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 and melissa lee. joe is off today jason trennert is here >> thank you for having me i appreciate it. >> we're going to put you through the paces today. there's a lot going on with the markets. let's take a look at what's been happening with the major markets. in europe, they're closed for the easter holidays. in the united states the futures are indicated down dow futures down 56 points s&p off by 6.5 nasdaq down by 21. this comes after the first down week we've seen for the s&p in four weeks nasdaq composite has been up and down for the last nine sessions alternating. if you're looking where we

stand, you have to put it in perspective. the s&p 500 is about .9 of a percent shy of its record close from back in september overnight in asia, hong kong was also closed for a holiday. you see the shanghai composite was down 1.7%. the shenzhen was off by 1.5% the nikkei ended up by 17 points then if you check out things with treasury yields, as we say, this was a bit of a shock after not paying attention for a week. the ten year is trading at 2.57%. we've seen a big pickup in yields over the past week. >> focus this morning, oil prices jumping on reports that the state department is preparing to announce a major crackdown on countries that import oil from iran the u.s. reimposed sanctions but granted wavers from the eight name buyers that allowed limited purchases. those come from china, india, japan, south korea, turkey, italy, greece. they could face u.s. sanctions if they continue to import

iranian oil. let's take a check on oil prices wti is up by 2.33% brent is trading 2.65% the real goal is to bring iranian oil to its knees obviously this is negative for u.s. equity markets, i would imagine, because of the impact or maybe it's not. >> it should be. i think at first glance there's actually though been a pretty strong correlation between oil prices and the stock market over the past -- really over the past six months to a year so it's been pretty strong so the problem with this is that oil prices are rising probably for the wrong reason they're not rising necessarily because economic growth is stronger rising for regulatory reasons, but year to date both brent and crude are up between 34% and 31% respectively. >> this is a pretty big deal

this is a situation where the reason oil prices collapsed back in november is because of all of these sanctions that had been granted that hadn't been expected oil prices to that point had been pricing in the sanctions were going to bring you to almost zero. with this actually happening at the same time they're trying to get venezuela to not -- venezuelan exports not to be accepted by other countries. that put a real squeeze on oil prices. >> it's true i think, again, trying to focus on what drives largely the -- if you're looking at u.s. perspective, what drives u.s. economies is consumer spending. >> not the economy at large but oil prices. >> oil prices in particular. oil prices, the energy sector has been a laggard for a long period of time now you're starting to see some consolidation in the sector obviously. there's more concerns about shale in terms of oil by shale and that production as well. but i'm not sure this is going to be enough, my own personal opinion. i think i'm more focused on the

fact that the earnings recession that a lot of people were expecting is probably unlikely to come about as severely as people had expected. it's hard to say this is a good event. i'm not saying it's a good event. there are other factors. >> in terms of the dynasty that we'll hear on conference calls oil being up to year to date highs, dollar index being at 1 1/2 month high these are things that companies will likely address. i would imagine it would impact companies negatively. >> i think that's true i think we'll also have a very big impact on how the fed sees things as well and next week we'll see -- may 1st i believe we'll get another reading from the fed in terms of how they're thinking about things and i would say they would probably have to view this in some ways as far as global growth is concerned. if anything, that might keep them on the sidelines more if the earnings recession we

thought would be here doesn't look like it will materialize, how come you saw a weaker s&p? >> you're still 1% below where you were in october. this has been an incredible run really from i think christmas eve really was the low, i believe. on december 24th and a lot of that i think was driven by the fed. the s&p fell close to 10% between their meeting on december 20th and december 24th. i think obviously you saw a pretty good reversal where chairman powell was doing everything, sending flowers and candy to the new york stock exchange by january 3rd. there was a big tone change in terms of the way the fed was looking at things and i think that's being reflected in equity prices. >> speaking of earnings, huge week ahead for earnings. more than 1/5 of the s&p 500 will report results. big names to watch including coca-cola, facebook, at&t,

amazon, chevron and exxon. >> you mentioned boeing. let's talk about this. over the weekend, wow, was that a story. boeing workers survived the 737 max jet trouble shedding a really -- can't say critical light. it's more than that. this is the headline really of the dreamliner claims of shoddy production draws scrutiny to a second boeing jet as workers on the 737 dreamliner plant in south carolina have complained of defective manufacturing, debris left on the planes, pressure to not report violations. response to these allegations, boeing tells cnbc this story paints a, quote, skewed and inaccurate representation. shares of boeing flat this morning. in this story you had whistle blowers, ten whistle blowers who have filed complaints. there are folks working literally as the last line inspectors, if you will, saying

i would not get on these airplanes. i wouldn't put my family on these airplanes. i don't know if you -- >> i read that. >> i mean, to leave behind -- one of the allegations was that in one of the planes metal shavings was left behind and that could have impacted the circuitry of the plane that there is a ladder left -- >> like a -- >> an entire ladder. >> left inside one of these planes before it was delivered metal shards that could get into the wiring metal shards that could get into the actual engine. >> the operational performance of the aircraft. not just a rag >> these were on the record quotes from people who worked in these factories. so -- there were people on the record in those instances. there are many questions i have. one is does this change the dynamic in terms of what happens to the 737 max, which of course

is the big question, but also if you're going to the airport in the next week or two, are people reading this article and saying to themselves, you know what, i've -- am i on a dreamliner do i want to be on a dreamliner? do i want to change my reservation? >> the stock is only off 1%. what do you think? >> to andrew's question, that's a pretty high bar for most people and maybe i'm just -- i fly so much that i'm pretty fatalistic -- >> if it's going to happen, it's going to happen? >> yeah. to a ridiculous extent having said that, i think as andrew's pointing out, this brings up questions of the safety of culture. >> i want be to read this to you. joseph clavin, a technician at the north charleston plant, he's not a former employee, he works there. he said, quote, i told my wife i never plan to fly on t meaning at what point like does that -- >> people making the planes

won't fly on the planes. >> by the way, kudos and bravery to joseph clavin is he still an employee of the company. >> if they fire him, how bad would that look? >> right >> at this point >> it's very interesting >> it is very interesting. you know, again, it's one of america's premiere companies and, of course, you've got some serious questions about -- >> i don't know if you caught the other piece of this article which was as a splierp upplier r military that the military had problems to boeing that they were delivering planes to the military that were problematic and they tried to cut them off briefly and just brought them back. >> i think the thing that caught my attention last week, too, was the idea that boeing shutting down production or slowing down production of the 737 max, the idea that that could save .2 off of gdp this is something that echos very loudly through washington

as they follow up and see what happens with this. >> the nature of this story is obviously quite different, right? i think the problem with the 737 is that it was over engineered. >> i don't think so. i think it's in the same vein, actually i think the problem with the 737 if you tie back to this, "the wall street journal" going back to december of last year, has tracked where there are issues where they were trying to make sure that they could get the sale, get the plane which is why they wanted to classify it with the same plane where in fact it had been engineered so differently and it should have been classified as a different plane. by classifying it as a 737 even when it was a different place, they had moved and adjusted things, that was a streamlining the process and making sure that the pilots didn't need additional training. >> i just wonder whether there's a large cultural -- a legitimate -- >> a rush to get the plane out rush to deliver. >> a problem with quality. >> although i don't want to rush to judgment. i'd like to hear more -- the company came back pretty strenuously and said this was a

mischaracterization. >> just so we're clear this is the air force. the air force halted deliveries of the kc 46 tanker built in everett, washington, completely different place. after finding a wrench, bolts, trash inside new planes. will roper, assistant secretary to the air force, told a congressional subcommittee, this is the stuff we're not focused with to say it bluntly, this is unacceptable debris translates into a safety issue. and so if it's happening with the military as your client or whether it's happening -- >> this is not going away. this is going to be more deeply investigated. >> this is going to be -- >> i don't know how this compares to airbus, i just don't know i'd like to hear more on that front. >> a lot of people are defending the stock. if you take a look at the decline in the stock, 446 was the high came off the high on the news of the accident it hasn't gone down too much so people have been defending it based on the fundamental

>> i'm not even sure that's the case. >> why >> i could see margin compression of this company because they're going to have a slowdown a little bit. they have to work on some of these issues and perhaps washington will force those issues, but ultimately in a world where you only have airbus, you only have boeing and by the way if you're the united states and an america first world you want to support boeing, long term boeing is not going anywhere, at least i don't think so. >> i don't think that the bet is either being bullish on boeing or thinking it's going to go bankrupt but i think there are some questions at this point when you see headlines about shoes to drop, about whether or not in delaying them, the next generation of planes, 797s on order. there are plenty of carriers that don't have a lot of boeings in your fleets. >> becky's point is once you start to get on the radar of -- >> regulators.

>> -- the federal government and regulators and if the regulators are a little too close to the company to begin with, there will be more of an effort to show there to be a little bit of space. >> but as an investor how does that manifest itself given that there's not many options and people want to support a company like this. >> listen, i think it's a great company. i think we have a longs-term point of view. i would be a buyer of the company over the next six months to a year though, again, if you're on the radar of regulators. >> long term. >> it's not a good development >> separately new this morning, ousted nissan chairman ghosn declined bail on the latest indictment every other day there is a new indictment this is aggravated breach of trust. this is the fourth indictment. the bail request was made after the latest indictment.

he's facing three other charges including understating his income separately, nissan has filed a criminal complaint against ghosn saying it has determined some of its over seas payments had been ordered by ghosn now it's getting hard to try to make sense of this or not. at one point i was empathetic. now i don't know what to think anymore. >> japan, inc., i have to say, which is a black box and there's really -- there's not a lot of transparency japanese countries are generally speaking -- i'm not defending ghosn, but it wouldn't surprise me also if there -- this was part of some sort of incriminations against somebody that they're somewhat afraid of in terms of what they might do with the company i think that has to be part of

the calculus. >> and the japanese legal system while he's been in jail for all of this, turns out he gets 30 minutes of fresh air the lights are on 24 hours a day. it's disorienting for him. in the meantime, tesla says that it has sent a team to investigate a video that appears to show the explosion of one of its cars parked in a garage in china. the video was posted on tweter but not been -- is that smoke coming from a car in the garage or -- tesla is sending a team to investigate and help authorities. >> spontaneous combustion is what it looks like. >> there have been prior reports of things like this happening either in accidents or

spontaneously. >> tesla has had 14 vehicle fires either spontaneous since 2014 china's had 40 think of how many are on the road and put it in perspective. tesla announcing late friday that it is shrinking its board from 11 members to 7 tesla says the move will allow the board to operate more nimbly and efficiently. it was announced late last week and you can see the shares down by about 2%. down a decline of about $6 $267.33. the mixed view is that there are certain people on the board who didn't want to be up for it. >> right people who potentially shouldn't. >> some not -- >> it would be a different story if you were getting am on it

friday it announces that it's reducing the board today it's having its autonomy event. >> right >> exactly and then wednesday its earnings. very big week for tesla. when we come back, we'll talk about the fallout from the mueller report lots of buzz over the weekend, but will it matter to the markets? we'll talk about that next. right now as we head to the break, let's talk about the biggest premarket movements in the dow. exxon mobil up about -- almost half a percent as we see earnings this morning. we'll talk more about that this morning.

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a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome. welcome back to "squawk box. fallout from the mueller report. they cautioned against over reach. senator elizabeth warren calling for an impeachment process against president trump. >> when you see it all there together, ten different episodes of the president of the united states trying to block an investigation into both an attack on the united states by a hostile foreign government and an investigation into his own

wrongdoing, we have a constitution of the united states and it says when the president engages in this kind of activity, then it's time for impeachment. >> okay. for more reaction this morning i want to bring in nick johnson. he is action e axios's editor if where is this headed >> we're going to hear more comments like this elizabeth warren was the first 2020 candidate house leadership are still sort of reticent on that. this is not something nancy pelosi wants to do i'm watching everything jerry nadler says. he's chairman of the house judiciary committee. he's going to call barr and mueller. he's going to go wherever the evidence leads does that lead to impeachment? this is something democrats don't want to deal with. mueller wrote in his report, this is a political question we're in a political environment. there's a lot of democrats who want this so i'm watching does this continue to grow? is there a political ground swell of support for this to

happen to start the machinery in the house of representatives for this >> nick, what is your sense to that answer and to the extent that it becomes the next sort of not just talking points for the next couple of weeks but the next talking point for the next year and a half and creates a cloud over this election and, therefore, how it impacts the election if it will at all >> i mean, the election is a political process for the removing of a president. that's what a lot of senior democrats are going to say if you don't want donald trump to be president we shouldn't go through an impeachment process we should go for a new election process. we'll have a new president in two years anyway there's a sense that elizabeth warren encapsulated. there's a sense among grassroots democrats. the mueller report outlined things specifically. this will be a tension that very much informs what happens in congress in the next few years there wasn't a lot of stuff on the agenda legislatively for them to undertake.

the only thing we've reported them getting to is something on prescription drug reform this is consuming democratsfor the next year and a half. >> nick, what do you think this is the central question is elizabeth warren a leading voice for the democrats? >> that's a great question i was waiting all week last week for one of the democrats running for 2020, who was going to take the first stand and say this is the first one. congress has been out of town for the last two weeks they're home on easter break i'm very fascinated when they come back. another key thing we're going to be reporting on today, nancy pelosi will do a call, sort of take the temperature on this is this something that house leaders can push back against and say, calm down we'll do hearings. let's not rush to impeachment. is there a ground swell? let's move forward with impeachment. this is something we were put in congress to do. >> a couple other topics one relates to elizabeth warren.

elizabeth warren's been receiving a number of donations from employees from google, amazon, apple, facebook and the reason i mention it is -- >> right. >> -- she says she wants to break up all of those companies. >> i don't know if the employees of these tech companies are fascinating. they're pushing the companies and the ceos the furthest on these issues google, microsoft employees who would threaten the company because they had inappropriate deals with the defense department, with immigrations and customs exchange the big challenge the tech companies have is aggressive -- the enthusiasm, the activism of their employees. to be honest, i'm not surprised that employees of some of these tech companies are donating to the presidential candidate who wants to break them up. >> the other thing i wanted to touch on with you is you had a piece in mike allen's place over the weekend about capitalism and billionaires we've had a number of billionaires on our set overth past couple of weeks. >> right. >> who made some of these statements, here in fact, about

their qualms or -- i don't know if they have qualms with capitalism so much as they have said relatively straightforwardly that they think capitalism is broken ray dalio and even steven schwartzman made some comments which i thought were surprising last week given his support of president trump and where he's come from historically about the state of capitalism if you will. i did an interview over the weekend with dave sticklitz. he has talked about progressive capitalism catching fire with some on the left what's your take about what's happening here is this a bipartisan issue >> this is 100% a theme we've been following for at least a year now, at least since president trump's election if you look at the rise of the populus movements, the brexit. a lot of people feel that the economic order of the last year wasn't working out for them. it's very striking, not just

sort of populus but billionaires themselves, people who have benefitted from this are saying maybe there are steps we should take. >> let me play the role of joe kernen for a second because i often get put on the other end of it. is this really about capitalism unto itself or is this about the policies that surround capitalism which is to say some of the controls, some of the just -- in terms of this isn't the idea of capitalism itself or sort of how the government puts guardrails on it. >> you can't separate the two. this isn't an academic economics class talking about theory we're talking about sort of the political realities of this and the way capitalism is viewed and all of the policies and the way things are influenced. the way wealth accumulates wages have stagnated we had a report average inflation adjusted have been flat is that something that's working or not working particularly things such as education and housing.

i don't think you can talk about it theoretically. >> we're running this banner underneath that says capitalism versus socialism that's not what we're talking about. we're talking about capitalism versus more controls that come with capitalism. >> right. >> i don't think that anybody's advocating saying socialism is the way to go. >> we'll have a poll trying to figure out what people mean when they say socialism a lot of these terms are thrown around what does socialism mean >> today's socialism doesn't mean socialism it now means what you're referring to, this other idea. >> aoc may be different. >> if i can maybe assume the role of joe kernen here. the one i would say, the real question it seems to me is between free market capitalism and crony capitalism i think the larger -- milton friedman is one of my great heroes milton friedman is one of the first to say that the biggest beneficiaries of large government are large businesses because large businesses have

the political wherewithal, they have the financial wherewithal to change the rules in their favor. to me that is really the issue and that is something that i would say unites both left and the right. you know, especially on the -- >> especially on technology when you start looking at some of the big tech companies and say, have the regulators been able to keep up. >> absolutely. you're never in a better poli political position in my opinion as when you're not on the radar at all and jack was in that position. they're no longer in that position now. >> it's a longer conversation. we're going to have more of it over the next couple of hours. nick, great to see you this morning. >> thank you. >> coming up, signs of trouble for samsung. new delays on the launch of the galaxy bolt just days after high profile problems details next what's a target date fund?

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♪ ♪ it's -- the song makes sense when you listen to the story samsung is postponing media events for its foldable phone in china. the company did not give an official reason why. the phone's flexible screens break. cnbc put the $2,000 phone to the test last week as you can see, experienced major issues samsung said it is investigating the damage reports. i've seen other reviews that have been pretty good. when it actually works -- >> it's great.

>> it's pretty awesome. >> the cnbc review said this is a glimpse of the future before it broke they were very impressed by it before they had the technical difficulties. >> yeah. >> one feature the one feature in the phone -- >> that you had to get right. >> by the way, we always talk about the huawei huawei just introduced one of these as well. and it is shockingly good. i mean, that -- you should go online -- >> note that you are going to get one? >> no, not yet you go look online at what huawei -- >> shiny things. go ahead steal my -- >> twitter video of it it's a foldable thing that i think blows this thing out of the water, if it works again, they all have to work and y'all have to agree they're not stealing your information. coming up when we return -- there's some caveats and warning labels crude prices on the way on a report that the u.s. is planning to crack down on countries that

import oil from iran we have details and analysis after the break. it is moving markets this morning. right now looking at thursday's s&p 500 winners and losers right before the three-day weekend back in a moment dear tech, let's talk. we have a pretty good relationship. you've done a lot of good for the world. but i feel like you have the potential to do so much more. can we build ai without bias? how do we bake security into everything we do? we need tech that helps people understand each other. that understands my business. we've got some work to do. and we need your help. we need your support. let's expect more from technology. let's put smart to work. ♪ ♪

welcome back you're watching "squawk box," live from the nasdaq market site in times square. welcome back to "squawk box" this morning take a quick look at u.s. equity futures at this hour we are in the red. the dow looks like it would open off about 50 points. nasdaq off 17 points right now s&p 500 off a little over 5 points we're going to talk about why some of this may be happening. crude prices jumping brian sullivan joining us talking about the new iran sanctions reports that are

impacting and the equity reports as well, brian. >> reporter: yeah, listen. jim cramer has talked about this oil has gone up. that has pulled the market up. at some point there may be a breaking point we'll find out where that is either way, back to the key story. last year united states imposed sanctions on iran. nobody should be buying iranian oil, however, a number of countries, china, japan, south korea, they've petitioned for wavers we'll stop buying iranian oil but we need time this is part of our long-term supply strategy. those wavers for six months were granted. those wavers are now rolling off and according to numerous reports, guys, the u.s. government does not want to extend it. in other words, saying to our allies, hey, do not buy anymore iranian oil, period. they want to bring down iranian exports to zero. now keep this in mind. iran produces about 2.75 million barrels per day. that is way down from where it used to be but still it's a lot. one of the biggest opec users.

iran does use some of its own oil but most of it is exported around the world here's the question. if we can truly stop iranian exports, we're talking maybe a million and a half to 2 million barrels per day of supply used by japan, india, china, south korea, turkey and others that now has to be filled by somebody if saudi arabia cannot make up that gap, where does that oil come from? because it's a commodity if there's not enough of something and too many people want it, prices are going to go up and, becky, i mean, this is not a president who likes to have high oil prices. i mean, we have seen -- guys, we have seen this president when oil hits 60 get angry on twitter. we're at 65 now. if oil goes up, i expect more tweets. >> brian, you said one thing you said if we can stop these exports. how effective do you think these sanctions will be? >> well, i think we're going to

find out the reason i use the if word is this okay the way that we work -- i don't want to get too in the weeds and wonky, it's early. >> go ahead. >> our treasury department stops it by p doing one thing. if you want to buy iranian oil, we'll cut off u.s. capital markets. we can cut them off with the treasury. >> we've been really effective in the past. is there any reason to think it would be less effective? >> no. i think we'll be effective in stopping that flow on official sales. here's the thing, a lot of these oil tankers from iran, we've seen it in the past, it will probably accelerate. you know what they do? they fill up a million barrel tanker, they turn off that gps dranker. they call them a ghost ship. effectively they go around the world selling oil to people that are not putting it on the official registry and ships that are not visible on some of these satellite tracking services. literally, it's like new york. you want to buy a watch?

you want to buy a million barrels of oil in a super tacker which is being illicitly sold. india needs this oil more than any other country. there's a lot of ways to get oil into india >> brian, i would just simply ask you, couldn't the u.s. fill the gap? >> right. >> obviously a big part of the trump administration's goals with regard to oil was eliminating the trade deficit that we have in fossil fuels and it's very much on the drill, baby, drill administration perhaps we can fill the void. >> we could fill a small amount of the void, jason, good morning by the way. >> good morning. >> but here's the thing. what's the difference between vegetable oil and mayonnaise and effectively that's what we're talking about. >> what? >> they're both delicious, by the way. one's better on sandwiches, but that's the difference in the viscosity of some of this oil. some of the iranian oil is thick, heavy crude. >> it has to be refined. >> texas, we're light and sweet.

like maple syrup. >> it's different. >> it's a different type of oil is the problem it's venezuelan oil by the way, but venezuela's got their own problems down to 5 or 600,000 barrels a day. they can't make it up. even if they wanted to, they can't make up the gap. we know the rolling disaster that is venezuela. we're going to see, guys, if this works, where the price of oil goes we're up 2.5%. the president has to put pressure on one party. you know who that is. >> saudi arabia. >> saudi arabia. that's it. pick up the phone, call the saudis you need to put more oil on the market saudis need 88 bucks a barrel to meet their own needs i'm not sure how willing they're going to be to do that. >> brian, thank you very much. it's good to see you brian sullivan joining us to talk about what's working in the trading week ahead is jason hunter. he's head of global fixed income at jpmorgan. drew mattis who is chief market strategist and managing director at metlife drew, let's just start with this i mean, in terms of what this

means for the market, it could mean good news for the equity market if you actually see earnings for oil companies pick up here in the united states. >> yeah, i mean, it could be people are looking at earnings very carefully we're coming into earnings season i'm actually paying close attention to margins, right? i don't actually -- you know, it's nice that they make profits. we want to see sales go up but you need to see margins continue to be at a healthy level because that tells you the economy has a buffer zone and if there is a downturn in the economy for a little bit, it doesn't necessarily mean layoffs and reduced cap ex. >> what have you seen so far in the earnings that haven't been released >> i mean, you know, the margin numbers over the last year or so have been really healthy and actually quite stable and that's one of the reasons why we don't expect a recession any time soon usually you see margins decline pretty precipitously, bad combo of words, beforeyou actually get to a recession. >> jason, let's just talk about technicals and what we've seen so far you saw the s&p break through that range

i guess it was 2800 to 2816. we're now looking at s&p above 2900 what happens from the tech number perspective >> from our point of view, we've had a 2950-3,000 thinking that would happen by the end of the summer as we crawl towards that area with the s&p, we're not inclined to aggressively buy the broad market what we'd rather buy are the groups that didn't work in the quarter. you saw semis, technology, other groups take a leadership role. what we like now is looking for things like pmi to turn the corner what groups tend to act well energy one of them financials and materials are others that we were focused on the things we should see under perform, one, global fixed income should sell off and utilities and other defenses should under perform. >> we haven't seen global fixed income sell off. if you look at the flows we saw according to epfr, we saw the biggest in flow into bond funds since, what, a couple of years 2015 i believe is the number

what do we need to see happen before you become convinced. >> on the fixed income, you've got the technical sells. we have a number of systematic strategies that look at positioning, sentiment and price momentum those all triggered sell signals very similar to the summertime of 2016 when global pmis turned the corner same sets of signals fired then. we're seeing what we'd like to see. >> what's your favorite sector right now? >> i mean, we're a fixed income shop so private fixed income assets. >> which would be specifically what would you tell people to buy? >> i mean, it's nothing people can buy. it's stuff that we can buy and that's why we like it, actually, because it allows us more flexibility. >> drew, thank you jason, good to see you. >> okay. coming up, a lot more on squawk this morning big changes at bed, bath&beyond. it still isn't selling beds. - will give you the details - >> sounds beyond >> beyond. beyond

this is joe's problem with the company. name changes back in a moment how do you gauge the greatness of an suv?

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♪ welcome back to "squawk box. in today's executive edge, the board of bed, bath & beyond is getting a makeover

the current five directors will step down. warren ossenberg and leonard fi finestein will retire from the board. the lead independent director has been named a chairman all this follows pressure from an activist group made up of three different funds who hold a roughly 5% stake we've been talking about what might happen there and that's what's happened, so. coming up, should teachers be exempt from paying income tax? that's one idea from blackstone ceo steve swartzman, in order to improve america's educational system we'll debate that with former senator evan bayh. stay tuned to "squawk box" on cnbc through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from finding out what's selling best... to managing your fleet...

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welcome back last week on "squawk box," black stone's chairman and ceo steve swartzman outlined what he called a marshall plan to

address income inequality in the united states. >> we should make teachers pay no tax i think teachers is where the key is, and we have to address getting the best people. and it's not just money. and you can see from these strikes, people don't have enough money but we also have to make teachers a special class in our society. >> joining us right now, former u.s. senator evan bayh evan, i've sort of struggled with this, because i love the idea of it in theory, but then the second he got off the air, when he got off the air, we started getting tweets and e-mails from people -- what about police, firemen, doctors, nurses in this country so, what do you do >> well, also what about our men and women who serve in the military, andrew so, it's a good idea we need to attract the best people into teaching money is a part of that. but if that's all you do, it's not going to have much impact in the short or long term another way to put is it if you just pay more on the same people

to do the same thing the same amount of time, it's probably not going to change a whole lot. the workforce will turn over in the long run, but you also need to look at high academic standards that reflect the realities of the marketplace, number one number two, a system of assessments. that's a fancy way of saying tests, that are authentic tests, that measure how individual kids are doing. and then third and most important, you need a system of remediation to take kids who need to do better toward meeting those high standards and get them there you need to do all those things as well. >> senator, though, how much of this is about what states we're talking about? because as i went through the list, new york, for example, second highest payer in the country, you get paid $73,000 on average as a school teacher. in florida -- by the way, we had senator rick scott on last week where he was saying we should lower taxes. in florida, it's $47,000. >> yeah, but the cost of living here is so much higher. >> but then this becomes the question, though by the way, you can go farther down, you go to virginia or you go to oklahoma and you're getting paid $41,000

and you can say there's a cost of living issue, but even with the cost of living, i would argue that there's an issue. >> there are also pensions, though teachers receive public pensions, which is not an insignificant part of the long-term compensation, i would argue. >> well, you get all those issues and i'm glad you mentioned the respective states, because your viewers may be surprised to know that the percentage of the federal budget that goes to education is maybe 2%, maybe 3%, something like that. when i was governor of my state for eight years, it was, you know, 55%, 60%, so really it's the state and local communities that take the lead here. and so, if you make the income tax free, you may go to, you know, go from on an after-tax basis -- let's say in new york you were saying -- you may go from $55,000 up to that full average of $70,000, $75,000. that will at the margins attract perhaps a better caliber of people, but it takes a long time for that to have an impact and if that's all youdo, without the academic standards, the assessments and the remedial

efforts, you're just not going to move the needle a whole lot by the way -- >> how about school choice wouldn't -- if we're really worried about ultimately -- i think this is one of the frustrations i think that average people like myself -- both my parents were teachers, by the way -- is that it seems to me most of the discussions are around what's best for the teachers as opposed to what's best for the kids. >> i think that's to evan's point with the testing. >> i think -- i understand that, but school choice it seems to me would be one of the primary focuses of that. >> senator, i want to let you answer, but i'm going to have to invite you back to provide the answer because they're playing the music for us right now it is a longer conversation. it's a good one as well. and we plan to do it with you soon. >> ask me back, andrew, and i'll come. >> you bet and jason, thank you good to see you. >> sorry. >> no reason to say sorry. when we return, we're talking strategy with our guest host for the next hour, savita subramanian, head of strategy.

a big week for the markets as we get ready for an earnings rush a preview of what as to come and what it means for your investments, straight ahead. more trouble for tesla a model s exploding in china the dramatic video and reaction from former gm chief bob lutz is coming up. plus, democrats calling for more taxes on the rich, but is it the right move? we'll debate as a second hour of "squawk box" begins right now.

♪ >> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ welcome back to "squawk box" right here on cnbc i'm andrew ross sorkin along with becky quick and melissa lee. joe kernen is out today. in studio, savita subramanian, the head of u.s. equity and quantitative strategy with bank of america merrill lynch she's hanging out with us for a little bit this is going to be fun. >> that's right. >> u.s. equities this hour -- do you worry about this, down marginally it's an oil story. dow down about 50 points, nasdaq down about -- >> remember, we're about 1% from the highs for the dow and less than 1% from the highs for the s&p 500, so -- >> very short-term thinking this morning. >> we're just used to being up 20% since december 24th, christmas eve. >> that's right. >> and we should say, since we mentioned crude, u.s. is looking to cut exports to zero, crude

surging on the news. we'll see whether that's impacting across the board, but wti crude up about 2% right now, $65.33 if you're buying by the barrel. here are the headlines this hour we've been watching shares of bed bath & beyond this morning as the retailer is remaking its board with five independent directors departing and the company's two founders stepping down as co-chairmen. these actions follow pressure from an activist group that wanted the entire board and ceo replaced the stock is up by 9 cents this morning, a gain of about 0.5%. the national association of realtors will be out with existing home sales for march later this morning economists are looking for a 3.8% drop. and tesla will hold an investor event at its california headquarters today ceo elon musk is hoping for the focus of the event to be on tesla's self-driving efforts, but it's probably more likely investors will want to hear how the company plans to work through financial issues should also point out that tesla was just downgraded by ever core to an underperform and cutting

their price target to $240 from $330 as they're concerned about the severe drop-off in demand for the model s. separately, tesla is investigating a chinese social media video that shows a parked tesla model s exploding. that video has not been independently verified by cnbc there have been other reports of tesla cars catching fire in the past most of those occurred after crashes, though. tesla says it's going to be sending a team to help investigators determine what caused this issue. >> and of course, this will be a little bit of a cloud over today's events where they talk about autonomous driving and the future of trying to build a fleet as opposed to simply just cars. also a big week for earnings for wall street ahead. dom chu has a look at what you need to watch. >> all right, so, andrew, tesla's just one of the many companies reporting earnings this week. it will be the busiest week of earnings season, specifically for s&p 500 companies and dow components as well we know tesla's not one of those. however, almost around 150 s&p 500 companies, including 12 dow

components, are all reporting throughout the course of the week just to give you an idea what it's going to look like -- monday, today, kimberly-clark, whirlpool, halliburton tuesday, verizon, dow component coca-cola, also twitter in the mix, proctor and gamble, snap -- yes, not an s&p 500 company, but still a big one. at&t, boeing, caterpillar, tesla, and facebook all on wednesday. boeing may be looking for commentary with regard to what they are thinking about the future given the 737 max plane and its grounding so far by many airlines around the world. amazon, ford, intel, bristol-myers and freeport-mcmoran on thursday and then very oil-heavy on friday with exxon and chevron both reporting numbers as well. but remember, melissa, becky, andrew, as we talk about earnings season as a catalyst, we are still very early. only about 77 s&p 500 companies have reported so far, which means after this week, we'll get a very good view of it but as of right now, melissa, down 1.7% and every other

company in the s&p 500 reports earnings as expected not a good look so far we'll see if that changes. >> thank you, dom. joining us now is fidelity investments and savita subramanian from bank of america merrill lynch. great to have you both savita, i'll start off with you. 2,900 is your market. >> yes. >> seems like the market's sord of tired here. testifies within pretty much flat lining for the past at least month. what is the contour of 2,900 look like toward the end of the year >> yeah, obviously not a straight line, but our target for year end is 2,900. at this point, i feel relatively neutral on equities. i think a lot of the easy gains for the market are in the stocks, and we saw this complete round-trip in equities over the last couple of quarters. from here on out, i think what's more interesting is the internals of the market. so, i think what's really fascinating right now is that the world is still very defensively positioned but cyclical sectors and stocks look

like they could actually have a pretty great second half so, where we're putting our money at b of a merrill is on cyclical sectors -- industrials, consumer cyclicals, tech old tech, not new tech, so more cyclical tech, rather than secular tech but the market overall -- i mean, what i worry about for the next couple of years is that share buybacks kind of seem to be fading out a little bit, and those have contributed a huge chunk of earnings growth over the last five years. like, 30% of earnings growth over the last five years has come from companies just buying back their own shares. >> why do you think the share buybacks go away >> i think they go away because, a, investors don't want share buybacks anymore so, in our own surveys, we found that a huge proportion of investors want companies to pay down debt at this point, rather than use that money to buy back shares. >> is that defensive psychology in this part of the cycle? are they worried >> well, i think part of it is

that they're worried because leverage ratios are fairly extended and then the second reason is that the cost of capital on the debt side is starting to creep up a little bit. >> right. >> you've got the fed off of easy money you've got credit spreads at all-time lows, you know, potentially going to move higher you've got the tax benefit for debt slowly being removed. so, i think there are a lot of pressures on debt capital that investors are starting to worry about. >> i would imagine that this would be a greatest concern, when you look at the different kinds of companies in the market, amongst small caps, which have the highest percentage of companies that don't have the free cash flow to pay down their debt. >> absolutely, yep. >> is this sort of part of the market that is signaling -- like a canary in the coal mine? should we be watching this very carefully? >> you know, i think buybacks will probably continue and for many companies, it's just a reflection of that they generate a lot of free cash flow you know, free cash flow as a percentage of sales for the s&p

500 is about 10%, even after dividends, it's still 6% so, the numbers are very healthy. i mean, not every company is loading up on debt in this sort of form of misallocation of capital and generating sort of, you know, the illusion of earnings i mean, earnings per share, i think i agree, are overstated, possibly by about 20%, about 50%, sorry, $20 per share. because as companies buy back shares, they shrink the float, and so the ratio of sort of earnings per share against the dollar earnings goes up. so, i think that is a real thing. but then the question is how do you value the free cash flow and i think that doesn't really show up in the typical metric. so, i think investors will continue to discriminate between companies that generate enough free cash flow that even after satisfying dividends and even after capex, they can still buy back shares. and i think as you point out, we're starting to see that

distinction between those who can do that and those who cannot and you know, the change in leadership is part of that story. >> jurrien, did you say $20 a share in earnings on the s&p 500 is because of buybacks >> yes in terms of earnings per share, yeah. >> that's shocking. >> it's a big number, but if you think about it, since the global financial crisis, the s&p's up 4.7-fold if you strip out that $20 per share, it still would be up 4-fold, which would still be an equitable market so it's a big number, but it doesn't change anything directionally. >> i think, though, the one thing that we all forget or that i forget frequently is that precise, companies didn't generate earnings from share buybacks in fact, shares increased rather than decreased so, i think this is really just the last five years phenomenon, where the hurdle rate has been super low, capital has been free, and companies have basically been incented to buy back shares. >> you think 30% of the market

right now is being boosted, artificially or not, depending how you want to think about that. >> exactly. >> by buybacks >> yeah. >> you think it comes down to what on average in the next two years? >> going forward, we're modeling no benefit whatsoever from buybacks. >> zero. so from 30% of the market to zero >> which is kind of what we experienced prior to the crisis, no buyback benefit, because most of the time, buybacks were simply done to compensate relative delusion -- >> you'll still have companies with a lot of cash on their balance sheet, thinking of apple or something. >> i think you'll still see buybacks from big tech, financials, and those companies are probably going to do a lot better than the rest of the market because they're the scarcest resource -- >> is that part of the reason that you like to focus on those reasons? >> absolutely. i think financials and tech are the cash return sectors going forward. and the rest of the market looks a little bit less exciting that way. >> jurrien -- go ahead. >> i would just add that in the old days, half of the s&p return came from dividends, so it was

around 5%. these days it's 2% you add in cash -- add in share buybacks, it adds about 3%, you get back to 5% so i think, you know, there are problems in pockets of the markets, but by and large, i think this is just a way to return cash to shareholders, to bring that cash yield back to 5%, which is where it used to be in the old days before dividends sort of went down to 2%. so, it really comes down to free cash flow. the companies that generate it, they can do their capex, pay their dividends, and still buy back shares. that to me is a fairly benign phenomenon. >> all right we'll leave it there jurrien timmer, thank you so much savita will be with us for the hour. democratic capped dates are all talking about the high tax rates on the rich during the 1950s and '60s and why they could pay more today is that really true? well, robert frank has the story, and you've got to hear what he's got to say about this one. also, boeing back in the news this morning. reports of shoddy production on

the dreamliner and just a culture that seems to be in chaos. details about that story right after the break. "saw rur ia mequk"etnsn mont the latest innovation from xfinity

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welcome back, everybody. as boeing works to revive its troubled 737 max jetliner, a new report from "the new york times" sheds some critical light on another one of the company's products the headline for this story is "claims of shoddy production draw scrutiny to a second boeing jet" as workers at a 787 dreamliner plant in south carolina have complained of defective manufacturing, debris left on planes, and pressure to not report violations. in response to the allegations, a boeing spokesperson tells cnbc that the story paints a skewed and inaccurate picture of the dreamliner program and the team at boeing south carolina shares of boeing this morning when we last looked were off about 1%, down to $375.78. okay, we have a lot more to talk about on "squawk box" this morning. it's the first full day of trading for pinterest and zoom we'll talk ipos and the names ready to come to market after the break. and later, incredible video out of shanghai, apparently

involving a tesla model s. the company is now investigating reports of an explosion. can see the shot right here. it's quite remarkable. it's the latest problem for elon musk and the company "squawk box" returns with the video in a moment. i wanna keep doing what i love, that's the retirement plan. with my annuity, i know there is a guarantee. it's for my family, its for my self, its for my future. annuities can provide protected income for life. learn more at retire your risk dot org.

welcome back to "squawk box. it is the first day of trading for zoom and pinterest, both performing well after listing on respective exchanges, perhaps too well cameron ansari is greycross principal and was partner in pinterest and shareholder in the company as well. and rhett wallace is here, ceo viewers may recall that he made a bullish call on the program for both zoom and pinterest last week so, zoom zoomed, like 80% zoomed you also had a zoom, if you will, for pinterest. i thought it was actually somewhat of a terrible mispricing i thought -- >> then zoom increased their range before they went over the range before they zoomed -- >> i thought -- but for those clapping, who thought this was a

great success, i thought this was disgraceful -- >> because it's overpriced >> because if i was morgan stanley and i was the banker underwriting for zoom and the stock zooms 80% on day one -- >> you mispriced it. >> you mispriced it. there's no other way to look at this i would go so far as to say pinterest, up 30% -- i think you would like in a perfect world that 10%, 15% bump, maybe 20%. i'll take 20%. >> did you think the lyft pricing was perfect because it maximized the money raised for lyft, right? >> it becomes very interesting as well. but lyft had its own issues, but you -- i'm curious, as a shareholder, did you look at this and say, fabulous >> i think for all the concern before that it was going to be priced too low, it was going to be before the last private round, there would be unicorn tears in the street, disaster. i think they priced it relatively conservatively, then they got more demand -- >> talking about pinterest >> yes they upped it slightly and even that morning at the

exchange, you saw it going up a dollar, a dollar, a dollar. >> mispriced or not? >> i think appropriately priced at the end and a 20% to 30% bump is nice to have at the end to give momentum to the stock. >> and you think 80% is appropriate? >> i think you live in the world you're in, right and they were both coming right after lyft and it was such a disaster, they were required to make the deal be successful -- >> to go low. >> well, to be smart and a lot of people heard of pinterest and not so many of zoom and the more they heard, the more they liked it so it's not so much mispriced in the moment, but because of who they sell to and the nature of the company, people didn't know it as well. >> not only did they not know it, but they didn't know it enough that others were buying into zoom technologies, which went up for no reason, on the pink sheets, going up a zillion percent. but i look on the pricing thing, and obviously, i always care about who the underwriters are morgan stanley is also underwriting uber. there is a huge incentive for these underwriters to get, to make sure, especially after

lyft, to make sure that the market is actually going to look good, because guess what, the mother of all ipos is coming -- >> correct. >> -- in uber. that's where the fees are. that's the big game. all of this is a sideshow, if you're an underwriter, relative to that one. >> the flip side of that, i think, is that uber is so big that if it goes wrong, it could close the whole window and stop all the ones that are coming behind from coming for six months or so, if they really get it facebook wrong. >> yeah. so you look at the pinterest deal at 30% up, you're happy with that. generally speaking they only sold a small part of the company, so long term it could actually be helpful for them, but how much cash did they leave on the table >> they raised about $1.5 billion, so maybe you could have raised $1.8 billion or $1.9 billion. but what's interesting is these stocks have only traded for four hours or something pinterest didn't open until noon. >> let's talk about where these

issues go next because part of it with lyft was the immediate short interest that emerged. what do you think will happen with both zoom and pinterest >> i think our sense was that lyft was really weak right from the beginning, and you didn't need catalysts to feel like this makes no sense these guys, i think, priced well, the charts for the day held right in there and i think they still do as people say, now we can announce earnings, we can have coverage and it could run to the lock-ups before things get crazy. >> what was the lesson on day one of lyft, though? because lyft wept up, creeped down a little bit, but it wasn't -- >> but lyft made no sense at $72, much less $87. >> does zoom make -- >> and that's the difference between these things pinterest is priced very well multiplewise to its peers, so investors can say i can ground into a value -- >> of this group, pinterest seems to be the one that is on a price multiple seems actually conservatively valued. >> it's easier to feel like, okay, i feel comfortable in the

context of pinterest -- >> do you feel comfortable with zoom -- >> fully, fully priced >> fully priced. >> i mean, it's $300 million something of revenue that's worth what, $15 or $16 billion right now. >> i look at the comps for zoom. you even look at hubspot or a zendesk, twilio. zendesk started upside trading 10 to 14 times twillon about 20 to 22 times i think -- >> they sign a good comp and people are like, people will pay more for this than dock you sign it's profitable, but it's a big premium over comps. >> for pinterest, is there concern that facebook's big push to monetize instagram and now instagram with the buy buttons that that could be a pinterest killer >> that was the number one concern i think people brought up over the last several weeks because they believed that they happened to snapchat, where instagram released similar functionality and snapchat has gotten hurt. we'll see. instagram is a formidable,

massive competitor, but i think the use case is fundamentally different than what people do with pinterest, so it will shift the way people use instagram -- >> wouldn't you say the interest base is hanging in on pinterest and the issue is monetization? the sales force is doing an increasingly good job of monetizing the user base, right? instagram is a threat to the user base but less so to the monetization you keep getting that growth -- >> how much of is this is market sentiment that is lifting this and if that turns, it goes away like that. we could talk about the differences of each of these stocks, but i get the feeling that all of these ipos have been boosted by positive sentiment and this whole idea that this is a hot commodity right now. what happens if that turns >> i think one of the things that -- while that is inarguably true, one of the things that helped zoom is that they actually have earnings per share at this point, so you start to move into the land of hard metrics where you can look at it on a rational basis -- >> and a lot of them don't have great metrics on an individualized -- >> lyft losing $1 billion of

ebitda and $2 billion of revenue means if you don't have sentiment, you have no business being near the public market. >> but the other question is, what price are you paying for growth and where are you going to see growth elsewhere? so i think what's interesting right now is if you look at cyclical companies that are trading at much lower valuations, you're actually potentially going to see a bigger earnings surge from si cyclicals than the secular growth stocks. that's the other thing, we've been in a market with lackluster growth, but if we actually see the cycle turn, that could be the biggest risk for the ipo market today. >> i think this is another reason that zoom did as well as it did, is even though they have earnings per share -- usually you're trading growth for profitability. >> right. >> zoom had both, sill growing at 120% per year. >> how much do you think will be left for the ipos still coming uber being the biggest, but put them together, 2019 could be $700 billion of market cap

does the window close? is there a window on that? >> i think it depends on the sector when i look at health care, this is the one sector where supply is outstripping demand there's been more ipos within health care than any other sector they're flooding the market, and that's not necessarily the best environment for appetite but i think within tech, you're still at a relatively light level of ipos. >> when we've seen this before when the big ones come, like alibaba did, sometimes it blows out the lights, that people are full and they need to push back from the table and wait before they see what they want to sell out of to create new capacity -- >> that's still less than one amazon, so there's a lot of -- there's some room to move. cameron, rhett, thank you guys for the conversation. >> thank you. when we return, oil on the move plus, reports of a tesla exploding in shanghai. the dramatic video and reaction is straight ahead. "squawk box" will be right back.

crude oil on the move this morning. joining is on the squawk news line, john kilduff of again capital.

hitting highs not seen since october of 2018. how high do you think oil goes but embedded in that question is whether or not you believe actually cutting off oil leaving iran will have enough impact on the markets or if there is enough of a black market to sort of get around that >> it is doubtful the exports will go to zero. there is some active black market activity out there, but they're going to have a hard time with that, melissa. legitimate companies, even the big refiners in china, they're not going to risk the sanctions implications from the u.s., but there will be others that will certainly try to buy some. i think the indians will be particularly willing to buy. at this point, this whole thing, the market reaction you're seeing right now is because we are in a tight situation supplywise because of the efforts of saudi arabia over the past several months. it's going to turn on them if the saudis have it within their power and have the wherewithal to fill this gap to the extent they're reluctant

yapt or they don't, it's easy to see wti heading up above $70 a barrel we're just that tight in the market right now there's nobody else that can make it up we're pumping full out, we're exporting as much as we can in the u.s. we don't have the leverage or the bandwidth for it. >> why wouldn't saudi make up the shortfall? >> well, you know, i think they wanted a higher price for a while. they're still feeling a little burned after what they went through last year, late last year when they did turn the spigot open to make up what they thought then was going to be iran's exports cut drastically because of the sanctions regime. i think they will. you know, they're in a good spot right now, melissa they've got that bond offering out the door it went exceedingly well, so they're sort of covered that way and the oil price is still at a level where they're doing quite well so i do think they'll come through, but they're not going to be as enthusiastic this time around as they were i think in november. >> what do you think is a pain point in this market, john, in terms of seeing what economic growth is around the world,

which is sort of, you know, stalling, maybe some places it's turk, maybe it's not how high can we go and still be supported in price >> i think we're at the pain point for many countries india particularly under strain with brent over $70 a barrel, pushing on $75 u.s. consumers could be staring down at $3-a-gallon national average now at least for a time as we get into the start of the summer driving season. that's going to hit consumer confidence can they afford it yes, because of the employment will things sort of drag on? yes, but it will be a drag on consumer confidence at the very least, and again, i think the global economies, between the u.s./china trade war fallout, we continue to see bad export data out of all the asian countries now and this will own exacerbate the stress on those asian economies from this higher oil price. >> john, thank you john kilduff of again capital. just quickly, savita, what is a

pain point in terms of corporate profits and the consumer in your view >> yeah. i mean, higher oil is actually good for corporate profits because the s&p is levered to oil. so i think this could be a source of positive earnings surprise for the year where analysts are penciling in super low expectations so, i think that's one potential silver lining of higher oil. and then i think the other point that john made was consumers are making more money, so we might not feel that energy pinch until we get to higher levels. i mean, but $5 a gallon in california is not a good environment to be in so we're getting to a point where this could turn ugly >> we've got a lot more coming up on "squawk box," including this one -- more trouble for tesla? that's the question. a model s exploding overnight in china. we've got the video. it hasn't been confirmed as all real just yet, but we've got the video and the reaction you've got to see it here are the futures right now at this hour we are in the red with the dow off about 50 points, nasdaq off

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welcome back to "squawk box. tesla making headlines over the weekend. phil lebeau joins us with the latest phil >> no shortage of news from

tesla this weekend, andrew you guys were talking about the video out of china of the tesla model s apparently exploding as you mentioned it hasn't been confirmed yet. there was also news about tesla that -- actually, it's news that came out on friday the company is going to be shrinking its board of directors. currently, they have 11 directors on the board they are going to be bringing that down over the next year and a half down to seven those board members who are going to be leaving -- linda rice johnson, antonio gracias, steve gervetson and brad buss, all scheduled to either this year or next year to leave the board. they are also shrinking terms for the directors down to two years. meanwhile, for elon musk, today's a huge day the company will be holding what they're calling autonomous day as part of that autonomous day, they will be giving their vision for the future when it comes to autonomous vehicle technology, not only what's being built into their vehicles, what they plan to add to the vehicles, but also, don't be surprised if you

see at least some vague promises, if not outright promises, from elon musk about, hey, we're going to start an autonomous vehicle rideshare program or ride-hailing program. ever core, as you look at shares of tesla, is out with a note today saying don't get too excited about all the promises you'll hear today. we want to hear some near-term benchmarks, if you will, in terms of, okay, when do you expect to see some return there. that's when you may be able to ascribe some value, if you will, to anything that is mentioned today. by the way, that autonomous day, guys, is going to be live streamed starting at 2:00 eastern time that's when we'll start to see what elon musk has in store. and don't forget, we also get their earnings on wednesday, and thursday's the deadline for the s.e.c. filing. >> take us through the fire issue. we have a guest host this morning who owns one of these cars, who's worried about it and there are people who look at a video like that. do you think it's real >> well, it looks real, but

first of all, you don't see when it's pulled in you don't see if there's anybody who's around the vehicle i would love to talk with somebody who specializes in battery chemistry. do these just explode like this, or is there a simmering fire first? i mean, that really looks -- i mean, you just see some smoke for what, four seconds, and then there's an explosion what's interesting, andrew, is they say, well, we want to investigate it to see if it's legitimate does that mean that they're going to promise to -- >> they're going crazy on twitter right now. >> oh, yes. >> and other people are saying this whole thing is some kind of hoax. >> right i'm not surprised! i see that all the time. andrew, i see this -- any time there is a tesla vehicle fire, and are they overcovered relative to gas fires? you bet. they are way overcovered relative to internal combustion vehicles that catch on fire. having said that, it is new technology, and also, it is technology that people look at and say, are we 100% certain about this now, i can tell you from talking

with people, whether it's at some of the third parties who have tested these batteries, who have tested other electric vehicle batteries, they're comfortable with the technology overall. having said that -- >> if it's been 14 fires over the last, let's say 7 1/2 years, um -- >> right. >> -- what do we know about the previous 14? i guess that's what i wonder, because we can look at these pictures and -- what's the back story? >> becky, a lot of them are sparked after there has been an accident and some of these accidents, you've had a tesla colliding with either another vehicle or a wall at close to 100 miles per hour and when i've talked to people who are experts in battery technology, everybody says the same thing -- you have a vehicle slam into a wall at 100 miles per hour, you're going to get an explosion. so, you know, you can't sit there and say, well, this happens across the board x, y and z times. >> right. >> and we do know that the federal government has looked

into this to a certain extent, as has the ntsb. they're still investigating some of these incidents and we have yet to see them come out and say, look, there's a definitive threat here >> so, is this the first spontaneous combustion that's been reported, or has this happened before? >> well, i've seen other people say, well, i've heard that there are reports of spontaneous combustion with tesla vehicles and their batteries or other electric vehicles from other manufacturers, and yet, it is not something that we have been able to say definitively, nor have investigators from the federal government been able to come out and say, look, we don't see something here having said that, this video's going to get a lot of attention today. >> the video is supposedly -- i mean, if this is a true video, it's a closed circuit camera in a residential parking lot, and it's amazing how it's perfectly positioned on thetesla from th very start of the fire through the alleged spontaneous combustion i'm not saying if it's real or not real, but i think it's sort

of waiting for this video to be verified. >> i agree i agree. 100%. >> and phil, very quickly, take us through the governance issue of the guys leaving the board on friday th is this considered good or bad because the company spun it obviously in a very positive way -- >> right. >> but others have questions about what this really means. >> i think at the end of the day, the main question you have to come back to, andrew, is does this change whether or not -- and the big concern has always been with this board, that this is elon musk's board, that whatever he says -- and you heard him talk about this in the "60 minutes" interview -- look, i'm going to do what i'm going to do and the company's going to follow me, generally speaking. he gets very little pushback from the board i do know from talking to people that there were growing discussions and have been growing discussions amongst board members about increasing governance now, whether or not that sparked the decision here to go from 11 to 7, i can't say with any definitive certainty whether or

not that's the case, but i don't think we're going to see a huge shift in terms of elon musk's influence. i just don't see that happening. >> phil, thank you good talking to you. >> you bet. joining us now to talk about tesla and the auto industry is bob lutz he is former general motors vice chairman and vlf ceo and bob, i think i know what your answer's going to be on tesla, but let me ask anyway what do you think of all this news >> well, i generally agree with phil first of all, we don't know how the new board is going to behave, but i think we can generally say that this is a tailor-made board of hand-picked people that are beholden to elon musk, and it in no way resembles a normal public company board. these are not people who will supervise elon -- there is no adult supervision. because when you have independent directors that really come from outside and are not personal friends or

relatives of the ceo, you have a degree of supervision and shareholder accountability for the ceo's actions. and that has been notably absent at tesla and when you look at the composition of the new, reduced board, there are still a lot of people in it that are very close to elon musk i'm not saying it's a bad thing. it's just an unusual thing in a public company where you usually have outside directors who hold the ceo accountable and will criticize him, and i don't -- you know, if you look at elon musk's behavior, vis-a-vis the e s.e.c. and other activities, you have to tell yourself there is no board that tells them, that gets him in and says, elon, stop this stop this stuff or we're going to have to remove you. >> bob, let me switch gears and talk a little bit about the new nafta and what it means for the auto industry. we've got kevin hassett from the

cea who's going to be joining us in a little bit. there have been some different takes on how important this is, how many jobs it will create, how much it will mean for the u.s. economy overall but what can you tell us what do you think it means for detroit? >> look, i think much of it is factored in. and when the automobile industry has been notably reluctant to criticize the newer agreement, and basically, it just has content rules where certain percentages of a nafta-built vehicle, or what the new trade agreement is called, a certain content has to be from so-called high-wage countries, which means mexico and canada -- >> that means u.s. and canada, right? >> i'm sorry, yes. i misspoke, u.s. and canada. so, i think that it probably doesn't change it that much, and it will probably increase costs somewhat but when you think about it,

labor cost is a relatively small component of total vehicle cost. a lot of the total cost of objects, whether they're purchased in mexico or in the united states, are fixed cost and so forth so, i think there will be some hand ringing, there will be some additional costs, but it's no different from additional cost that's caused by additional government regulation, which can go into the hundreds, if not thousands of dollars, and nobody worries about that but here, i think it's much ado about nothing. i think the car industry is happy to have firm rules they're happy to still have the alliance of the -- the regional alliance of the three countries, and they're happy to be able to plan their sourcing with a degree of certainty. now, if you look at -- >> well -- >> i'm sorry, go ahead. >> well, i just wonder, there is

some -- there are some critics in congress, and i just wonder what happens if this new nafta doesn't get passed what will that mean for detroit? >> well, that would be the worst possible outcome, because then we would have continued uncertainty, and you can't resource assembly plants and major components overnight let's not forget, 70% of a car, by any automobile company, 70% of the car is purchased stuff. and you can't just change suppliers overnight. so you have to make your sourcing decisions a year or two or three years in advance. and in the absence of knowledge, what the trade arrangements are going to be, it becomes -- it becomes incredibly difficult and as i say, what the automobile industry hates worst is uncertainty and the absence of firm parameters >> right

hey, bob, it's good talking to you. thanks for your time this morning. >> okay. when we return, democrats are calling for more taxes on the rich robert frank has a preview robert, what can you tell us >> good morning, becky democratic candidates saying america's best days were when the rich were taxed at 70% or higher, but did it work? thriakofow you the tax bres e ch and ha they actually paid, after the break. so, you're open all day, that's what 24/7 means, sugar. kind of like how you get 24/7 access to licensed agents with geico. hmm? yeah, you just go online, or give them a call anytime. you don't say. yep. now what will it take to get 24/7 access to that lemon meringue pie? pie! pie's coming!

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welcome back to "squawk box.

it is time to talk taxes robert frank is here with some pretty interesting stuff to talk about. this is very interesting historical information for us. >> i found it interesting. on the campaign trail, democratic candidates are citing the 1950s and '60s as the golden age of taxing the rich with rates as high as 70% or even 90%. what candidates aren't saying is that the taxes actually paid by the wealthy were much lower and they haven't changed much over the past 60 years. an analysis by top economists led by toma pikity looked at the total amount of taxes paid by the top 1% relative to their income now, in 1960, when the top official rate was 91%, the 1%ers paid 80% of their total rate that rate fell and today the top 1% pay a rate around 37%, so it's only 5% or 6% points less than the golden 1950s days

so, why did the rich pay so much less than their official rate? first of all, those top rates only apply to a very small group, less than 10,000 households made enough to pay that 91% rate in the 1960s also, much of that income came from capital gains and investments. those, of course, taxed at much lower rates. and as they always do, the wealthy found ways to avoid those higher rates so, even though the top rates were much more, twice as high as today, the taxes paid by the rich have actually been fairly consistent over time >> all right, let's bring in our guest to talk about this with robert joining us right now is the center for american progress senior fellow, seth hamland, and resident fellow alex brill welcome to both of you seth, what do you say to that? >> well, i think it's certainly true that, you know, back in, what you said was the golden age, wealthy people paid a much lower effective rate, but it was still, you know, it was still much higher than it is now

and so, i think even a five or six-point difference is nothing to sneeze at, even if we brought it back to those levels, that would raise a tremendous amount of money, like $2 trillion over the next ten years so that's nothing to sneeze at but i think it speaks to the issue that the top marginal rate is just one piece of this pudzle and we need to be thinking more holistically about the tax code and the ways wealthy people avoid it through capital gains and also through tax avoidance, which i think speaks to the fact that we've disinvested in the irs in recent years. >> tax avoidance would be taken care of with the top rate that you're paying. >> well, if there's a capital gains rate that's much lower -- and back in those days, it was 25%. it's about that now. you can, you know, wealthy people create tax shelters to basically convert their income, ordinary income, into capital gains, even if it's labor income or regular income. and today there's more loopholes. you have the capital gains loophole you have this new pass-through

business deduction, which allows wealthy people to take a -- pay a lower tax rate, even in the top rate, which is now 37% >> robert, what do you know about that >> well, look, you know, this is the big question with all of these proposals. if you go to a 70% marginal rate, do you -- >> effective rate. >> -- include capital gains or not? >> right. >> and there is a huge difference in what you collect and how it's treated if it's just ordinary income, you collect a lot of money if it includes capital gains, to the guest's point, there is so much avoidance and timing that the wealthy can just shift everything to a different year so you actually raise a lot less if you include capital gains on that and of course, none of these proposals have gotten that specific yet. >> have any details, right alex >> well, i would agree with seth's point and the point earlier, the tax avoidance is a huge problem i wouldn't refer to those provisions as tax loopholes myself i think we tax capital gains at a lower rate because we want to encourage capital accumulation

to grow the economy, but it's definitely the case that as the rates go up, that people get more and more and more creative in terms of how they report their income there are really two effects here that matter one is a real economic effect, which is high marginal tax rates, discourage entrepreneurship and innovation, and economists only debate the magnitude of that effect they don't debate that effect. and then the second is the point that was mentioned earlier, that people find ways of reporting less income. so it might actually look like this policy's working because we'll see incomes from high-income individuals fall, but really what we're doing is we're just encouraging them to hire attorneys and accountants to come up with new schemes. >> what's the way to fix that? what would you say, seth >> so, i think the main -- one of the main problems with the tax code, what some people call the achilles' heel, is the ability of people to defer realization of capital gains, sometimes indefinitely so, basically, avoiding capital gains taxes forever.

and i think we really need to look at the base of the capital gains tax. senator wyden, who's the top democrat on the finance committee, talked about looking at a mark-to-market system but we really need to look at catching up the base of the capital gains tax so people can't avoid it. >> seth, alex, thank you both for joining us and robert, thank you. >> thanks. >> i also want to thank savita for hanging out with us. >> nice to be here. >> good to see you good luck with the battery. coming up when we return, council of economic advisers chair kevin hassett, big "ua b."e just ahead right her onsqwkox one-millionth order. millionth order. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot.

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president trump's update to nafta still in limbo could a new, positive assessment push this deal over the finish line council of economic advisers chairman kevin hassett is our special guest. crude oil prices on the rise this morning, hitting their highest levels of the year we'll tell you what is behind this big jump. and the ipo rush lyft is in the rearview mirror, and uber is next can the ride-hailing giant avoid wall street's biggest potholes that's the question. the final hour of "squawk box" begins right now

live from the most powerful city in the world, new york, this is "squawk box. good morning, everybody! welcome back 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 and melissa lee. joe is off today our guest host this hour is peter krause, chairman and ceo of aperture investors. let's take a look at the futures this morning you're going to see right now on the first trading day of the week that there are red arrows dow futures off about 52, nasdaq down by 25 and the s&p down by about 5 1/2. this comes after the first week of losses that we've seen for the s&p 500 in four weeks. however, you are also talking about some incredibly high levels s&p is less than a percent off of its highs dow is down by 1% from its highs, too also, look at what's been happening with treasury yields you did see treasury yields climb over the last week and this morning the ten-year's sitting at 2.572%. a couple big stories investors are going to be talking about today. crude prices jumping this

morning. one report that state department preparing to announce a major crackdown on countries that import oil from iran crude prices are up about 2% the u.s. reimposed sanctions on iran last september but granted wavers to their eight name-buyers that allowed limited purchases for six months those countries could soon face u.s. sanctions if they continue to import iranian oil. and a new story in "the new york times" shedding light on another one of boeing's key products the article says workers at the south carolina plant that produced 787 dream liners have filed a dozen whistle-blower claims and complaints, reporting issues such as defective manufacturing in pressure to not reporting potential safety violations in relation to the allegations. boeing says it paints a skewed and inaccurate picture of the dreamliner program and the team in south carolina, but we have to say employees are on the record saying they wouldn't have

their family fly on a dreamliner plane and other complaints that related to the military and air force as well, that the air force itself had complained about some of these same similar issues with different planes for them and tesla says it has sent a team to investigate a video that appears to show the explosion of one of its cars parked in a garage the video was posted on twitter. you can see it right here. we should say -- and let's be very clear right now -- it has not been independently verified by cnbc. and i know of no other news organization yet that has verified it separately it appears to show smoke coming from the hood of a tesla that's parked in a garage, and then the car bursts into flames there are lots of people with lots of questions about this video. we should show it again. some people saying look at how close the camera is right on it. the smoke comes out of it. it literally looks like it's just combusting out of nothing

so you know, lots of shorts all over the place that are spreading this around, for obvious reasons, but questions remain >> definitely. by the way, evercore downgraded tesla to underperform, the day of the autonomy event in california this is a big day for tesla, facing a lot of questions. >> the reason for the downgrade is because they're concerned about the lack of demand or decline of demand for the model s, nothing to do with this stuff. >> can we run the video again? because if you run it carefully -- >> oh, my god, we've run it 40 times -- >> if you move it carefully, the camera moves. >> i noticed that. >> the camera moves. >> but we don't know if it's a closed circuit camera that's moving or if the shot of -- you know what i mean if it's playing on a monitor -- >> we don't know the source. >> for amateur investigators, the fact that the camera's moving. >> we're not going to know anything until we hear more from investigators. tesla is sending a team to check this out themselves. >> maybe we'll get some answers.

a few stocks on the move this morning bed bath & beyond is reconstituting its board five board members at the retailer are stepping down and the company's founder and co-chairmen are leaving the board as well. the lead independent director patrick gas lynn has been named new chairman and we should note it had been the target of activist investors for some time. shares are up 4% kimberly-clark beating estimates by 12 cents in the latest quarterly report adjusted profit of $1.66 a share. revenue also topping wall street forecasts. the company said results were helped by higher selling prices and cost reductions which helped offset higher commodity prices and current currency headwinds. the international trade commission is out with an assessment checking out the impact of president trump's u.s./mexico/canada agreement the commission says the trade deal would likely have what they call a positive impact on all broad industry sectors within the u.s. economy with manufacturing having the largest potential for percentage gains but the new nafta or the usmca, still has to be approved by

congress kevin hassett is chairman of the council of economic advisers kevin, thanks for being here today. it's good seeing you. >> yes. >> let's run through what the itc had to say because i think there's a little bit for everybody in this report they say they do expect u.s. exports to both mexico and canada to increase by 7% and 6% respectively they expect ad culture and food exports to be up about $2.2 billion, but they also say when it's said and done, they only expect it to boost the u.s. economy by about 0.35% what do you take away from this? and i know some of your numbers are higher. >> first of all, even if you take their numbers, if you go farther out, six, seven years out, the number gets above 1% of gdp. so, i think for me, it was almost comical when i watched some of the news stories come out. this was a blockbuster report. this report said that the economic effect of the usmca is double the impact of all the previous things that the itc has assessed going all the way back to 1984, so it was a blockbuster

report the idea that it's a small effect is belied by really this. do you remember, i came on your show a long time ago and i said we'd get about 0.3% a year out of tax reform and people were like, that's ridiculously absurd now it's 0.3% in the itc report and people are covering it as a small effect there is a chance it would have been a lowball report and would have been much more difficult to pass usmca the big news is this will help get people who are on the fence to vote for it and we are more opposite abo optimistic about getting this through congress because of this unprecedented itc report finally, you're right, i have numbers that say they're missing some valuable things and we can talk about that, too, but i think even in the near term, my number is closer to $100 billion because they don't account for the patent protection part of the deal, which i think is a big part of the deal. >> let's talk about what this means in terms of its chances of getting passed where does that stand now?

what kind of percentage odds would you give it of being passed by congress >> i think vote counters are saying we've got all the votes we need and speaker pelosi needs to bring it to the floor so the thing can pass and in the senate everything's fine i think there's broad bipartisan support for economic policies that help blue-collar workers, help manufacturing, make the economy stronger, create 176,000 jobs by the itc's own numbers. so i think just as we saw with prison reform last year, that this is going to be one of those things that's a chance for real reasonable bipartisan moment to get something done for america. >> it's good to hear we spoke with bob lutz earlier, and he said the biggest concern for any of the auto manufacturers is going to be if there's nothing passed, if the old nafta gets removed, because that level of uncertainty is really the worst-case scenario they're looking at trying to make their purchasing decisions one, two, three years in advance, and the uncertainty is what really kills business leaders. >> which is why congress needs to move and get this passed by the end of the summer. it's something that we have now got the itc report, you know,

investor lighthizer has been meeting with everybody on the hill and even with people all around the country i think we have yet to see anything that changes our mind that it's really a historic bill don't forget, the thing that the itc recognized that i think is really interesting and awesome is that, you know, digital trade and ocean litter and all sorts of things in this trade deal are really 21st-century things and when i first got here, president trump said, you know what's going to happen, we're going to have one trade bill, it's going to pass, then all of the other countries on earth are going to want to copy it and we're going to get basically a cascade of trade deals and so, i think if we can get this usmca deal passed, that we could then look forward to that cascade. and at cea, we modeled that, taking the itc numbers and sort of said what if the rest of the world were to copy the deal and then we're talking in the hundreds and hundreds of billions of dollars for the benefit of the u.s. economy. >> switching gears, kevin, if we can talk about the price of oil this morning we're seeing that spike pretty dramatically to year-to-date highs on this report that the

u.s. will no longer grant waivers to those countries that are still importing oil from iran to what extent should we be concerned about oil and higher oil prices as a headwind to the economy, to the extent that the administration seems to be very concerned about interest rates and interest rates are at historic lows. >> well, the administration is very serious about taking a hard line on iran, and if you look at the black market value of the iranian real has dropped by about two-thirds because our sanctions really have teeth. i think you can expect more news out of the white house in the next few days on exactly what's going to happen with the sanction waivers going forward but keep in mind that, you know, the total iranian production is smaller than the change in u.s. production over the last few years because of the horizontal drilling boom and so on. so, i think that the global oil markets are poised to be able to deal with this and you're right, that the spot price today is moving around a lot because of these unsernts, but there's plenty of production

that can come online, were something to happen through the rest of the year. >> so we won't get a tweet of the president saying oil prices are too high, they should come down >> i think oil prices fluctuate and when they're high, it's often because the u.s. economy is a lot stronger than people think. and that's actually the other thing i want to talk about today, which is we've got a gdp number coming out this week and our internal numbers at cea got up around 3% for the first quarter last week with some of the good news on retail sales and so on. so, i think that we're looking at a continuation of the 3% growth that we had last year to this year, and the first quarter usually is a little bit low. so, i think that there's almost more up side than downside risk going forward on the economy. >> your number is higher than what a lot of banks on the street -- we did see jpmorgan and goldman sachs raise their numbers, but i think that was to 2.7% and 2.5% -- >> gdp is now at 2.8%, but it's an uncertain science there's probably about a 0.5% margin for error and we're just

a smidgen under 3% and there's about 0.3% coming off of the number because of the government shutdown and other factors. which means if you're at 2.8%, the signal is that we're still growing at %, and that's a different signal than people expected in january. >> kevin, steve schwartzman, founder of blackstone, longtime supporter of the administration, made some, i thought, remarkable comments last week about his view that, actually, the system currently as structured -- and i think he was talking about the tax system and everything else, actually hasn't -- i don't know if he was saying it hasn't benefited blue collar workers, but clearly that the system isn't working or isn't working well enough. at one point, he proposed this idea of not taxing teachers. and i was curious what you thought both of that idea, but even the broader critique of where we are and it's a critique -- the "financial times" has a big piece about it over the weekend as well and you're hearing it from all sorts of people in the business community. >> well, i have to go back and look at what steve said. i think the world of steve, and

i'm sure that after i study what he said that there's going to be some food for thought for me in there, but the thing that i can say is that, you know, the idea that blue collar workers aren't flourishing right now, well, that's belied by the fact that we've created about 500,000 manufacturing jobs in the two years that president trump's been here, the idea that low-income people aren't benefiting from the tax cuts, well, that's belied by a chart -- you could go to the cea twitter feed and we put it up a few weeks ago -- that shows that the bottom 10% of the wage distribution is actually growing the fastest with nominal wage growth last year of 6.5% for people in the bottom so i think there's a heck of a lot of good news that, exactly as we said, the tax cuts will come in, cause the economy to boom and drive up wages for blue collar workers. >> i think the most provocative point he made is he said, look, the current generation, the bottom half of the current generation doesn't have the same opportunity that he in his generation had do you believe that to be true >> no, i do not believe that's true and again, i think that that looks true in 2016 and 2015. there was a heck of a lot of

really bad wage data because we had a system that was chasing capital, chasing entrepreneurship offshore, and that stuff has taken off big time, and it's taken off around the country but also, you know, we had an event last week about opportunity zones. this new policy that we have that's making sure that the capital, or a big chunk of the capital is headed towards distressed communities, and one of the facts i mentioned at a press event that we had with the president last week was that the zones themselves were announced by the states in the second quarter of last year, and according to the latest zillow data, real estate prices in distressed communities are up 20% relative to the second quarter of last year, and you know, by our analysis, more than half the people that live in distressed communities own their home and so, we just gave a huge 20% wealth shock to most people in distressed communities all around the country so, the idea that our policies are not reaching all across america and making all america the land of opportunity again i think is just incorrect. >> hey, kevin, thank you for your time today. >> thanks, becky

coming up when we return, is it time for some fresh market highs? that's the question. the dow sitting exactly 1% below record lows from october of last year, but is the momentum there to keep the rally going? we'll talk markets, ipos and chore with our guest host, peter krause, when "squawk" returns. pnc bank has technology to help make banking easier,

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welcome back to "squawk. want to get to our guest host this morning to talk markets and much more. peter krause is chairman and ceo of aperture investors, former chairman of alliance bernstein and help us just understand where we are we've got oil, looks like it's on the move. you know, where do you -- how do you correlate oil these days to the equity markets because sometimes we say it's a great thing, and sometimes we say it's a terrible thing. >> yeah, i think it's hard to correlate oil with the equity markets. oil is generally impacted, at least in short periods of time, by supply changes, either increases in supply or decreases in supply. over longer periods of time, oil prices will follow the economic environment, economic demand, and the supply that actually is created by new drilling. so i think looking at oil prices to define whether or not the market's going to go up or down, that's probably challenging. >> help us, though, with this -- well, i want to understand where

you are, because you have been very negative, very negative over time since you've been coming on this program you've said things are going to get worse. you didn't want to get back into the markets until we got back down to basically december lows, and frankly -- >> been wrong. >> you've been wrong the train has left the station so what are you doing about it >> i'm still in the same place. >> meaning you think the train is going back to the old station still. >> no, i think -- i mean, let's look at what we said so, you asked me the question in january, and i said i'm uncomfortable with the market. the marketwent up 15% since then so, if we had bought the market, we'd be up 15% that would have been a good thing, for sure. but you know, we don't know that the market's going to stay at this level and certainly, there's plenty of cynicism out there about how much higher the market can go and where growth is in the world and where growth is in the united states and how close or far away are we from a recession. and there continues to be significant risk -- >> so you're just sitting on cash waiting for this moment of --

>> as we said, i didn't take any money out of the market. you asked me would i put more money into the equity market, and i said i wouldn't actually take money out of the equity market, but if i had cash, i either would buy options, which by the was, would have worked, or i would have kept it in cash or bonds. >> and, let's just drill down on this has there been anything that's happened in the last couple of months that has changed your thesis >> no. i still think the market's uncertain. i still think it's challenging -- >> it's always uncertain it's always challenging, though. >> yes, it's always challenging, it's always uncertain, but i think that the direct increase of another 13% up is i think, frankly, a low probability i think we've seen the market move 13% or 14% in a year's time. >> it feels like there has been some changes at least number one in the united states has been the fed pivot. number two, overseas, is what seems to be a bottoming out in china data number three is the newfound dovishness of central banks around the world after the

powell pivot do those things -- those are major changes. >> yeah, those are really good points so, why did the fed actually stop raising rates why are the rest of the central banks getting dovish because they're worried about the economic environment it's not because they think the economy's going to take off. if they thought the economy was going to grow, they would keep raising rates. so, they've made a clear signal, which we talked about the last time we were together -- made a clear signal that, actually, i'm concerned about the economy. i don't actually want to raise rates. >> and yet, though, what they've done about it has made investors more bullish. >> it has. no doubt about it. because listen, investors like the fact that there's no inflation. they like the fact that the fed is saying there's no inflation and equity markets do well in that environment >> okay, so, but -- >> but the fed is also saying i don't want to continue to increase rates because i'm nervous about where the economy's growth is. and when it becomes obvious to the equity market that growth is actually slowing down, it's going to react, just like it did in december -- >> we had a guest on in the 6:00

hour, with a point that the earnings recession people thought we would see has not materialized, at least based on the earnings we've seen so far. >> earnings this quarter have been better than expected, but they're not robust. >> but the market came down pretty significantly anticipating that -- >> the market came down in december it's very hard to say. that was such a sharp move down and a sharp move up. it lasted for a day and a half at the bottom. i wouldn't exactly call that a market reaction to weaker -- >> what do you think is a fair price? if this looks a little rich and if that looked a little undervalued at that point? i'm assuming -- >> fair price for the market >> yeah, what do you think is a fair price >> now i'm guessing, but something in the 22 bottom, 2,400 is a fair price. >> that's a lot closer to the december lows. >> december lows, yeah. >> within your reallocation, what are you allocated to and have you shifted that equity allocation within that bucket? >> well, i think value stocks have been a real challenge for the last ten years, but there

are opportunities in value growth is probability more expensive than it has historically been, and there's four or five stocks that are driving that growth. >> right. >> and so, finding growth is challenging. look, we had a talk about ipos and tech ipos. investors are looking for growth and in those ipos, they see growth and they're bidding them up because there's growth -- >> would you buy any of those ipos right now >> would you buy an ipo? the question is would you hold an ipo there's lots of people buying them how long they hold them is another question. >> you saw what happened with lyft are you expecting a similar scene on zoom? >> no, i think, look, i think that just because some ipos have not done well doesn't presage that others will not i think that the market's still in a good enough environment, a strong enough emotional state that ipos will probably do reasonably well. it's really a function of where the underwriters price it. >> peter's with us for the rest

of the program when we return, an interview you don't want to miss with an uber shareholder and former company insider. we're going to talk expectations for what's likely to be a blockbuster ipo, also competition with lyft and how the current o cehas transformed the company. stay tuned "squawk box" will be right back. . more than half of employees across the country bring financial stress to work. if you're stressed out financially at home, you're going to be too worried to be able to do a good job. i want to be able to offer all of the benefits that keep them satisfied. it is the people that is really the only asset that you have. put your employees on a path to financial wellness with prudential. bring your challenges.

all right, folks, some breaking news. the white house just out with a statement confirming that sanctions waivers on the export of oil from iran will not be renewed. that is expected to be the topic of secretary of state mike pompeo's news conference moments from now, but listen to this this may be the most important part the white house also says that the united states, saudi arabia, and united arab emirates have agreed to take timely action to assure that global demand is met, as all iranian oil is removed from the market. remember, saudi arabia is the one place that they really needed to go to ensure that they would increase production. united states companies may choose to do that separately, but they've spoken with saudi arabia and the united arab emirates and we'll see what that means. you can see the impact on crude oil, up by about $2.03, a 2.8% decline for brent crude. wti is up. much of this was telegraphed, but fact that they've already spoken with saudi arabia and united arab emirates is new from

the white house. we'll be hearing more in 15 minutes' time. coming up, the glamorous ipos continue and uber is next what does this say for the ride-hailing king? we'll ask a former iidnser and current shareholder to weigh in.

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welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. let's get to the stories that investors are going to be talking about today. we do get a key read on the housing market that comes later this morning. the national association of realtors will be out with its march existing home sales at 10:00 eastern time they're expected to post a 3.8% drop another piece of housing data was issued on friday when the market was foreclosed. housing starts were down by 0.3% last month economists had been looking for a 4.1% increase. and shares of halliburton are rising in premarket trading this morning the oil field services company beating estimates by a penny with profit of 23 cents a share. revenue also coming in above estimates.

halliburton was helped by a recovery in international demand and the stock is up 3% this morning. let's talk ipo aftershocks following big pops for pinterest and zoom on their first trading days now interest is turning to uber. leslie picker is joining us now with more. >> good morning, melissa to put things into perspective, uber's ipo will be five times the size of pinterest's and zoom's ipos combined the company is expected to float about $10 billion worth of stock, making it the largest u.s. listed tech ipo since alibaba's deal in 2014, but executing larger ipos can require a little extra love and attention from its advisers. even with a brand name like uber with a global business in ride-hailing, food delivery and freight, selling $10 billion worth of stock is no easy task for one, uber is already discounting its valuation. it's seeking to bring more investors in the door. the company had initially aimed for $120 billion, but sources say it's now aiming for $100 billion or maybe even less than

that the company also needs to find investors who will stick around for a while. some larger deals, namely lyft and even facebook, allocated stock to investors at first who were looking to make a quick buck, investors who flipped the stock too quickly. uber needs to ensure it has a loyal base to keep the stock price afloat after its debut lastly, market timing. uber needs to go public in a market that is willing to give the company a pass for its $3 billion in operating losses, and that usually requires low volatility like we're seeing, high stock valuations, but of course, as we know, these things can change on a dime. >> thank you, leslie to continue this conversation about uber's ipo, we have a very special guest, amile michael, former chief business officer and senior vice president at uber this is his first tv interview since departing the company. a true insider understands the culture and has watched the transformation of this company and remains an investor in it so, you've got a lot at stake over the next couple of weeks. >> sure do, sure do. >> help us understand a couple of things.

first of all, the transformation that you've seen, both on the inside and the outside of uber and how you think about that >> well, i'd say that uber had to be pretty provocative to get our place at the table a lot of these transportation systems in these cities were closed we were not welcome. we could not launch our service there. so we had to foster the power of the people, who said i want transportation to be democratized and we had to push hard to get in and i think now that we're in, you could take a more diplomatic approach, which dara has done and done quite well. and you could have a seat at the table and have the conversation about how to improve the service. >> as somebody who worked very closely with travis, how did you feel initially when dara khosrowshahi first took that role and was quite public in his rebuke, if you will, of the culture that was created >> look, every management team gets to have its own philosophy

about how to run a company and as a shareholder, i was more interested in the company just doing well so, he chose his own leaders they've been in charge for almost two years now the company seems to be making some really smart moves. i'm proud of what they've done i'm proud of what we did way back when. and i'm really hoping the stock will do what it can do. >> as you've watched shares of lyft, what are you thinking it suggests for what will happen to uber and should we even put them in the same sentence? because they do seem to be different businesses. >> i think they're more different than they are the same and here's why when we first started uber, we thought about it as a platform, a platform for urban logistics, which is why you saw uber eats start very early in uber's lifestyle. now you've started with uber rides, uber eats, uber rush, uber freight, you name it, on a global footprint that was in every country in the world, about 93 countries at one point. that's very different than ride-hailing in one or two countries.

so, i think if you think about -- thinking about google or amazon. google has maps and gmail and all these other apps i think uber will have something similar. >> do you see, though, the path to profitability because that's the ultimate question everybody loves revenue and growth, but at some point, there has to be a finish line. >> there has to be. >> of some sort. >> i do. i see that as you get economies of scale, as you get more users who use both rides and eats, you're going to see the ability to drive more revenue and reduce costs. and i see a path to profitability, you know, soon. >> how much is it a problem to have a competitor like lyft? if you have a strong second competitor, how much of a cap does that put on your ability to really, i guess make profits >> there should be a strong competitor in every industry google has microsoft bing. nobody talks about bing, but bing has 20% to 30% of the search market share. so, you can make money if you have an industry structure

that's 70/30 or 80/20. i think what you ultimately have to do, though, is the free money from these has to stop pouring in and being used without consequence. and now that the companies will be public, they'll be accountable. >> so every ride has to make a profit. >> i think it does, over time. >> but the price work seems to be still going on. here in new york, i'm getting notices from lyft that they're bringing prices down then i went to see what uber was doing, and their price is even lower! >> look, i say that in any city at any given time, you could see different competitive dynamics most of the cities are run independently of the mother ships, both uber and lyft. so, each -- the dynamic changes based on the city. >> that's really interesting what you say, though just going back to this idea that you want the vc money, the easy money to stop, right? there will be more discipline when it's actually publicly traded. >> yes. >> and there's not this liquidity that keeps kind of flooding in and making you only as smart as your dumbest competitor, basically. >> yeah, that's right. we used to say that so long as

there's free money, uber had to have the most of it, because that's the way the world was working at the time. >> are there cities that uber operates in where you think the pricing structure is stabilized and where you actually are running a profit you may not be able to say that, but where you can actually see that it does work? or are all these cities basically searching for scale and that there are subsidies running around, and that actually it's a little difficult to say where it's going to stabilize? >> i haven't been at the company in almost two years, so i don't have that kind of insight, but i'd say that there's a lot of regions in the world where the prices have stabilized in london, for example, they're making good money is my guess because they don't have a lot of competition there. >> given that this path to profitability is sort of, you know, we don't know what it quite is, and it could be rocky for the first couple years as a publicly traded company, especially as the free money spigot turns off, do you stick with it as a shareholder do you, you know, stay with that ride, even if you see the long -- i mean, i don't know what you see for the longer term, or if you thought oh, it's

been a great business, a great investment because i got in at the bottom, which is a different perspective from investors today deciding whether or not to buy an ipo, an allocation. >> i'm bias because i am a shareholder. >> sure. >> i'm a believer in the long-term value -- >> and you got to hold after the ipo -- >> i have to hold, yes. >> just through the lock-up or are you planning to hold longer? >> i think every investor or former employee has to hold until the lock-up and after that, it's your discretion. >> and what are you thinking about then >> holding. >> even after the lock-up. >> yep. >> elon musk announcing, or today, planning a big day on autonomous vehicles. and one of the arguments around profitability for uber and for lyft of these companies is potentially getting to autonomous so you can take the driver and the driver cost out of the system. where do you think uber stands in this whole game, if you will -- >> more specifically, he wants to have a fleet of autonomous cars he wants to have transportation as a service. >> right. >> and in most-recent leasing agreements, the consumer cannot buy the car at the end of the

lease because they want to reclaim the car feasibly for this self-driving fleet. >> i am a believer in the self-driving car revolution. i just think it's a little farther out than what people think it is. i mean, you have to have the technology work perfectly. people are not going to tolerate imperfections in the tech. and it's going to take a long time to do that and to have that really impact, you know, the cost of rides. because of the electronics you have to put on a car now are more expensive than the driver >> so, for investors thinking about uber, or even for lyft, the profitability story is not about autonomy you think it gets there before autonomy, it's about human beings driving these vehicles and part of that transportation -- >> i think so. i think so i think you'll have a lot of -- you'll see profits coming a lot sooner than autonomy comes because it's not about the driver, it's about the incentives and the liquidity in a city, and there's ways to make this profitable. >> and final question because i know you're very good friends with travis. what does he think of all this now? >> i think he drs. >> he's on the board.

>> he's on the board he's a pretty big shareholder. i think he's off on a new venture, and he's happy. >> okay. we will leave the conversation there. there's going to be a lot more conversation about uber over the next couple weeks and months and probably years thank you. come on back. >> thanks for having me. thanks. when we return, secretary of state mike pompeo about to hold a news conference about the administration's decision to crack down on countries that are buying iran's oil. we will take you there live and ghafr isui b, ant analysis rit teth qckreak ♪ creating the perfect night... just takes a little creativity. the light beer you've been waiting for has arrived. lower carbs. lower calories. higher expectations. corona premier. has been excellent.

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welcome back to "squawk box. take a look at futures right now ahead of the market open we're about 45 minutes away. the dow looks like it would open off about 75 points, the nasdaq off 33 points and the s&p 500 off about, we'll call it 8 points but we have some news that is coming up right now. secretary of state mike pompeo is set to speak any minute now this is coming just minutes after the white house announced that there will be no extension of waivers for countries that buy iranian oil. ylan has been standing by. what can we expect >> becky, the white house will say that it is ending those waivers for eight countries that had been purchasing oil. these countries had gotten six months to sort of wind down those purchases, bring them down to zero. there were three countries that had already stopped buying iranian oil. they are greece, italy, and taiwan but five countries are still purchasing oil, including china

and india, and those are two of some of the biggest purchasers of iranian oil, very important to those countries we will see how they will respond to washington's announcement but already, washington is saying that it is prepared to make up for some of that global supply that could be lost. the white house said in a statement that it is working with saudi arabia and the uae in order to ensure that global oil markets remain adequately supplied so, some sense there at the white house that this could be disrupting to the markets. they're trying to hedge that off by making the statement. but of course, we will see how this all plays out and the reaction of some of these countries that could now be facing sanctions once those waivers expire on may 2nd. >> we've been watching brent this morning, brent crude up by about 3% on these reports ahead of this even, and then on that white house statement itself and ylan, i guess some of the big pressure comes from what's going to happen in terms of that waiver, saying very specifically

in a statement, saying this morning that they have already spoken with saudi arabia, the big player, and with the united arab emirates, to make sure that they're going to continue to pump that's got to be a point of contention prices have come back up off their highs on those issues, too. >> and i think there's an open question about whether or not some of the countries that could face sanctions that have been purchasing iranian oil have yet to finish winding down those purchases, how they will react, whether they will actually comply beijing has said that it considers its purchases of iranian oil reasonable and legitimate it does not agree with washington's move. what would china do if the trump administration went ahead and imposed sanctions related to its purchases of iranian oil will they call washington's bluff on this? that is something that could play into the ongoing trade talks, yet another point of friction as they try to resolve other matters. we know that the administration often views trade issues through the lens of national security.

sometimes they bleed together. could this be one of those issues as they try to have another meeting and finally put a fine point on a final deal >> peter krause is our guest host today and peter, what do you think i mean, just watching the oil markets' reaction. back in november, oil prices plummeted after we heard about all of the exemptions being handed out it had been expected immediately that there would not be that number of exemptions we have seen oil prices pick up pretty significantly this year, but what do you think happens next >> look, i think the oil prices are going to continue to reflect this sort of restriction in supply and you know, we're not going to see a lot of new drilling based on these prices. we're not going to see more holes being punched into the world to create more oil at these current prices and so, my guess is that economic activity stays where it is, oil prices remain relatively constant. >> if you look at oil prices, at least in the permian basin, there are some of the majors that have said they can be profitable at $35 a barrel that may prompt them to do more drilling, at least in the united states. >> or at least not close the

wells that they have that are currently operating and continue to have consistent supply. oil looks like it's going to be -- people predicted oil was going to go to $100 or $120 a barrel, which i don't see happening, and even if there was strong economic environment, you know, we'd likely see prices rise and oil continue to be developed in the world. >> you know, it's an interesting point. part of the other reason you might see this rise this morning is there was strong manufacturing data that came out of china, too, which suggests maybe, potentially, we've seen a bottom or a plateau when it comes to china's economic activity. >> yeah. look, i think china is obviously a big importer of oil. they are the marginal demand in the marketplace. and if the manufacturing environment in china grows dramatically or changed significantly, you'll see incremental value. >> i hate to cut you off, but secretary of state mike pompeo now taking the mike. >> -- against the islamic republic of iran, i want to address yesterday's terrorist attack in sri lanka.

what was supposed to be a joyful easter sunday was marred by a horrific wave of islamic radical terror bloodshed it's heartbreaking that a country which has strived so hard for peace in recent years has been targeted by these terrorists we've mourned the loved ones of the victims, some confirmed to be indeed u.s. citizens. this is america's fight, too i spoke with the prime minister of sri lanka this morning, and our embassy and other parts of the u.s. government are offering all possible assistance to americans and the sri lankan government alike we urge that any evildoers be brought to justice expeditiously and america is prepared to support that we also stand with the millions of sri lankans who support the freedom of their fellow citizens to worship as they please. we take confidence in knowing that not even atrocities like this one will deter them from respecting religious freedom today our nation grieves with the people of sri lanka and we

stand committed, resolved to confront terrorism together. now, turning to iran almost one year ago, after withdrawing from the iran nuclear deal, president trump implemented the strongest pressure deal the goal remains simple to deprive the outlaw regime of the funds to stabilize the middle east for four decades and iran to behave like a normal country. revenue comes oil cells. it is the regime's number one source of cash iran generates as much as annually in revenue. the regime well north of $10 million. the regime would have used that money for support terror groups.

and it would perpetuated the humanity crisis in yemen our goal has been to get countries to see iranian oil entirely last november, we ran an exemption from sanctions of seven countries and through taiwan to share a well supply oil market today i am announcing that we'll no longer grant any exemptions we are going to zero we are going to zero across the board. we'll continue to monitor compliance and any nation or entity interacting with iran the risks are not going to be worth the benefits we have used the highest possible care of our decision to ensure our market stability. the united states have been in discussion of our allies and partners to help transition them

away we have been working with major oil producing companies to make sure the market has the volume to minimize on the impact on pricing. the kingdom of saudi arabia and united arabs will ensure appropriate supply for the markets. i can confirm that each of those suppliers are working directly with iran's foreign customers. and as i said we are doing our part here in the united states too in 2018. crude production increase by $1.6 million per day over the 2017 levels. u.s. energy agency increase of $1.5 billion a day in calendar year of 2019 with the announcement today we made clear of our purpose, we

are going to zero. how long we'll remain there depends on the republic iran senior leaders stop sponsoring and committing terrorism and halt the arbitrary detention of the u.s. citizens our pressure is to fulfill these demands and others finally as i have said before, these demands are not just coming from the united states government and many of our allies and partners there, similar to what we hear from the iranian people themselves. i want the iranian people to know we are slistening to them and stand with them. t our hopes are for a better life with them.

i will now take a few questions. >> thank you, good morning mr. secretary. >> good morning. >> on iran, aside from this, your goal is bringing back to the negotiation table. are you really interested in re-negotiating with jcpoa or negotiating for something like that are all these steps you are taking aimed at just getting them to change their behavior without getting anything in return and secondly if you can address a report about the comment you allegedly made to iranian diaspora leaders last week in texas. >> what were the comments? particular >> the you are not arresting any -- it is basically economic and diplomatic pressure. some kind of comment

>> thank you, let me take those in reverse sequence. >> we are not supporting any outside groups we are supporting the iranian people so, i get questions all the time about outside iranian groups including the mek. every time i engage with anyone and this is a meeting with folks who have families inside iran, i want to make clear we are supporting the iranian people and not any particular group second, our objectives, we are happy to get the outcome however we can achieve it. the president always made it clear and we made clear to iran's leaders, if americans attack we'll respond in a serious way. i don't think there is any doubt of the fact that it is required for us to take action and respond to something that the iranian leadership or malicious

some where in the world that we'll respond to that, it is important to protect the america's interests. there are 12 things we are looking for. when we get to those things, we are happy to negotiate with iran if not, the campaign of which we have been engaged since frankly the administration took office, clearly the president's decision to withdraw from jcpoa we built to work on this israel and a lot of countries are working alongside us these fascination campaigns that are taken place inside their country. we are watching to see they have a role in protecting venezuela the nature of the islamic republic, threatening citizens all across the world this is not the united states

coalition, working to achieve the ends which we have laid out. >> thank you >> with the maximum pressure of the campaign, have you take any change in the iranian behavior with the few exceptions that you mention before of short of ca cash -- and talking about new leadership >> so, we have watched iran have diminished power as a result of our campaign their capacity to reek harm around the world is absolutely diminished i talked about it with spectors. what we are announcing this

morning, the destination of iegc of a couple of weeks back. each of these things will continue to support the iranian people so they can get what they ultimately are so desperately seeking. i don't have any comment on the new appointment other than this you are describing as a hard liner. it is the case that every iranian leader that includes rouhani, accepted the notion of the nature of the regime itself. so, they accept the islamic republic of iran is the appropriate method for which iran, once they conceded that in our view, these distinctions are insignificant. if you are pushing and supporting efforts in iraq and

the under writing of whhamas, m definition is working against what america has laid out its objectives >> mr. secretary, i want to ask about your timing of the announcement and oil supplies are pretty tight given a lot of oil from venezuela as well what are your discussions and china said today that the use is beyond jurisdiction. what assurances do you have from saudi arabia, the uae to supply the market in a timely fashion it is the five largest imports of iran, will they abide of what you are asking them? >> we made clear if you don't abide -- this is why we are laying out this

morning. we have a requirement and conduct these transactions in the financial market we don't lay out sanctions that we don't have any intention of ea encouraging countries. i will leave others about the details. i had conversations and the president had conversations with these countries and they committed of sufficient supplies in the market and i am confident that we'll achieve that and i am confident that they'll support this policy that's consistent with their objectives as well. >> good morning. >> more? >> thank you, sir. >> very quickly. we can stay all day. >> you said you are at zero level