anonymous, like i said earlier, 255 basis points, spread between u.s. treasuries and bunds, that's going higher up. >> okay. >> thank you great to see you, sir. >> thank you. >> mike, thank you for being here great to see you everybody have a great day we'll see you back here tomorrow right now it is time for "squawk on the street. ♪ ♪ i can make your hands clap good morning, and welcome to "squawk on the street. i'm david faber with jim cramer, live from the new york stock exchange carl is on assignment this morning. let's get you started for the day. of course, look at futures right now as we set up for the open. half hour from now you can see going to be higher i have a very keen sense for the obvious. european markets have been open for some time. let's look at performance there as we get closer to the session end there. you can see real strength there, germany's dax and the ftse up

well over 1% ten-year note yield, 2.718 a look at crude falling a bit yesterday and today as we hover around $54 to our road map this morning, it does start with what well, a meeting actually between president trump and fed chair powell coming to light we'll give you the details and powell's vow to remain nonpolitical >> okay. >> shares of alphabet falling after an earnings beat investors concerned about how much money this company is spending is jim cramer worried? i want to know that. we'll find out and netflix is being called out by a tv exec who says the numbers there, they're not to be trusted. we'll break down the claims. what it could mean if anything for the company. well, fed chairman jerome powell and president trump met last night. the federal reserve said it was an informal dinner to discuss the economy and outlook for growth, employment and

inflation. fed vice chairman richard clarita was also in attendance powell, jim, i can recall, a few weeks ago, asked by david rubenstein in an interview would you meet with the president and he pointed out it is not uncommon, it happened. fed chairs meet with the president. if he asks, he indicated he would likely go. clearly he was asked and he went. >> he went this is fine look, the guy has really figured out that the best thing to do is to look at how the economy is doing. and i think that president trump cares passionately about the economy, it needs to grow. that's nothing new there the only thing new is that there is a lot of homework that powell did subsequent to when he put the wrecking ball to the economy. and he realized, wow, i've got

to just maybe do a little more thoughtful don't just go on tv and say, hey, listen, we have to overshoot. that was monumental. that was monumental. the overshoot comment -- >> so tough on him the october 3rd comment? >> the third and fourth. october 3rd and 4th, the days that live in fed infamy. i'm the only one that says that except for moment of people of america who recognize he crossed over from wall street to main street and said things that, like, did he not know about auto inventory, housing inventory, did he not know about the materials that go into tech, did he not know about liner box coming down, did he not know about polyethylene coming down. >> they comment so much more than the fed we grew up with greenspan, we actually had that brief case indicator we kidded about it, but at the same time, it spoke to that there was no way to know would he raise rates now we get so much communication and powell certainly seems to

have, as i think a lot of fed chairs have to learn to communicate a bit, or better. >> he's got to speak to more ceos, the 27-year-old people who make the phone calls. >> he says he speaks a lot to ceos. >> sure, yeah, sure. >> he spoke to the ceo of the country. >> that guy is pretty bullish. >> yes >> breaking news all the time. >> yeah. >> trump raises his forecast constantly. >> constantly. >> yeah, constantly. he raises the lower end. >> he's raised them. >> the wall is difficult to figure out in terms of the president's per share forecast >> yes, yes. are you ready to move on to alphabet. >> i've been ready to move on from the moment that we started because alphabet is monumental >> i feel a lot more comfortable discussing it as well. let's talk about it. shares of google, parent alphabet, down in the premarket, despite quarterly results that beat wall street expectations, concerns about a jump in

spending are weighing on the stock. here is what ruth porat had to say on last night's earnings call. >> with respect to capex, we continue to invest in both compute requirements and for office facilities, although we expect the capex growth rate in 2019 to moderate quite significantly. >> all right, moderation, quite significant of a type of moderation is the stock going to be higher in a few days? >> yeah, sure. absolutely the stock was down, stock was up 11 ahead, i wish that hadn't happened how i wish disney's stock didn't run ahead. makes the hurdle bad was the conference call good no these guys say hey, listen, we're spending a lot on cloud. diane green did a great job. we're spending a lot on cloud. it is not clear how good a job she did and spending a lot on cloud because they have to play catch-up to amazon, which by the way, didn't talk about cloud at all. amazon was just, we screwed up india and spent too much in

march, f.a.n.g. has shot itself in the foot. it is amazing. we're able to talk about netflix, it is alleged numbers f.a.n.g. is the problem child, on the conference call. >> what does that mean >> ruth was criticized for spending too much, criticize ed for not getting return, criticized for -- one thing was another bad spend, david, it is like, are you kidding me, i mean when is something going to come of it? they hired this guy glen feinberg from giesinger, health care system, best in the country, are they writing him blank checks are they writing people blank checks like, here, take a million dollars? >> how many employees did they have >> they added a lot of employees. now contrast that with apple we want apple to spend to win, right? you got to stop buying back stock, spend to win. it is not easy to come up with something big. >> i suppose not but these guys at google are spending $6 billion in r&d

operating expenses -- >> they're not taking the money and shoving it into a furnace. >> biggest increase was, of course, head count growth followed by the acruel and the valuation of equity and other bets >> maybe working on a secret project. >> they may very well be, what would it be? >> it is secret, david the first thing when you join google, first thing you know about google, don't talk about google i feel this company is severely undervalued. i think if they guide to spend less, i don't know what it would do, because we don't know what other bets are doing anyway. we had dave cody on, nest, they paid billions for nest, i'll give it to them. he did they ended up spinning off verzinio i listened to the call i have to sit down with ruth the call was, like, are you guys, like, do you know what you're spending on it was like military contracts guys, what are you doing i'm waiting for the $100,000

toilet. >> they added 4400 employees over the course of the -- job growth >> david, it sounds like wpa, the works progress administration this is like the civilian conservation -- david, this is a -- this is like the nra. it is like -- it is fdr jobs program. >> yes. >> i'm going back to college and getting a job. i'm just applying. i did well, i know how to -- >> couple of things on margins, one that kind of creeps into my area these -- youtube, the over the top service, not talking about now overall, but youtube, which competes with hulu, which competes with directv now. there is no margin in that business. >> none. why is that? why is that? >> a lot of people like that service and far more seem to like it frankly than directv

now, which as we know lost -- lost how many -- >> atp story. >> last quarter. youtube over the top not the case but, jim, they may be building the cable company of the future there, but it is no margin right now. and that's pressuring margins overall. >> i think they should stop giving it away they should also -- >> they're building a -- >> they're building up the cloud, but we don't know how they're doing cloud. they're being opaque on cloud. they were opaque. >> they were opaque. >> you know what they're saying, guys, if you want to own us, fine, if you don't want to own us, fine i like the way amazon was. i want to own it, it was an unsatisfying conference call because the analysts have had it analysts have said, you got ruth porat, she didn't exercise the -- no, they're trying to figure out how to have the next big thing. and they ought to start monetizing the things they have. i had suggested things, david, for youtube, they could have a

premium channel. i go out there, say, listen, here is the premium channel idea that's good. that's good. that's good. nothing. nothing. i'm getting tired of giving away my advice for free, okay >> you're not listened to? >> nobody listens to me except for you. >> i do listen to you. >> not even my new dog xilinx, couldn't care what i say >> really? >> xilinx, no. he ate a plastic bottle the other day. what an idiot. >> i know. we have that too i'm still amazed at the -- i don't know where we are in terms of capex, but for very few companies on a list that spend $7.1 billion in capex per quarter. >> i don't know how you spend that much. how -- >> you know what they're doing the data centers alone, do you know how expensive it is to build one of those things. and then secure the power for it >> what should they have bought? service now? >> i don't know. >> service now workday? what do you want them to buy >> why do you want them to buy all these things >> someone, brent on the conference call, said when are you going to buy something

the jeffrey's analyst. you've done less m&a than anybody, you have a lot of cash, why don't you buy something? >> bottom line, bob pisani, 22% top line bottom line is that they were -- 22%. >> the analysts hate it, they should try to be covered by other analysts and charge $5 for what is -- what does espn plus charge they should have a $5 plus channel. they narrate, they have baseball stars narrating games, but you don't see the games, don't violate the mlb patent i wanted to buy mlb. what >> all right >> you said disney no one listens to me. >> no one listens to you. >> i'll go in there with, like -- >> only me your children don't listen to you? >> are you kidding me? not in the least. >> wife? >> no one. only my ex-wife.

>> that's the way the world works. >> on vacation, christmas, we had the best time. i brought karen and lisa, had the greatest time on earth can't believe it we also brought lisa's ex-husband, and lisa's ex-husband's wife. >> why wouldn't you travel with all your exs still to come, misleading viewership figures we'll fill you in on that. also ahead, starboard value founder jeff smith will join me along with papa john's ceo steve ritchie. we're going to discuss starboard's strategic investment in the pizza chain it is aimed at giving it some boost to turn it around. give you another look at futures. we get started with trading, 17 1/2 minutes from now. a lot more "squawk on the street" before that. this is huntsville, alabama. aka, rocket city, usa. this is a very difficult job. failure is not an option. more than half of employees across the country

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netflix is not telling you the whole story. that's what fx networks ceo is saying about the streaming company's viewership figures speaking yesterday at a television critics association event, he claimed netflix is being misleading about the success of its programs. since it refuses to use metrics

that other networks are bound to use. he said, quote, when you take hundreds of at bats, you're going to get some singles, doubles and even the occasional home run and failing to ever report a single strikeout undercuts an accurate perception of their batting average and misrepresents the scale of their hits. >> are they going to get bryce harper >> i don't know if they get bryce harper everything he said is accurate, isn't it everything he just said is accurate >> who cares you give the dogs dog food. >> they're just basically handing money out left, hand over fist to anybody who comes along and giving shonda rhymes more money than the other guy and it goes on and on and you're trying to produce programming to compete with them, it can get a little frustrating, particularly when nobody knows if you're producing a lot of hits or not >> tesla, netflix, amazon. give me a break. who are you to even tell us what to do? tan. >> tan >> yes, tesla, amazon, netflix

t.a.n. can do whatever it wants. it's t.a.n forget it. it's t.a.n he's going to, what, what does he want netflix to do? put out a release saying, what, punisher 3 is not going to come out, polar was too violent what is he going to say? we like "bird box" and now we're going to do "cat box"? what do they want? how many advertisers do they have who cares? if you -- did you watch "bird box" >> i think it speaks to the increased competition that is going to take place and continue to take place particularly as others pull their content from netflix and it becomes ever more reliant on its own product also, they're throwing so much money -- that's what i hear from all the people you would speak to. >> you go to the coen brothers. >> can't believe how much they paid can't believe how much they paid -- >> you know what i say

i say that they sent a letter -- >> yes, they did i was going to give it its own time let's finish our conversation about netflix. >> then starboard. geez i'm working my butt off and you get all the good guests. >> oh, will you stop it? all right, let's take a break. we have a lot coming up. including talking about -- including talking about appaloosa and this move at allergan, a name jim has been focused on recently, stock has been down. let's get jim's mad dash maybe that will be the subject of it. got you -- getting close to the opening bell here. also, early facebook investor roger mcnamee out with a new book about the social network titled "zucked." i'll be on "squawk alley" for the entire hour. a look at the futures. a lot more "squawk on the street" for you straight ahead

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welcome back we have a mad dash, and let's get to this allergan news, jim appaloosa, david tepper, well known hedge fund, not active but uses it, one of the tools in the toolbox, sentd sends a letter te board saying, ladies and gentlemen, we submitted a proposal for the upcoming annual meeting to request that you separate the roles of chairman and ceo. not the first time they have

asked. they asked the board to do this in april 23rd of last year, subsequently may 7th, and june 5th. and now they say in the wake of tuesday's earnings, which you focused on. >> right. >> it should now be readily apparent to all interested and responsible parties that allergan requires a fresh approach to its business strategy and unbiased review of its capabilities, opportunities and way forward. >> well, let me tell you, brent saunders will be under fire here now. that last quarter was suboptimal and they talked about positive -- they didn't talk about their major depression drug, that's been a very hard category they spent a lot on different things, and ended up giving you a pelican bill for two weeks and now there is another challenger to botox the company is under siege >> siege, really >> it got downgraded by everybody, just this morning bank of america, merrill, took it off the u.s. one list, david.

the analysts are desserti idesei droves it generates a lot of cash david, how about if we got bob ugan in there, seasoned chairman, new jersey, didn't win for senate, terrific guy, used to run celgene, lives not that far. he could be a seasoned chairman that could come in and really do a lot of good. i'm going to propose that david tepper, who i have known for years and years, say that bob ugan, i saw bob at the jpmorgan health care conference >> now, new chairman may solve some issue that they have, but it is not going to necessarily going to put the company in a different direction. >> no, i mean, the fact is they spent a fortune on new things that -- new companies that seemed to not work out, bought back a lot of stock, have a lot of debt on the balance sheet, it is a very hard business, the pharmaceutical business, unless you have a hit they need a hit. they are not -- they are not hitting hits, not getting any

hits and something needs to be in there with botox celgene, look, when bristol-myers bought -- decided to buy celgene, they said there are other assets coming up, other hits they need more shots on goal i did not like the quarter i do not like the quarter one bit. i did not like the border, eggs and ham. what has to happen is david tepper has to put it in play i don't think he puts it in play to say you want a chairman. >> his focus seems to be on, again, getting a seasoned independent chairman with extensive pharmaceutical experience to exert a favorable influence on executive decision-making. >> look, botox is one day. i'm trying to get evolus on air, which has the new -- botox is an amazing formulation. i don't think the dermatologists can be so quick to run away from it but if there is price competition and the numbers come down, the analysts deserted allergan one after another after another. tepper's note will send it up

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you're watching cnbc's "squawk on the street," we're live from the financial capital of the world, the opening bell going to ring in two minutes from now oil does often or the price of oil seems to be connected in a lot of algorithms and therefore can have an impact on the stock market one way or the other based on where it is going oil itself, you know, interesting yesterday, the new york times decided to do a big story on it -- this weekend, the permian basis suddenly, woken up to the fact it is like saudi arabia >> it is bp reported really good quarter today. the stock was at 43 when i woke up it is coming down. it is coming down. oil is coming down even though bob dudley says the oil market is tight -- >> bp had a good quarter. >> surprised it is not up more

when it gets up to the high of the permian buys, sell the futures, the long curve, now five years, right around here. i also worry, david, i don't want to -- last night someone called me on the oil stock, i said, frankly, i don't want to recommend any more oil stocks. there are things happening in terms of the next generation these are taking the appearance, they're beginning to have that kind of tobacco-like feel. i don't think the younger managers want to own it. >> so, what, millennials pressuring fiduciaries to divest themselves >> becoming money managers and not wanting to own these things. i think it is worth watching they don't like plastic either i was talking to benno dorer about this, from clorox, it is a very big yiissue. watch this oil derivative as a way 20 years from now where people say, i'm not going to own -- it is going to take a long time.

>> we had jim on talking about plastics and they had a whole strategy there too very important part of the business >> yes i think that you have to watch this this is a new trend. >> there it is, the opening bell, at the new york stock exchange for tuesday and a look at the s&p cnbc real time board, big board. equbot, at the nasdaq, ing, it says here many models, manager of many models. >> we got to watch allergan, david. they had messy data with some toxicity issues with some new things strategy made no sense when they had money to buy good assets, it didn't come together i think that we have to watch

what -- whether this is shot across the bow by tepper and something big. i don't know >> don't know how much he owns he did note in his letter nearly 40% voted in favor, despite fanfare and support for an organized campaign in terms of separating chairman and ceo in the past these are shareholder proposals. i believe they're nonbinding. >> trying to make some noise here. >> of course he is of course he is. and it is having an impact on stock prices in a positive way, to your point, it is not -- >> you got to -- >> perhaps a shot across the bough, not an actual -- >> what you need are new drugs. >> i don't know when their nominating window was. it may not be -- >> i don't know what the answer is anyway. who is going to buy this thing wouldn't he have sold it if there was somebody to sell it to >> i think so. there is a belief there are buyers remember, celgene, which had another drug, revlimid, off patent, very full bid from

bristol. so you had to think that allergan botox may be coming off that, maybe somebody is out there trying to milk the near term i don't think a chairman would do it. i don't think -- that's not what's needed. >> let's talk about a name you often praised in the past. that would be estee lauder. >> david, this man is the most unsung ceo in america. he won't come on tv. he's a genius. he teaches when you sit down with him, he teaches. and he has, you know, he sits with -- do you know he introduced the term influencers. he goes to young influencers in china, and finds out whether they like two face two face right? >> i don't know what that is >> oh, david you have to go shopping with me for cosmetics. >> that too? >> yes, cosmetics. he's done such a remarkable job, and everyone thought he's going to get hurt by china there was a big -- he did not get hurt by china. the duty free stores are

gigantic part of his business. they did well. i just can't say enough. when i sit down, all i get is -- i look at his conference calls, people, look, you'll sit down with execs, did you read the conference call by -- who's that who's that he's the ceo who is better than you. that's who he is i think he's remarkable. on the road constantly he's an influencer, david. and thought leaders. >> i hate that term. is there any read through from this, better than expected performance to others or is it really just specific to the success of -- >> ralph lauren just had a strong quarter fantastic. i think, david, the read through to estee lauder, honest to god, you may want to buy las vegas sands here macau. estee laudelauder, people are spending again you know what people -- what the wealthy -- what kids would spend premium is uber, iphone,

cosmetics. you can't step outside the skin care line was terrific >> somebody i know said you got to look your selfie best. >> always look your selfie best. i suggested every department store use that, not a single one, because nobody listens to me nobody listens to me david, you notice that amazon is heading back to where it was before the disastrous quarter? the disaster how about the disastrous google quarter? where is google? out there. disastrous. >> apple up 10% for the year >> disastrous. >> apple's performance is now outpacing that of the s&p despite of course that warning that took place with three days into the new year. >> i said buy f.a.n.g. did anyone listen to me. they thought i meant diamondback energy facebook. >> we know nobody listens to you. we established that. >> no. amazon, wasn't that disastrous a lot of people say things like that why do people come on our air and say that was a severe disappointment and then the

buyers come right back the answer isbecause these are companies that have a level of growth, david, that is frightening. alphabet's growth is just staggering so they don't have the leverage for the growth does anyone read the conference calls in the statements besides making fun of ruth porat, who is a great cfo? the amazon call, okay, next, you can't do that. long odds out for these guys and they come back and they just buy them and buy them and buy them, like nothing was wrong what are you looking for >> i'm looking for gilead's release. there it is. >> gilead. >> gilead is notable today because it is down >> gilead is like -- gilead is like advi, and what people fear is going to be like allergan with botox. >> gilead, high class problem for a while. an incredible drug, cured people of hepatitis. >> terrible thing to say, please don't take this the wrong way, but the pharmaceutical business wants chronic illness. they don't want to solve this.

>> or you want something like high cholesterol, you take lipitor for the rest of your life. >> right. >> that's an incredible drug, unlike gilead's key therapeutics that were very expensive, but in a matter of weeks, cured a horrible disease. >> you sell the stock? that's what's happened advi is going to come on -- they got biosimilars all over that thing. >> let me put this in perspective. >> sure. >> gilead, chronic hepatitis c virus product sales, eclusa, harvoni, savaldi, they got a lot of them, $738 million in revenues for the fourth quarter of '18 compared to $1.5 billion for the same period, so down by half >> yeah. >> which is great, because it means the population of patients obviously declined dramatically.

overall, $3.7 billion in those sales last year, versus get this, $9.1 billion in 2017 >> wow >> what do you do if you're gilead >> buy someone gilead should go buy a company with all that cash they need to buy someone right now, like a target immunotherapy company the way gsa did. they have to do that now like today. >> they did it to great effect when they bought -- that was them, they bought pharma set. >> they got to do another. what have you done for me lately speaking of what have you done for me lately, you any i like lisa sue lisa sue made them fortunes. that's one to watch. can they hold it up? right now it is not holding in print. stock is pretty good but i don't know whether you want to buy it right here. gilead, david, the new ceo is going to start soon. that's what we have to see.

>> okay. >> and, david, never write off a biopharma that has a lot of cash. >> and they do they have an enormous amount of balance sheet capacity, back to talking about gilead, there it is, you can see. jim, i can remember, this company had a market cap of, what, 150. >> so great. i know i know i know but this guy milligan coming in, milligan, ceo, oday is the guy i like, oday is from roche everybody loves roche. everybody, everybody >> alphabet is down 24 cents >> of course i knew that the idiots would sell it. morons sold it down 40 last night because everybody has every right to be morons, nothing in the constitution that forbids that and the day traders who didn't even listen to the conference call don't even realize how much money they're making, and ruth porat has to -- they have to listen to those

hecklers, the heckler analysts, hecklers what what is so funny >> you are you're funny i listen to you and i find you humorous >> i think ruth porat is fabulous i said it. okay i think she's fabulous she doesn't have to take this nonsense from these people >> t-mo and sprint continue to try to seek approval for their deal to get together. >> did you see register's cookbook >> i did t-mobile telling the fcc in a number of filings that came out it would freeze most prices for three years if it does get approval for the deal. >> okay. what do you think of that? >> i don't know. i mean -- >> they have great numbers >> the numbers were good commercials were really good >> does ledger wear that magenta, whatever -- >> he wears an apron a lot when he's cooking on the weekends >> different kind of ceo, david. >> yes, he is. yes, he is >> he's insane >> whether or not they're going to be able to succeed in getting approval from the staffers at

doj -- >> i interview people at burlington, people were selling t-mobile, burlington stores, so great, so great. it is like google. here's money i asked what do you think of your ceo most people don't know who the ceo is i don't know who my ceo is they knew john ledger. they had spoken to john ledger they like john ledger. and they weren't talking about, like, john ledger, like, you know, music. the ceo. >> i like -- >> how do you like that? boeing did we talk about boeing >> now we are. now we are what about it? >> that stock won't quit. >> it won't. earnings last week. >> grew 400. why? because thechinese need them more than they need the chinese. people don't get that. and by the way, airbus is starting to -- people don't talk about that either. jim mcnerney told me that would happen, the previous ceo you wait you wait they don't have it airbus doesn't have the mojo

>> okay. i think that's a good place to conclude our brief comments here and head to bob pisani, on the monitor there, doesn't he look nice >> holy cow. >> i like that pocket square hi, bob. >> hi, guys. always a pleasure to see you both two to one advancing to declining stocks nice start nice start everywhere. up 1% in europe. most of asia is closed but i want to emphasize, we're at a global economic global stock rebound that is going on, just look at the year to date, europe is up 1% today. we have the s&p up 8% for the year germany's up 7%. shanghai is up 5%. remember, shanghai is closed for this week. the nikkei is up 4%. even brazil is up almost 12% this is a global rally that just keeps rolling on today, sort of the same thing. sectors here in the united states, consumer discretionary strong, ralph lauren had great numbers overall. tech strong. apple is leading there materials and industrials, and because this is a cyclical rally the last six weeks, consumer

staples have been lagging and they are again today stock prices generally have been following 2019 earnings guidance i can't emphasize that enough. it is not so much fourth quarter what they're saying about this year look today, it is exactly what you would think. look at the numbers today for guidance estee lauder, higher revenue guidance for 2019. look at that, 11%. cente centene, that's up seagate, a little disappointing on third quarter revenue guidance on the flat side pitney bowes, they cut their dividend, they raised their buyback. that's down. church & dwight, a little bit of a problem, they have margin pressure overall, they were a little light as well church & dwight is a good one to look at. talking classic consumer products, arm & hammer, water pick and all of that, higher cost from commodities, transportation costs, they had a 25 basis point hit for margins because of tariffs what are they doing about this they are raising prices.

they are successful. others are not and so you got a little bit of a gross margin problem here that church & dwight exemplifies, one of the reasons they're down today. this is showing out in the first quarter earnings estimates we had a very strange situation. look at this, first quarter earnings only expected to be up half a percent hold on. revenues are up almost 6%. that's kind of strange, folks. that tells you between the top and bottom line something is going on there well, that's margin compression. you're getting prices, you're getting higher prices somehow, higher wages, or higher commodity costs, church & dwight is a good example of that. here is a sign that higher costs are definitely impacting the bottom line of companies that are out there. still, the rally rolls on. i mentioned yesterday, the internals are excellent. every day the advance/decline line, advances nicely. we're not at the old september highs. we're getting close, buying interest is higher, selling pressure is lower, the vix has collapsed. we're at 15 on the vix

one thing we don't have, guys, is breakouts new highs. the one exception and jimmy is right on it as always, it is boeing that's the only real big, big breakout we had. a little bit of lilly maybe doing a little bit better as well but that's the big breakout, new high for boeing. we're just at the highs for the day here david, back to you. >> i can see that, thank you, bob. s&p up about .3% disney reporting after the bell as bob well knows. some questions on this continued sale process for the regional sports networks i've been focused on $71 billion deal for fox, almost 2 billion of the ebitda received in that deal from the regional sports networks which agreed to sell per a consent decree with the department of justice to get the deal approved. the deal itself expected to close within weeks, i think we can say at this point. will they get it done before the end of the month unclear. but soon but this process as we have been pointing out has been a

difficult one. and certainly one in which disney is not expected to receive anywhere near the proceeds from a sale that they paid to acquire that almost $2 billion worth of cash flows. yes network sold separately to the yankees in partnership with a number of other people. the other networks that equate to 1.45 billion or so in ebitda produced every year, jim, not gathering a lot of potential bidders. we told you last week, mlb is in there. what they're doing, unclear, because everybody needs a character agreement. everybody needs to make sure if they want to bid the highest bid they can imagine, that they have got their distributors in place to carry these things and pay them the feed for them for years to come. >> otherwise over the top does not work just too expensive. >> all the deals come up in a couple of years. mlb is there perhaps trying to pursue the idea of getting back all its nationwide rights for all of baseball and then liberty is now there.

alphabet is not involved >> they have money to burn. >> apollo and sinclair had been there together sinclair has been seeking this very small, would need significant help from private equity my understanding is they're no longer part of the process at sinclair and apollo. sinclair does appear to be calling others as in liberty or mlb and trying to figure out whether they could maybe attach themselves there but liberty is at least hanging around the hoop. something they often do. very strategic thinkers when it comes to constructing deals. very much unclear whether they would be there at the end, but an opportunity to pick up an asset at significant discount and pay a low multiple for the cash flow being received, perhaps they do it the question will become for disney and perhaps they'll get it on the call as well, as this gets closer and closer and they have time, 90 days after the close to get it concluded. would they consider something along the lines of a sponsor spin they can't spin it, but they could did a deal, my understanding, from the antitrust regulators, they sold 51% to one entity and spun the other 49%. wouldn't be tax free

not clear it would benefit them that much. but, again, just to update on that, right now, as we pass the second round of bidding, now sort of in the third -- >> that's in the mix tonight people will be asking about it. >> liberty with private equity >> now wait for the analysts >> the key questions for mr. iger and he's going to answer many of them in an analyst meeting, i think scheduling for april, is about direct to consumer it is about that strategy. that is really centerpiece for disney. >> well, look, i absolutely have to hear about espn plus. >> yes >> because i love espn plus. i think it is a loved product. but i don't know whether it has enough signups and we need to hear millions of signups in order to make that thing -- millions. i got ask you a question. >> okay. we got to get to rick. so -- >> who is buying apple here? >> who is buying apple here? >> is it buffett >> i don't know. >> what the heck is going on i was at apple, stock at 150

tim wanted to talk we talked. up 24 points. >> apple shares now $174. >> starting to talk about again the biggest company on earth >> yes, $820 billion market value, above amazon right now, is apple >> yes, what do you think of that >> and microsoft >> apple regained. >> passed microsoft. >> regained the top. the market cap >> i wanted to point that out. >> i'm glad you did. to rick santelli, get an updade on t update from the bond market. >> two day of 10s, not a big range expansion here, but we have built upon the move that happened after friday's big report and, of course, a couple of days post fed meetings. you see on the november 1st start of 10s, i picked that because that's the right side of the double top, right around 3.25, it has been a stellar drop, but we regained net range. closing in the 270s a couple of sessions in a row. if you look across the sea,

though, bund yields definitely are just 3 basis points off the lows which was a whisker under 15 basis points. this plays into the changing weakening fundamentals of much of europe's engines of growth. whether we're talking germany, france, italy to some extent, and that really puts some pressure on the currencies and the currency scenario is playing into the next chart, two-day dollar index as you see, we're only 5 points away from 96 handle. technically significant. many including me to some extent thought we would weaken a bit especially with the new pause stance in the fed. but it is all relative value trade no matter how you slice it indefinitely the weakness of europe and the investors potentially shunning that is taking a bit of a toll on their currency as you see on the year to date dollar index we do have auctions starting today, 3s, 10s and 30s jim, david, back to you.

>> thank you, rick well, coming up, the effort to boost the performance of papa john's we're going to talk with starboard founder jeff smith and papa ceo steve ritchi "squawk on the street" will be right back

early facebook investor roger mcnamee has a lot to say about the social network he'll be on "squawk alley" for an entire hour to talk tech and discuss his new book eitntled "zucked. up next, stop trading with jim

okay and we're at the end of the show, but still time for "stop trading. >> there are two economies the real economy, which is emerson electric a fantastic company. they talked about how china is very weak. and then the estee lauder. they make you look great for selfies. so there's the other economy and, frankly, estee lauder versus emerson what do we have on "mad money" tonight >> david, we have -- dancing

with the stars specialist, robert herjavec. >> was he on "dancing with the stars" >> are you kidding me? i think he married his partner or something we'll ask him about that he's cybersecurity -- his company is cybersecurity which is the hottest area still on earth because the chinese have the stock. and it's the military. david, some people posit the military is running china and xi is just a front for the generals >> i don't know about that coming up, though, we have jeff smith and papa john's ceo steve ritchie. keep it here and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here.

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welcome back to "squawk on the street." rick santelli here you hear that roar behind me we had a number come out our ism january read, nonmanufacturing expecting a number around 57.1 a little disappointment. 56.7 56.7 it equals our read in july, exactly 56.7 you have to go back to january 1 of '17 so two years ago where it was lower at 56.3. so like a lot of the feel-good indices that try to measure the economy in various ways, they

have fallen below what i call the crown because we've had about a year and a half to two years of very extraordinary numbers. now they're just highly above average. sara, back to you. >> all right, highly above average. we'll take it. rick, thank you. good morning welcome back to "squawk on the street." i'm sara eisen with david faber and mike santoli carl is on assignment. markets turning higher again stocks rising for a fifth day in a row. the dow up 137 points. s&p 500 up 0.3%. after digestion of a mixed bag of earnings, alphabet not so hot, but some big gainers like ef estee lauder shares of google parent alphabet falling after an earnings beat. >> plus a meeting between the president and fed chair, but they weren't alone we'll tell you what was discussed and who else joined the meeting. it's the state of the union. the president getting ready to deliver his address tonight. we'll take you live to the white

house, next. first up, let's talk stocks. rallying this morning. the dow up triple digits the s&p aiming for its fifth day of gains this is tech giant alphabet reporting an earnings beat but concerns about a rise in spending, pushing the stock further into correction territory. it is down right now less than 1% joining us is morris mark, ceo and managing partner at mark asset management and laurie, lead of u.s. equity strategy at rbc capital markets. you're still a big holder of alphabet, right? >> absolutely. are you taking this opportunity to buy, or are you concerned along with investors about some of the line items here >> okay, i'm always concerned, but i think the company reported powerful revenue numbers, and i think they are in great shape strategically. they are making some oouf mystically big bets and making them in their core business outside of the big bets outside of their core business and they could do a much better job of

disclosure this stock is cheap. you don't get too many stocks trading at a market multiple growing their revenues 23% for annum holding one of the best franchises in the world. but they could do a much better job of telling people what they're doing and why. >> $7.1 billion in capex for the quarter. that kind of a number is enormous $6 billion in r&d. part of that i mean, do you expect they ever will heed your request and other investors to give us more information about where the money is going >> you'll have to ask larry page i don't know i think the key thing is we have a good idea where that money is going. it's going into the cloud. they have a -- i think they made a strategic bet. i think it's the right decision for them because i think there were two other companies that are directly leading the cloud the cloud is going to be the center place -- centerpiece of the new world of computing cloud, hybrid and at the edge. and i think they want to make sure, not only that they have

the opportunity, but that they don't cede that space to microsoft and amazon that's why they're spending that money and also making an incrementally big bet on youtube. this goes beyond big bets, beyond waymo and everything they're doing makes sense. >> morris, though, not quite a market multiple. 24 times this coming year's earnings for - >> i think it's less we have a $47 gap number they report gap, even though they have huge noncash charges that would add to nongap and they generate a ton of cash flow and our next year's number, 54, 55, and -- >> all right it's a premium i'm not saying it's not worth it right about 16 times for the market >> i'd rather own alphabet than proctor & gamble >> this was the last of the big faang names to report. can they continue to drive the

market as they have for this bull market. what's the verdict >> what's really encouraging about this reporting season is we've seen a lot of the favorites stumble and take some hits because they just weren't quite meeting elevated expectations but investors are finding other things to move into whether it's the financial sect oenergy sector, areas that i'm hearing people think look a whole heck of a lot cheaper, have recession priced in, in the fourth quarter. i think it can keep working even though people are loosening the grip on some of these names in the faang space. >> apple on january 3rd, i think when they told us first about weaker guidance and then followed it up with the quarter. stock up 10.3% this year beating the market alphabet is up 8.6%. facebook up 30 i mean, these names keep coming. they actually haven't really stopped. >> yeah, well, we've definitely seen some stumbles here and there but what i think is healthy is that we got some breadth to this market and not just focused on this one narrow

area of leadership like in 2017 and the first half of last year. >> we are at a moment, lori, the market is up 16% you from the low but has still only taken back december's losses we've gotten this far on negative sentiment and basically people overdiscounting something bad in the economy from here on out if we're looking at first quarter earnings, near zero at least by the consensus is that okay for the market at this level >> we've done a lot of work around this. can the markets keep powering higher if earnings expectations continue to fall they can if you look back at 2015 and 2016 you saw 2016 earnings estimated falling until the fourth quarter and took a huge slice. we think the buy side gets ahead of where the sell side is. >> morris, what else have you been doing in tech you've been reducing expose ur. >> not at all. we were just interviewed by a professional magazine and facebook is one of our four

recommendations. i mean, facebook is one of the leading media companies of the world. i think they'll get things right. and i think that i'd rather have private businesses getting data than the government getting data because if a lot of private businesses get data, at least one will watch the other i don't know who will watch the government so i think that instagram is a uniquely valuable asset. the decision the company just made to integrate instagram, facebook, whatsapp and messenger together makes sense for the future because we're going to have personalized messages and personalized messages will go through those vehicles >> as a guy who used to also cover old media or used to invest a lot in it, so to speak, disney -- you still actually reporting after the close. very great focus on direct to consumer there, obviously, going to be a key part of that give me your sense as to what your expectations are and why you own this stock >> we own it because it has

unbelievably attractive assets and on balance, bob iger has shown great acumen in terms of buying and/or building really attractive entertainment franchises there are big questions. i don't think we'll get the answers today. i don't think we get the answers until the fox deal closes and until april 11th >> right that's when the analyst meeting is when they are going to start to address what their expectations are for what they can do with those platforms. >> they have to talk about basically distribution, implementation and their strategy and i think i'll be impressed, and i think the market will be impressed if they go all in. if they don't go all in, then i think you could have -- >> what's all in mean? >> all in is facebook, amazon, spending money to attract c content, to create content and to get the content on the platform i think theaters are uniquely something special unto themselves i think i want to see disney put everything that it has on the

net. >> i'm reading from your investment letter, fourth quarter 2018 that's where i got the dere deuced exposure to facebook. but you also say that you're not concerned about a major economic downturn to. >> i'm less concerned today than i was there because the president had a very nice dinner with chairman powell but, seriously, the fed has indicated that it's aware of the risk of being too heightight. and it's aware of the risk of letting the balance sheet get too small. to the extent the fed acts responsibly and thoughtfully, i think you bring a lot of the risk out of the equation and we are -- we appear to be making progress. this is a big question and is a risk here and is a big reward with a deal with china if we do it, i think, really, stocks are cheap interest rates are low 3% long-term bond money is low >> all right we've got to leave it there,

thank you for weighing in on some of the earnings movers. morris and lori. the big meeting in washington, it was a dinner. federal reserve chairman powell sitting down last night with the president. steve liesman has the details. steve? >> wasn't invited, though, david. didn't get a chance. the much-awaited meeting between jerome powell and president trump taking place last night. they sat down for a 90-minute dinner with richard clarida and steve mnuchin. steak was served the economy discussed. powell stuck close to his words at last week's press conference and did not discuss monetary policy expectations. trump has been highly critical of the fed for raising interest rates, including calling the fed out of control in october. a white house official said there were no, quote, pitch forks. they had very good exchange of views. this was the first meeting since trump nominated powell but it's not all that unusual october 2017, yellen met with trump. that was a job interview april 2016, yellen and obama met

amid concerns of a weakening economy. also met in 2014 not listed there, 2011 between obama and bernanke and amid the financial crisis, bernanke and sheila bair and obama met. tonight is the state of the union. we looked at the state of the economy under president trump and it looks pretty good the trump economy, 2.98% average gdp growth over the average six quarters, 1.6% inventory growth and greater equipment spending are the main sources of the added growth. the question is not if growth was higher under president trump. it definitely was. the question is whether it can stay that way. it's one of the questions for janet yellen i'll be sitting down with the former chair tomorrow at 2:30 in an exclusive interview mike sara >> one quick question for you, and certainly you can talk to janet yellen about this, but i think you know the answer, which

is, how commonplace is it for the president to meet with the head of the federal reserve? this one didn't get a ton of attention as it would have when the president was still bashing the fed chairman but since he's been patient it's been quiet i'm wondering how unusual it is. >> since the fed pivoted on its policy it's not that unusual. it happens about every couple years or so. sometimes there's a reason, sometimes it's just a check-in they normally do meet. it's been something that's happened over time, but it's not a regular meeting as fed -- the fed tries to maintain its independence from the political side >> all right, steve, thank you very much. we look forward to that yellen interview tomorrow speaking of the state of the union, eamon javers joins us now. >> good morning. i spoke with vice president mike pence about the state of the union yesterday at the white house. he said one of the things we can expect to hear is a lot goofed news abo

-- of good news they are briefing us on some of the themes the president is going to walk through in a speech each of these, they say here at the white house are areas where they think they can find bipartisan cooperation with democrats, including immigration, trade, infrastructure, lowering of health care and prescription drug costs and also on national security. and by that, the white house is talking about ending america's endless wars overseas as they refer to it. so we'll see if democrats are as receptive as the white house seems to think they will be to the speech tonight they say they are opening up with a high-minded, bipartisan approach trying to find common ground in a divided washington, d.c. and nancy pelosi will be sitting just behind the president and visible in the camera shot tonight. so a lot of analysis of how she and the democrats in the chamber react to this speech from the president. there will be some emotional high and low points as well during the course of this speech take a look at some of the guests the president has invited into the chamber

this has become a state of the union tradition. including alice johnson who is emblem attic of the prison reform efforts joshua trump is a sixth grade student in wilmington, delaware, who has been bullied due to having the last name of trump. judah samet is a member of the tree of life synagogue in pittsburgh that suffered that horrible shooting and then also some family members of a family who were murdered in their home in nevada by an illegal immigrant in january so some tough emotional moments here as well as some high points to highlight for this president as well. using those people in the room to sort of call out some of the policy directions that he wants to take the nation in. but it will be fascinating tonight to watch the democrats who now control the house chamber where the president is speaking and see how they respond to all the proposals the president is rolling out today with an eye toward trying to garner some democratic support >> yeah, we'll see how unifying

it is. eamon, thank you when we come back, a $200 million check and a new chairman papa john's ceo steve ritchie and jeff smith from starboard join us. the best performing stocks on the s&p 500 right now, which is higher.

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papa john's announcing a $200 million strategic investment by starboard value. and the addition of three directors they say will enhance growth and value creation at the embattled pizza franchise. here to discuss the future of papa john's, its ceo steve ritchi and starboard founder and ceo and chairman of papa john's jeff smith steve, let me start with you you are in a no-growth category. people say papa john's is behind on technology and your former ceo seems to have alienated a ski constituency in your pizza-eating population. what are you going to do to change that? >> thanks for having us here great to be here so exciting day for the brand yesterday. $200 million investment at a great new partner with starboard value and jeff smith as new chairman of the board. i have been at the brand for 22 years. started as a delivery driver for 6 bucks an hour. so this investment and this opportunity really gives us an opportunity to focus on what's most important i started 22 years ago and

realized there was two key things that are most important and unique about the brand one is our people and culture. so the opportunity to really focus in on transforming the culture of the brand but what really struck me the most, my first day with the brand, is quality. we're the differentiated player in the category. there's something different about what we do at papa john's that i think there's more to the story we need to tell to consumers. many people don't know that we have fresh, never frozen original crust dough that's six simple ingredients folks don't know -- and that's different from the other folks folks don't realize we use vine-ripened tomatoes from the vine to the can from the central valley in california all of our tomatoes around the world are grown there. and other folks, we use packed -- not packed but concentrated to nainatmatoes this new partnership with jeff can really advance the company >> i'm getting hungry, but none of that is going to translate into selling more pizza. what is your role here, jeff

what your going to do to help him execute on some of the goals he just laid out >> yeah, david, pizza is fun and it's about getting back to fun and making it fun again inside the company for us, this is a partnership with steve and with the board and, you know, we approached the company and said we want to get involved and want to help. >> why why did you approach the company? what about it that you saw was an opportunity for starboard profit >> i'll echo what steve just said i think it's the best quality pizza in the category. so starting with the best product in the category is always a good thing. now they've lost their way a little bit not just in terms of image but also in terms of messaging we can come back in and get our customers back and get them to come back and appreciate the brand. better ingredients, better pizza. it's a good thing. we did a lot of taste tests inside of starboard. the diligence was fun. i really enjoyed the pizza and really believe it's the best so that's where you want to go we've got go back to talking about how much fun pizza is and

how great the product is >> i can order a pizza on domino's app very easily track the whole thing. many say you guys are behind in technology are you going to change that >> so we were the pioneer. we were the first to launch national online ordering back in 2001 still very proud of all of our technology systems today we're going to continue to focus and invest in the customer experience also the first to launch national loyalty program in the category and we just refreshed. launched a new loyalty program which we believe is now best in class where consumers have the flexibility to buy whatever product they want at papa john's >> you don't feel like you're behind those who say you have to spend more money >> no doubt that we've got to get better and we're going to continue to invest in the areas of product and technology and people. we know that we need to improve the economics of our franchisees. at the end of the day, we are differentiated by our products we're ready to launch a line of six new specialty pizzas coming up next month. we're getting ready to expand

and think about menu variety we'll focus in on premium ingredients. a lot of those investments will be into that area. we're really excited about that. >> many of white houus who knowl look back at the success you had with an investment and, obviously, with all the board members you put on there is there a similarity in terms of the approach you're taking with papa john's as you did with darden >> it's actually really similar. so let's not focus on all of darden, but really on olive garden because olive garden was the struggling brand inside of darden people don't remember now because olive garden is doing so well gene lee, the ceo, has done a terrific job olive garden is doing well at the time we made the investment, olive garden was struggling a chain that people were talking about where the -- it was a dying brand. their customers were getting older. and what could be done to reinvigorate i remember the time we made the investment and people were

saying thing like that we got focused on the positives, on the competitive advantages and really built up the quality and, most importantly, the customer experience. the guest experience >> we're going to do the same thing here in partnership with the company, partnership with steve, we believe the same opportunity exists the quality is terrific. we have to focus on the competitive advantages and the customer experience. and the customer experience in pizza isn't just about the quality of the pizza, which you were talking about before. it's also about the whole experience how do you order how do you get it delivered? how do you have the whole experience and make it better? we're really excited about it. actually, i think you guys and jim were talking about the technology at domino's you know, their promotion right now is terrific. it's a terrific opportunity. it's a terrific opportunity as a de facto co-promotion for us they are out there for the next six weeks saying go buy a different pizza and they'll give you rewards. so that's wonderful. we're loving that and invite the customers back to papa john's. if you buy domino's pizza, you

just get domino's rewards. right now if you come to papa john's and come back to our pizza, you get our pizza, our rewards and their rewards, and they just get the picture, which is wonderful >> did you try and sell the company and fail to do so? >> no, it was a robust process we had a comprehensive strategic review process started september last year. the independent members of the board, the special committee, we looked at all options. a wide range of options. and back to what jeff was just talking about. the olive garden deal there. a number of other consumer-facing brands that starboard was involved in. we found the right financial resources to give us flexibility, but, frankly, even more importantly was those intangible values of leadership that has got experience in turn around brands. obviously, we're in a moment of distress here. it's been a difficult year for the brand but we know we have the plan to do the right things to move forward and brought on new leadership and an additional director also with anthony that's got 30 years of experience with consumer brands.

>> mr. snyder, still 26% holder roughly with the delusion from this convertible deal. he likes to talk and he doesn't want to be ignored is he going to be a continued problem for the brand? >> you know, i think what we want to focus on is what's doing the best interest of the stakeholders i talked about. our team members, franchisees. >> have you talked to him? has he agreed in is he happy or is he going to start yelling and screaming about things to alienate customers >> john is a large shareholder with the brand and the decision that we arrived at was to do what was in the best interest of our shareholders and stakeholders so we believe that he's going to benefit from that as we -- >> does he believe it? does he believe it >> john believes in the core values of the brand that i've talked about on quality and people i certainly would not question that and, obviously, we're hopeful we can bring john along. it's a journey >> all right now it's time to talk bristol-myers. you're here. do you own the stock >> talking about pizza, right? >> no, we're talking about --

i've given you plenty of time to discuss it happy that we have do you own bristol-myers >> i am not going to discuss bristol-myers today. >> you can't not discuss bristol-myers with me here for this moment. >> i can >> i've just given you ten minutes to talk pizza. do you own bristol-myers >> we are certainly interested in the story at bristol-myers. >> did you nominate any directors for the board? >> not going to discuss that right now. >> why would you own bristol-myers? do you not like the cell gene deal >> well me go back and talk more broadly. >> okay. >> so our job, we believe our job is to represent the best interest of shareholders so we look at lots of situations and we get lots of calls from shareholders who may be upset with things going on at different companies. we evaluate those situations to try and determine whether we can have a positive impact in representing the best interest of those shareholders. bristol-myers might fit that profile. >> but it might not. >> it might not. we haven't made that decision. if we make that decision, i'll tell you what, i'll come on and

talk to crow about it. >> you'll want to come on and talk about it because it would be an uphill climb. many wonder why you would own it if you were really trying to beat down the cell gene deal unless you really just like bristol-myers. >> i think we'll have to talk about it at a later date >> and you did or did not nominate for the board >> can't answer that question. >> well, you can >> i'm choosing not to answer that question. >> why >> i think we're here to talk about pizza, david >> well, we -- >> what are you guys having for lunch today? >> we finished talking about pizza. but i'll end with that to end on a, did you eat a lot of pizza? >> we ate a lot of pizza yesterday, too, at the company a great time with the eemployees yesterday. having a great time and testing. i'll be back there on thursday and friday testing more pizza and new concepts this is fun. this is what i love to do. >> we appreciate you guys stopping by. thank you both >> thanks for having us. >> we send it over to you, mike. >> thank you very much

tantalizing stuff. appreciate that. as we head to a quick break, take a look at shares of ralph lauren and estee lauder. both surging this morning. both named after u.s.-based founders both reported results today that beat the street. one up 11% the other up 14. big moves. and the major averages continuing that rally that started yesterday. in fact, started december 26th dow up 0.5%. "squawk on the street" back after this n't. enjoy our most advanced pressure-relieving material for the deepest sleep you've ever had. this presidents day, save up to $500 on select adjustable mattress sets. find a retailer at tempurpedic.com.

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good morning i'm sue herera here's your cnbc news update at least ten people were killed and 28 more injured in the deadliest residential building fire in paris in more than a decade a 40-year-old female resident of the building said to have had a history of psychiatric problems was arrested on charges of suspected arson. syria's foreign minister arriving in tehran for talks with his iranian counterpart on the latest developments in his war-torn country the visit comes after russia, turkey and iran announce that they are going to hold talks on the cease-fire in syria's idlib region pope francis leading the

first ever papal mass to the thriving catholic community in the united arab emirates this as he concluded his visit to the arabian peninsula he called for his flock to remain meek in following god and lindsey vonn crashing in the super-g at the world championships straddling a gate midair she ended up in the safety nets. vonn, the all-time leader in women's world cup wins announced last week that she'll retire after the world championships. you are up to date that's the news update at this hour mike, back downtown to you >> sue, thank you very much. now time for our etf spotlight. taking a look at the i-shares, aerospace, ticker eta. already up 15% for the year to date the group benefiting from the end of the imf treaty with russia the u.s. announced it would withdraw in six months names like raytheon rising on that news.

as it looks to ramp up missile production defense also expected to be a big topic in tonight's state of the union address. the trump administration could ask for more funding for the defense department you also have boeing moving higher this morning. the etf's biggest holding is 12% of the fund hitting $400 a share for the first time it got an upgrade by an analyst this morning >> when we come back -- david harrow is with us talking stocks and where he sees opportunities in 2019. plus, he's been sounding the facebook alarm for years early investor roger mcnamee joining us for a special hour of "squawk alley. u n'yowot want to miss that at the top of the hour.

some news today. president trump planning to nominate david malpass to head

the world bank he was chief economist at bear stearns. served at the treasury and state departments under president reagan and president h.w. bush administration officials saying the president will officially nominate malpass tomorrow. guys, you know i cover the world bank this is a controversial pick a lot of people don't know what the world bank is. it's a development lender. its mission is lending to poor countries and fighting poverty and climate change and those sort of issues it doesn't need an ally of the administration necessarily on it but the tradition is, this is going back to brenton wood the americans pick the head of the world bank malpass is controversial also because he has talked about how some of these multilateral institutions have gotten too much power he also in this role in the treasury department has blocked a capital increase for the world bank in 2017 and 2018. finally allowed it to pass through but only with some

strings attached like a lot of the lending wasn't going to go to china, for instance so this could be another way for president trump and his administration to put pressure on china but, guys, the bigger picture, what people who are big supporters of the world bank and imf worry about is that china has its own asian development bank which already has almost 100 members of it. it's gaining in popularity so it could long term diminish the importance of institutions like the world bank and the imf. so what? who cares? it's an area where the u.s. has a lot of control it's the biggest shareholder so this idea that the u.s. has a big say and a big vote in these global interconnected institutions, that could be a little in question with this pick it's an unusual one. people were thinking -- >> obviously if it were to happen it would be a gesture that said we're suspicious of these institutions, right? similar with the u.n. ambassador >> for sure. and i will just say that, you know, the world bank members have to ratify this decision

they haven't blocked it. there's about 180 members or so on the board it is expected to pass because the u.s. administration and treasury has probably been doing some behind the scenes work on it but let's see how emerging markets who want more clout at these organizations respond. moving on, trade and earnings in focus for markets. stocks rallying today but what's the post earnings playbook for stocks for that we're joined by morningstar stock fund manager of the last decade, david herro. chief investment officer of harris associates whose oak mark global funds has consistently beaten the benchmark and also includes today's stock in focus, alphabet, among its top three equity holdings. maybe let's start there and your take on alphabet and some of the concerns in the market today around those earnings. >> well, we really don't look at things quarter to quarter, you know, week to week, year to year we think alphabet is a great company. it continues to produce cash flow and this is what makes the company valuable

it continues to modify its business plan. it does the thingsnecessary to build shareholder value. and as such, we think it is itself a good value. it's taken its very strong position in search and it's expanded that. it's become a dominant place to place advertising. so whether it's this quarter or next quarter, we think alphabet is doing what it takes to build shareholder value. and that's what makes us happy shareholders of the company. >> what about valuations overall. december, really all of last autumn was brutal. your fund got swept up in it talk about december performance and what sort of opportunities that gave you for the beginning of the new year. >> if you look at our global and international funds, we have been hit quite hard as a result of our exposure into certain areas that really face downward pricing pressure specifically, european

financials and even some industrials in europe. and, in fact, today i believe that this is where we find some of the best value in the world today. many of these stocks are down 30% to 40% year over year. and if anything, have increased earnings some of the financials like a credit suisse or even a bn bnbnp bnp paribas or daimler or cnh, these are companies that have lost over 30% of their value and u.s. similar terms which have maintained and if not will grow earnings. we think these are very attract uf and despite the fact we've been beat up by them last year, we think they offer excellent value and will propel future returns over the next couple of years. >> david, in the global fund where you have the opportunity to go anywhere in the world, where are you finding more ideas right now?

it seems as if, at least report, the u.s. exposure was about 45% which seems a little, maybe even a slight underweight versus the benchmark. where do you find there to be better values? >> we are a little underweight the u.s. and it's not for lack of value in the u.s. we are able to find value there. it's just other sectors of the world have really been clobbered actually worse than the u.s. last year. and if you go to europe, it's been marred by all the political situations, the brexit, the fighting with the italians, so on and so forth slow growth. it has meant extremely weak share prices and even though share prices have been weak, we still see acceptable rates of growth because european companies, of course, sell and generate cash flow all over the world, not just in europe so we think europe is really one of the places in the world where there is acute value there's very extreme value in europe europe should trade -- a

european company should trade at a discount to a u.s. company because the return structure of european countries tends to be less than the u.s. but the discount today is probably bigger than it should be and then if you look at japan, another place where investors go, it should even trade at a bigger discount. and it probably doesn't trade at enough of a discount so as by process of elimination, we're actually finding some of the best, better values today around the globe in continental europe, including the uk >> it's david faber. i have a question about your investor base and we pointed out how strong your formance has been over a long time. when you have hit rough patches, have you found they've struck with you or are you sort of looking at outflows and wondering why that's happening, despite what is obviously your long-term view >> that's a great question and what we've seen is investors who have been with us through

more than a couple of cycles stick with us. in fact, they kind dove the rig right thing. they buyous weakness our investor business is mom and pop or big institutions and sovereign wealth institutions. we have a broad array of investors. and those investors who live through a couple cycles, of course, stayed pat, but the ones who have perhaps at the end of 2017 were chasing our very strong numbers in 2017 and 2016, they are less prepared for the length of the cycle, and they get a little impatient and they see a loss and maybe want to take a tax loss. did see some outflows at the end of 2018. we're back to inflow in 2019, but i think it's all about maturity of the investor base. are they seizing have they seen us go through these cycles if the answer is yes, they stick

with us. >> and how long is the cycle typically? >> i would say, you know, two or three, four years. you know, we have a downturn every six or seven years a measurable downturn but for every measurable downturn there's two or three measurable upturns. you mentioned our long-term numbers, to me, are very good, very acceptable. in most cases we're ahead of the indices anywhere from 200 to 400 basis points over 10, 15, 20 years. and people realize that we're bottom up, long-term investors who believe in concentration that in certain short periods of time, six months, nine months, we may underperform but usually what happens after those periods of underperformance you see very long outperformance. and again, this is the experience most of our client base is familiar with. and as a result, they stick with us >> i guess that help informs this next answer because i was going to ask you you've been talking about

attractive valuations and names you like in europe and the uk, two of the biggest problem spots in the world right now slowing economic growth and all sorts of political noise around brexit, around the italian elections and all of that. so what do you tellior investors given those big macro risks going into the year? >> yeah, what we try to tell our investors and what we ourselves try to focus on is to what degree do these political and macro issues actually impact the company's ability to generate earnings and profits in cash flow streams for their owners over the medium and long term. and to the extent of which they don't have a major impact, provides opportunity the share prices, of course, react in a knee-jerk reaction to any of these macro disturbances, whereas the underlying intrinsic value doesn't react at all or by a much smaller degree to these

things and this is actually what provides opportunity for the long-term investor price moves in a different direction than intrinsic value, thereby giving a bona fide investor opportunity and all it requires is patience and discipline and that's the message we really try to put forth to our client base >> david herro, thanks for coming on to discuss it with us. of harris associates and the oakmark funds. >> yeah, very interesting to hear from david. we've got a lot more "uasqwk on the street. don't go away. gather new insights, leave your data protected on-site, and put it all to work with ai. the ibm cloud. the cloud for smarter business.

stock reactions out of earnings haven't been this strong since the start of the bull market. find out what it mnsorea f the rally on tradingnation.cnbc.com. so, servicenow put your workflows in the cloud, huh?

mmhm. your employees must love you. [ chuckles ] thank you. you could say that. i love you. servicenow works for you. welcome back to "squawk on the street." i'd like to welcome my guest

from johns hopkins university. professor steve hankey thanks for joining me this morning. let's get right into it. you wrote an op-ed recently that i found fascinating. lying prices keep america keep e on spending. >> essentially every price that's thrown up by the government at the big mac row picture, rick, we're spending and not taxing in an amount equal to that, we're running a deficit in short, so that's a lying price. the taxes isn't worth the freight. what the government does is borrow and push the cost off to future generations our children and grandchildren that's just one example. the more micro level, you have all of the streets and roads in

most of the country aren't priced, they're a big cost but no one pays the toll to go through them and then you look at all of the entitlement programs, medicare, the sticker price is way below what the actual cost to the government is, so that's the lying price. >> you know, professor, i think all of our viewers intrinsically understand that, but how can we communicate what seems so logical? listen, countries want citizens to have good health care, to live in nice houses, have good jobs, go to college. giving that to citizens does have a cost. is it a cost we can pay? in other words, can we just raise taxes or would that hurt the economy? is there a solution here >> well, yes the big solution for most of these things is to have what they call user prices in which

you actually put a price tag on that reflects a cost of things politically that's tough because the politicians like to buy votes. the way you buy a vote is give somebody something with a zero price and have somebody else pay for it that's the name of the game. in other words, the lying price thing, rick, is just to generate more and more votes for those politicians who can pony them up and pass them. >> professor, we're almost out of time. what i really want to get at here, we actually understand the process better than we think productivity has been low. in your op-ed you directly reference if we give too much away without totally having a path to fund it and create deficits, it hurts productivity. is that one of the things in your opinion that has effected productivity

>> that definitely has effected productivity, and the more of these things you give away and run through the public sector, you're basically squeezing things out of the private sector and the private sector is where the productivity is. it isn't in the public sector. the public sector is basically a dragon the economy and productivity >> professor, we're going to have to leave it there, and of course i would like to have you back the election is a long way off, but i think the more on the topic we can talk, especially tackling entitlements, better off future state of the union messages may be. thank you, sir >> thank you >> sara, back to you >> rick, thank you. he has been sounding the alarm on "squawk alley" for years. >> i think that the management of facebook right now is committing malpractice as a shareholder, i am terrified by what they're doing. they aren't listening. i am like guys, stop looking at china and the future, look at

the now. help us prevent interference in 2019 i think they need to get with the program. this is really hurting their brand globally >> long time critic, early facebook investor, roger mcnamee joins us and he released his new book hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

coming up later today on "closing bell," the economic state of our union, ahead of the president's state of the union address. we have top economists on the right and on the left. there's going to be a debate on taxes, trade, infrastructure plan, and a whole lot more in the meantime, a special hour of "squawk alleyisp xt n'goway." une this is loma linda,

a place with one of the highest life expectancies in the country. you see so many people walking around here in their hundreds. so how do you stay financially well for all those extra years? well, you have to start planning as early as possible. we all need to plan, for 18 years or more, of retirement.

i don't have a whole lot saved up, but i'm working on it now. i will do whatever i need to do. plan your financial life with prudential. bring your challenges. good morning, it is 8:00 a.m. at facebook headquarters in menlo park, california, 11:00 a.m. on wall street and "squawk alley" is live >> we have no idea how many people lost their privacy over this i think the management of facebook right now i