up next. jim cramer will join us live for the ig vebig events on cnbc, 60 stock, one winner. the action kicks off at 1:00 eastern time i'm laying odds on it on twitter, by the way. we'll be right back. oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard.

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all right, a busy morning coming up on "squawk on the street". a huge line and news ceo qualcomm pepsi cfo vice chair hugh johnston and president trump's larry kudlow will join the gapping as well. it's kudlow and cramer all those big interviews coming up in a couple minutes here.

speaking jim cramer a lot of guest, your old co-host kudlow, is it kudlow and cramer reunited >> well, look, we have to find out what we will hear from trade one tariffs the trade war with china. also we have to find out about europe i want to know stockmarket versus tariffs larry is a free trader i want him to know how to handle this situation. >> you got qualcomm, pepsico, gary kelly as well a lot of sensitive topics around that issue qualcomm is fighting five or sex battles, do you, what is going to be the mark moving news and interview out there eb has to see if you are going to watch one? >> i think it will be dr. nancy soup by the way, i got the other side of the trade a pair trade for

jim chanos, you can go qsr versus dominos without a problem and chipotle versus duncan you have a long-short combo. >> i'll take it under advicement, jim. >> you are the best. i can't wait to go to the conference to get you a ticket >> i'll get you the ticket >> thank you very much. >> we will see you in a few minutes coming up. also, back here on "squawk box" in a moment. we will get jim chanos on the marks. duncan brands will be on later as well. he will respond on the stock, unveiling this is a new short position ar is short for a ye >> that is coming up at 3:00 p.m. eastern time. make sure you stick around [phone ringing]

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when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. >> all right, everybody, welcome back to "squawk box. if you see a bunch of munchkins to work today, don't be surprised, it is take your kids to work. check out the little ones hanging out at cnbc headquarters see you in a bit

yay. >> now, get to work. >> do you bring your daughter to work >> we do not want to introduce children to short selling. >> spot the fraud, honey smr just say no. >> we don't have but 30 seconds left is there anything you look at positively now >> look. i'm a gem optimist overall the world gets better over time. it's just that there are lots of companies that don't an lots that play games. those are things to avoid. >> broadly, would you buy -- would you buy the index and go >> basically, that's our advice for a relative, what should i do you should buy an index fund at the end of the day. it's the easiest choice to make.

>> don't pick stocks -- >> what you do is not a second job or something that you can do in your spare time, if are you not somebody who is an expert at this >> i don't think so. it's a fair amount of work do you really want to be reading lawsuits as a hobby? >> although that was pretty good >> jim chanos, make sure you join us tomorrow, "squawk on the street" begins right now [ music playing [ music playing >> good thursz morning futures up, nasdaq will try to break a five-day losing streak tons to tell you about amazon, microsoft, intel, ecb is green, holds