back at the wall, we have a lot of kiddos who are there including emma contino, right here with us at the nasdaq we have brayden ramali. 11 years old in sixth grade. he's been with us since i walked in at 5:00 a.m have a wonderful day make sure you join us tomorrow right now it's time for "squawk on the street. ♪ ♪ ♪ good morning and welcome to "squawk on the street. i'm david faber along with jim cramer carl is on assignment this morning. it is a big morning we've got on tap including exclusive interviews with the ceos of southwest, chipotle and lululemon. let's give you a look at futures. we've also got an awful lot of earnings facebook, microsoft out and they're lifting the nasdaq 3m, well, it is dragging the dow jones industrial average lower

we'll have more on that coming up roadmap does start with shrugging off legal woes giving facebook a boost. setting aside a lot of money for alleged bad behavior >> didn't you ever hear about asterisk. >> did mention this, 3m had an ugly quarter the shares are down. they slashed their outlook 3m weighing heavily on that statistically irrelevant average we call the dow. over at southwest, they took a bit of a hit as you might expect, having the largest fleet of 737 max's ceo jeff kelly is going to join us to discuss. stock is looking up. >> why not 5% is the max. numbers were really good much better than expected. he is a total trooper. >> we're going to talk to him about it i want to get to facebook. that is going to be a future stock up almost 9% in the pre-market building on what has been a strong year. quarterly earnings, revenue,

user numbers all ahead of expectation, hitting all time highs. they did expect to be fined 3 to $5 billion for privacy violations mark zuckerberg discussed what facebook's new privacy initiatives could mean for the company. >> the reality is any impact is going to be longer term. we don't know exactly how this will play out yet, but on some of the questions whether encrypting content will hurt our business, i'm more confident that won't be a significant issue. we don't use the content as messages between people to target ads today so encrypting that content won't change what we do. it will strengthen people's privacy without meaningfully affecting our business. >> jim, i had an opportunity to talk to a number of significant holders, you might expect, are pleased and positive they were all incredibly -- saying it was an incredibly positive quarter they managed revenue decline,

shifted ad load from news feed to instagram stories the result may have been, they didn't necessarily say this, that inventory growth came down, pricing went up. >> that's what's supposed to happen >> nobody cares about a $3 billion provision for the ftc. they lowered op ex growth guidance everybody is talking about shopping, instagram, how important that is going to be for the growth of the company. >> this was the quarter where you realized that advertisers preferred means of getting ahold of anyone is facebook/instagram stories. it was remarkable quarter, and, you know, zuckerberg did say something that was very true, which is that he is caring more about privacy. you may think it's a complete sham >> they have to prove that one to us, right >> the fact is when a lot of people started, particularly in the media because facebook is not liked among the media, focused on the library find, and, you know, like the library find does not matter when you have that level of cash, the library find is just

an asterisk. >> they generated $3 billion in cash in the quarter. they generated the amount. so that's why you can overlook it, i suppose, even though it is a number that is so many multiples above what the ftc has ever found. >> what are they going to do with that money? what are they going to do with it >> put it in the treasury. they could use it there. >> 100 billion that they raised from the banks that we never saw. >> like the sweep that fannie and freddie had. >> yeah. this quarter, i worked at goldman sachs, i love to mention that because people say, hey, whatever. >> why not >> they used to say to me, jim, the phone doesn't ring you have to make the call. you have to cold call. david, you know what the greatest job in the world is right now? facebook salesperson hold i've got to put you on hold. i have a guy who wants to place a $500,000 proctor? i have a huge clorox -- it must be a bonanza. >> it seems to be. and you know what, jim, they

haven't even moved to what they've been talking about, which is instagram, the ability to stay in the app and shop in the app and not even go to the website that you click on which conceivably could be a significant growth driver. i see the behavior of my own -- my younger kid in particular, what she does on that app. >> my daughter's doing it, re-inventing herself as sophia loren. >> right >> one of the things that happened throughout the call analysts are saying why don't you monetize this, why don't you monetize that? we've got a lot of things to get to david, this company reminds me of amazon when they realized amazon web services could be good businesses. zuckerberg goes on and on about how he's kind of a combination between gandhi and jefferson i question that. what matters is the ftc, it was a moffitt nathanson. they were talking about the

numbers. >> put a number on it. quantified it. >> once i have it -- >> exactly now investors have it. once you quantify the number, even if it is 3 to $5 billion, as enormous as that is for a company like facebook, they're happy to move on. >> that's it >> beat north america. that's the first quarter that they spent less. >> did you see the 642 -- >> to your point, they quantified the number. i have people talking about a 20 gap earnings number of somewhere between 10.50 a share and 12 bucks. >> plus 20 revenue growth, david? why can't i give it one time revenues i used to give that to u.s. steel. they're bigger than u.s. steel and i look at this thing, david, ebida 8.6 ers haves 7.9? do people know what that is? that's all mobile. remember when mobile was going to be the end? >> yeah. >> it's the beginning. this was a remarkable quarter. the reason why this stock is

going up is because it's being rerated on the fly as we look at it as the premiere growth stock rif rivaling, yes, satya satya nadella. remember that man's name. >> well, it's been nothing but up since he took over more or less, hasn't it? >> is he good? how about his quiet, understated method >> there he is, mr. nadella. it would appear he is quite good. >> very strong quarter at microsoft. it's worth mentioning, as you say. commercial cloud up 41%. >> david, it's a huge business. >> to 9.6 billion. >> how he's do it? >> azure -- >> azure that's the cloud business. >> right talk a bit about that business overall because you've spent so much time on it. not just microsoft and aws but so many of the other providers service now. >> john donohue, the new customers are taking three products used to be one product used to be on boarding for hr.

now it's pretty much everything having to do with customer he interface. you got your cell phone, david >> i do. >> you can introduce yourself. you file that you've joined the company by using your cell phone. it's over in an hour david, these companies, they used to take two days to on board. now you're on board and you're making money for the company the second hour you work there no more dead weight. he does it of course, he's a model. he's a model ceo, right? >> yes >> he's like probably four inches taller than daniel craig. he better watch himself. he better watch himself. >> he's a very tall man. >> we have to move on. >> for guys like us who are challenged that way, he's taller. >> david, service now. it matters >> before we get to the bad news this morning at 3m, on microsoft again -- >> oh, david, azure -- >> most likely the market cap will exceed a trillion dollars. >> why yes, if you're a retaile.

aren't you tired of paying amazon to crush you? microsoft is really very competitive on offering everything if you want to digitize david, this was the quarter you needed to digitize as we will hear from brian nichol when he comes on -- >> people are noting it's the acceleration in top line performance ads. >> goes for the largest company on earth. >> server and cloud serve advises. >> amy, who i've known her for i don't know, as old as time and she's just very methodical david, linked-in linked-in, they're 50% and amy is saying, we're going to do this, satya, we're going to do that no chest beat on that call that is a modest group versus steve baumer some people think that's billy madison. >> he was very good at cheerleading i never get tired of watching him run around a stage.

>> oh, my, how about when he said to me, so i mised cell phone. so i missed -- >> remember, i bought that one. >> i missed social. >> that was just genius. >> we love him anyway because he is a great owner in the nba. >> they're doing well. wow. they're taking the warriors down >> love him. lousy card player. i clean him out. used to come in with a shoe box of change. i used to clean him out. that shoe box was empty every time i play him. >> let's get to 3m this morning, speaking of getting cleaned out. missed on top and bottom lines 3m announcing a restrik during that will see 2,000 jobs cut worldwide reduction in its work force. jim, you follow the company closely. >> yeah, i do. >> you were a big fan of in inga tuline. >> mike roman is trying hard. >> the first quarter was a disappointing start to the year for 3m. >> every division was bad. they have the wrong mosaic

they don't have any aerospace, they have a lot of auto. they have divisions like health that are not doing well. safety you ever look at honeywell they got rid of a lot of divisions that 3m is in. the ones they're in are not doing that well. so they've got the wrong customers geographically they've got the wrong products right now, the industrial auto is tough and they're going to have to do a bigger restructuring than they talked about. >> 5% top line declines. >> remember, there's a big -- organically. >> health care hung in, consumer down 1.9 safety and graphics down 4.2 industrial down 6.6. electronics down 11.8%. >> do the job on that. >> okay. am i supposed to take 3m which you've often told us can be seen as a reflection. >> worldwide investor. >> is that bad news worldwide industrial >> dom chu was talking about how

there's investment this is the mosaic of disappointment, but the execution here, david, is s sub optimal and across every division and you have to start wondering, is the clock ticking here because they have not done anything massive now steve tousa who we all know is the moby dick, captain ahab in ge. >> yes. >> he's had a sell and i've gone over with steve because my father worked for 3m what can i say he predicted every single line item here. if you read steve, you would not be selling this thing at 18, you would have gotten out at 218 it was disappointing they have got to figure out a way that honeywell restructured or honeywell got rid of residential. honeywell got rid of auto. >> get out of these businesses instead of just trying to sort of tough it out? >> you can't anymore you can't. no, they have to make really

wholesale changes. this company can't look like -- 3m now cannot look like 3m of years before. >> really? >> there's execution people have to be replaced those numbers are unfortunate. >> okay. >> they ought to merge with tesla, david bred in the circus the stock's fairly down. p.t. musk. got to love him. a million robo cars by 2018. i'm sorry, 2020. >> you're right. very soon. all coming here. robo cars. >> david, we don't have to move on, but i guess we are. >> we've got to. you know why we have a ceo doubleheader. >> who we got? >> well, first we've got dairy kelly. >> gary kelly from southwest air? >> yeah. >> killer. >> brian nichol. >> the guy who used to own taco bell and turned around chipotle. >> i'm happy to participate.

i've got an 8.2 from bar stool for the pizza at the long short. >> all right let's give you another look at futures before we get -- well, we've got a lot more show coming to you you can see dow, that's impacted by 3m. a lot of dow points there for that statistically irrelevant average as i like to say the s&p looking up in a bit. more "squawk on the street" live omos9 tethis through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from using feedback to innovate... to introducing products faster... to managing website inventory... and network bandwidth. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.

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a lot of hats they've got there, too all those hats. >> i don't know. this fellow cindegard, a big "mad money" fan. >> noah's going to be a part of it apparently he's a big viewer likes our show, loves your show. >> i'm going to ask for a few

games at the phillies. >> hopefully he's going to get things going. >> in terms of his actual day job. >> mr. wonderful, they split that stock. >> what was his pick last year >> blue apron. >> that was suboptimal >> ill advised i don't have to worry about it so he trashes me all the time. i actually think he's a very nice fella. >> i think i go with your picks over his no offense. >> i like facebook i love facebook. i like facebook, amazon, netflix, google, i'm sorry, i like apple i call it faang. >> let's get to the bond pitts check in with rick santelli at the cme group in chicago fixed income land. good morning, rick. >> good morning, david you know, there's actually a lot going on, just in small doses. you know, yesterday as you look at a month to date of two-year note yields yesterday we closed them at the lowest level since the 2nd of the month so a little over three weeks and the reason i point it out is

because we are up a basis point not only in 2s, 5s, 7s, 10s, 30s, the whole curve part of that was a really solid though preliminary read on durables the market overlooked to some extent the big rise in claims, probably a little seasonality, holiday seasonality. look at a month to date of 10s lowest since the 11th, roughly two weeks. if you look at the dollar index, it's a completely strong picture no matter how you slice it that's a one week daily chart. once again, i'll say it. stairway to heaven if you look at this since may of 2017, we're at lofty levels and it jumps every day and it holds. it locks and holds where the counterpart, the euro versus the dollar obviously has breached 112 very significant just think about the european banks when you think which currency is going to be investor preference and then finally as i look up we still have, of course, another auction today but the demand for treasuries may give us a lot of clues as to

why these yields remain so soft. a couple of decent yesterday five year a strong auction jim, david, back to you. >> thank you speaking of the european banks deutsche bank and commerce bank in their merger talks, certainly worth mentioning that. >> that's hurting all the bank stocks >> yeah. yeah up next, jim has his mad dash. counting down to the opening bell there's one more look at futures again. the dow performance is largely a result of great weakness in 3m, particularly the point loss there. then you multiply that because it's about the actual points not about the market cap more "squawk on the street" after this pnc bank has technology to help make banking easier,

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welcome back we have 7 minutes before we get started with trading such a heavy earnings digestion after the bell. >> i have acid reflux because of the tesla call. >> let's talk tesla in the mad dash as we get ready to see how it trades. not looking like it's going to be a mover. >> but not bad because there are many people who say i like to look at the bull case. he's making a lot of cars. many more than anybody else and people like the cars worldwide now that's the overall thesis. but, david, i want to quote wed bush to this point in our 20 years of covering tech stocks, we view this quarter as one of the top

debacles we've ever seen like an episode of twilight zone david, money do they need to raise money? yes. >> well, for the first time in a while he seemed to at least be open to the possibility of raising money. >> if you're an investment banker do you want to raise money for a guy that's in front of a judge for saying things or is this all just minor and what really matters, david, is that he is tesla? no, he is edison no, he is ford no, he is barnum >> that helps a lot. >> yeah, it does he's a show man. david, he invokes buffet i love that. >> you have to be a show man in order to pull off what he's been able to pull off >> right, but he starts out -- >> raise the cap in order to actually organize. >> 1 million robo taxis by next year. >> all right. >> i mean, david -- david, i'm going to be 6'1" by next year. i'm working on it! 6'1" no, 6'3" by third quarter. >> was it a good quarter or bad

quarter. >> i'm going to deliver 6'4". >> was it a good quarter, bad quarter? >> bad relative to his own expectations. >> 6'5" with a skyhook i promise you, 2022. i will play for the knicks. >> awesome, they'll need you e re" sqwkn t more "ua o thstetcoming your way.

you're watching cnbc "squawk on the street. we are live from the financial capital of the world we have two minutes until we get an opening bell here on this thursday morning in new york city and as is often the case when carl is not here, i like to turn to you because it's something we've done for 20 years. >> 20 years. 20 years. >> i ask you sort of broadly speaking what you think the key will be to the market this morning. >> okay, david. >> a key to the market what is it, jim? >> impressive. i know it's trite. i was going with microsoft because it's a trade but i have to go with facebook. the reason why, in 1999-2000 we had companies that were wildly over valued, 400, $500 billion companies were selling at 40,

50, 60, 80 times earnings. facebook is going to earn 9 bucks in 2020. >> oh, i've got people saying well more than that. >> could be 10, could be 10. >> could be more. >> this stock is selling at one times revs this is going to be bold and people are going to say are you out of your mind it's old 52 week high before the debacle. it's going to take out 218. >> you think so? >> yes it's 26 times earnings it's growing at 20% david, what i'm saying, unlike 1999-2000, the company, microsoft, this one, only exception amazon, are not expensive on traditional growth valuation versus herb shis, versus clorox, versus proctor. >> right. >> that is a big change. listen, you're paying so much, you're missing the point these stocks are not expensive facebook being exhibit a of a very inexpensive growth stock. >> there's another one called

alphabet. >> they could have up side because of google. >> we've heard whether it is facebook or snap or twitter. >> yeah. >> one would expect -- >> more than 100 billion in cash and, david, they're monetizing youtube. they're monetizing it. it's a very big deal >> there's the opening bell here at the nyc you can see of course the real time exchange getting itself together looks like we're going to have more red than green on that board. here at the big board, ab imbev. >> summer lager. dance against cancer on the nasdaq >> david, i look at this market and i say to myself, let me tell you how perfect it is. if you're j. powell, he can say, the macro is not that good a lot of companies are not doing that good. if you're a stock picker, you can find 100 stocks that are doing much better. so powell, he's so side lined that the only people who really care about him right now are

people who are assigned to pal pal people. >> so the fed is on the sideline. >> they are really on the sideline they are a side show. >> are you complaining >> j. has a good chance. you know what, david, hair care for men. >> what? >> he's got to go -- he could be like -- he could be like 40 years old if he just -- >> you're telling me he should take the gray out of his hair. >> take the gray out of his hair, he'll be 40. he's dynamite, but he's no john donohoe. >> i am telling you -- >> you've got a man crush there, don't you? >> 100%. >> remember when he was here. >> i've known john for quite some time. >> we have to move on. visa. >> we're not talking about service now. >> no. it had a blowout, plus 30% taking the stock to new levels they are now alive with adobe, microsoft. i asked them to -- how about salesforce they used to be best buds. no, we're still fine without salesforce

donohoe is fine with that. visa never gets talked about not a great quarter. >> no. >> slower growth in the key payments category. they still raised guidance david, if they did a good number, it would be up 10. don't abandon visa. >> what about paypal speaking about payments they told us they have 40 million active users at venmo. >> 300 million versus 200 million. that's a great monetization. remember, david, when they broke away from ebay it was going to be bad >> yeah. >> well, it was bad for ebay. >> paypal, dan shulman. >> i said, jim, did you sell paypal what did you leave on the table? 15. >> david, this paypal quarter, fin tech, david, is so loved. >> fin tech is a -- >> fin tech. pornographic i know fin tech when i see it. >> yeah. you do

was that justice brennan who said that? >> potter stewart. >> potter stewart. correct. >> smart fella >> ven mmo processed tpp and they're up >> square will knock them. love affair should be with dan shulman because he guards your privacy as much as tim cook. >> remember apple? >> i do. >> what did qualcomm say badly about their partner today? >> nothing. >> okay. i just wanted to be sure. >> nothing. >> steve molikov sat here and would say absolutely nothing. >> right remember i was trying to get him to talk about the names of his two dogs >> yes >> he gave me the wrong names after the commercial break he called it skippy. >> i know what it is it's thor and rakno. >> thor will be on my show tonight. look at this facebook. look at this market. down 224 it's j. powell heaven and it's -- look at this, 3m, david,

is down 23 points. a great american industrial. now yields 3%. every line item subpar small restructuring. david, i question what's going on at 3m. >> you have and you seem to be saying leadership could be in question at some point if this continues. i don't want to put words in your mouth -- >> you can't have these types of numbers. mike is trying real hard, but the fact is, david, auto may not be -- you've got companies that are really based on auto like if you take a look at illinois tool works, okay? they've got auto itw. they went up that's my homage to will frost you do not have auto coming back the way people thought and a lot of that as teams said on my show last night, david, subscription economy starting to hurt autos uber is going to come. uber is the last big land mine we are to worry about.

look at pinterest versus zoom. pinterest is an ad versus market zoom is subscription people like subscription over ad why? because of ltv you can make a model long term value. >> we've talked about streaming, not to mention disney plus or netflix. this morning our parent company reports earnings comcast is actually up as well you know, when you talk to those who are positive on it they'll just point to the fact that it was an ebida beat and stock trades a little less than 12 times which they would argue is cheap. a lot of questions on the conference call about the streaming world. >> yeah. >> steve burke, our boss saying -- who runs nbc universal saying, hey, it's early. very early don't get ahead of yours self, you would assume all the entrants are in and it's a big battle somewhat reminiscent of cable in the '70s and the '80s.

a lot will come out with their own unique strengths leveraging their assets brian roberts will tell you, great? you know what the key thing is broadband. >> don't forget the cost of broadband. >> and that's the key that comcast is managing of course. video subs were down 121,000 total. loss of video subs but it's broadband additions that they want people focused on here's some color from mr. roberts this morning >> give me some color. >> had the best first quarter in ebida in ten years and broadband is at the center of that growth with broadband revenues growing 10%. so i think across the board when you adjust out for the super bowl and the olympics, pretty much exactly what we expected on the revenue side, at least internally you know, a few soft spots here

and there, but mostly the excitement is the power of the broadband network. >> see, david, what you pointed out, this is profitable growth, okay profitable cash flow david, do you remember when we were worried about how much debt comcast was taking on? >> yes. >> this company's ability to pay down the debt much faster. >> it can pay down the debt quickly. the leverage ratio will come down. >> the larger question and threat over time is 5g and whether or not you'll have wireless providers to bring a broadband product that can compete in a robust way. >> technologically, i like the product. you know what we're going to do, bring in gary -- >> thank you >> this is so exclusive it's scary. southwest airlines chairman. luv stock for sale today ceo gary kelly first of all, i want to thank you for coming on. you've been coming under challenging situations your stock does well how do you explain how well you

did given the fact that a lot of people completely, completely identify you for some reason, because it's only 5%, with the super backs, the super debacle max the 737? >> hey, jim. great to be with you good morning, david. thanks for having us so, yeah, you know, it's real simple we've just got the best people they do a fantastic job. and, you know, no matter what we seem to throw at them, they do phenomenal they work so hard to take care of our customers the max is a small percentage of our fleet fortunately, and our folks have worked very, very hard to manage through that. so my hats off to them they did a great job as you know, those are really great earnings considering all the challenges we had in the first quarter. >> no, they're remark annuable gary, i wanted to ask you. when i look at the max and people feel that you are the max airline, will there come a time when we won't say is this a max?

every time i go on an airplane with my wife, is this a max? they're grounded i mean, will we care boeing's reputation is on the line you're closely identified with boeing a lot of people feel like you'll ask for reparations from boeing. will there come a time when we won't think about it >> well, yeah, we're an all boeing carrier we're an all boeing 737 carrier so that's who we are that's where we are. that doesn't mean that we'll be an all 737 carrier into perpetuity, but that's certainly where we are right now and we're glad to be there we're not happy about this max situation obviously. who is those are very tragic two accidents so our -- our negotiations and our relationship with boeing is something that i'll take up with them privately and we have a

great historic partnership with that company and i would expect that would continue going forward but, yeah, we've got to work through this max issue. when we launch the max airplane we felt like it was the best single aisle airplane in the world and we still feel that way. obviously this mcas issue needs to be addressed, and we're happy with the way that boeing and the faa are collect dib bring addressing that issue. >> as a long-time boeing customer, gary, it's david, are you concerned the company is putting speed to market ahead of safety >> no. no and, you know, the -- all -- this whole situation will be examined very, very thoroughly as to why the airplane was launched without the awareness of this function boeing has an explanation to

that they have obviously locked on a modification to this software which we are very supportive of. we all wish that that were in place back in 2017 but in any event, we are where we are our pilots are the best 737 pilots in the world bar none, and we were very well prepared to fly that airplane, which we had no problems with whatsoever before we'll obviously be a lot more confident with it going forward. every airplane has its unique issues and this needs to be addressed and it will be >> yeah. well, i mean, as jim mentioned, of course, the aircraft represents less than 5% of your daily flights. that said, you've at least removed them at least through august fifth is that when you expect perhaps to revisit this or is it

possible removal will go far from that? >> david, when you say revisit, we're guessing right now when the faa will recertify, if that's the right word, the aircraft and allow it to be put-back into service. so we don't know when that will be it doesn't seem like it will be any earlier than late may and then, you know, i read all kinds of things as to when it will be returned to service. so that's all the august 5th date means what we did is we wanted to have a very reliable schedule published for the very busy summer travel season for june and july we wanted to make sure we didn't have and we'll take that on sort of a rolling 30-day basis and be concerned with publishing flights and make sure we have the airlines coming back. >> gary, one last question you are one hell of an operator.

profitability. everybody knows you have a great work force everybody loves to fly you there's a 10% shareholder. can we put this to rest? did berkshire hathaway buy you or try to buy you because you're the most successful airline in history? >> oh, jim, you're good. you know, i -- you know i can't talk about that so -- >> you know i've got to try. >> well, it's a heck of a try. but, you know, they're a great shareholder. they have a great track record we love the fact that they have confidence in our company and, you know, we're -- >> we'll leave it at that. >> that's where they are. >> congratulations i did fear -- i have to tell you, gary, oh, boy, i hope he does the number. you did more than the number congratulations on delivering for your shareholders and for your customers and yes for your employees. good to see you, sir. >> thanks so much, jim, and thank you, david. >> sure thing. good to have you, gary

gary kelly, ceo of southwest. before we move on to our next ceo interview, i did want to -- >> more coming in? >> yesterday's story not yesterday's, continuing story. >> oxycontin >> occidental petroleum barely budged yesterday barely went down some would say the stock didn't go down because so few people think they're going to go down some believe it's made itself a takeover candidate others simply say, you know why i hung in there, because they believe in the president and her vision and it surprised people where they believe they can take costs out. >> you've got that -- look, i can't add to that that was a great summary other than i think holub is a player. not so much i'm a mike werth man from chevron this isn't over. >> oh, no, it's far from over. >> this is not via com/cbs,

david. >> a bid for oxycontin but of course if they were to say no to this, there would be no way we could get this. >> you have to stay on this. vicky howell is the most under rated executive. >> we are. >> brian the way, brian sullivan covers this story better than anyone, other than except you. >> he covers the ins and outs of gas. i cover the mna. let's get to chipotle. had improved same store sales outlook. chipotle shares are up more than 60% so far this year kate rogers, although down 6% there. kate rogers with us now. she's here at post 9 she's joined by brian nichol who's getting -- >> that's what i need -- >> touches of makeup. >> a little t stone. >> we don't want anybody to look bad when they come on. >> david and jim, nice to see

you both brian, thank you so much for joining us this morning. we're glad to have you here. >> good morning. thanks, guys good to be here. >> so, brian, the digital number this quarter was huge. 100% growth year on year you had a few initiatives including that free delivery offering you also had the lifestyle bowls this quarter what do you think ultimately pushed the digital number over the edge and contributed to that 9.9%. >> if you've experienced our app, i think it's one of the best out there people just really love the experience of having that digital access and, you know, when we layered on the opportunity to give people rewards, which is something people have been asking for for a long time, i think it just really accelerated the experience for people and made people want to do it even more often. the other thing, too, we've done a lot of things in the restaurant to make it easier we're putting in digital make lines on our second line and then obviously the mobile pickup shelves make the process really frictionless so it's a great experience

hopefully you've tried it. >> so, brian, you just mentioned that loyalty and rewards program. you've already enrolled 3 million people you just launched it last month. what have you learned about the customers and how do you continue to monetize them in the future >> it's really early and we're really excited by the fact that we already have 3 million people in the program what we have seen in some of our pilot tests is we can influence behaviors and the thing that was really exciting is we saw a lot of light and lapsed users join the program, which is really exciting because obviously, you know, your heavy users and the folks that are already fans of your brand, you would assume they would participate, but what we really wanted to make sure of is this is something that would get people to engage at another level. early days we're doing just that feeling good about the program and it will grow from here, which is really exciting. >> every company now is trying to get delivery right. you say it's the fastest growing part of your business. you have that in app delivery

with door dash obviously working with third parties. why is that the right blend for the company? >> yeah, look. people and our customers, they want access to chipotle and one of the key access points is they love to have delivery where they are. and one of the things that works great for our business is that is a second line and as a result we have these mobile pickup shelves where these delivery drivers are able to walk in, grab the food and go and as part of this we have a smart pickup time so when people place their order they say, you know what, i'd like this at noon. the delivery driver knows the food is going to be on the chef at noon for them and then they can buzz in, buzz out and the next thing you know they're bringing you chipotle in less than 30 minutes. it's a real win for everybody and, you know, we're just wanting to meet the needs of our customers. >> that's unbelievable numbers how can this guy do -- 1,300 stores brian, i need to understand who

you are because i don't think people know who you are. you were at the enemy. you were the darth vader taco bell. you were the 80 ingredients in the burrito. how did you mind melt -- yes, i'm giving you a mr. spoke -- right? come on. how did you mind meld what you knew at taco bell with the culture, the -- let's say woodstock like culture which is one of the most discerning cfos, how did you meld one of those two and still come up with amazingly great food and it's digitized in 13 months i can't believe you did. >> i appreciate the spoke reference. look, it is -- it's one of these things that i was very fortunate. i started my career at procter & gamble one of the things i learned early on was you really have to understand the culture and how the business makes money and who

are the people involved in, you know, selling your products or making your products and that's really the approach i took when i came to chipotle i've always been a fan of the brand and the food, and when the opportunity presented itself, ql realized is we have people that are just unbelievably passionate, jim, about our purpose, of food with integrity, cultivating a better world, and, you know, i think i mentioned this before, we were on our back foot and now back on our front foot we're talking about what makes chipotle unique this commitment to food with integrity, our commitment to giving people access to great tasting food, and it is just simply true, when you use real ingredients, fresh ingredients, classic cooking techniques in the restaurant, the food just tastes outstanding. and that's what our teams are doing in our restaurants every day, and we just reminded people that's why you love chipotle and giving people that visibility and that insight into the brand has really resonated and then taking off the access,

giving them more of it, has really been a powerful multiplier and i think that's what you're seeing in the business it is fun to see this growth, it is fun to see this response. the thing i'm excited about is we're just getting started with these strategies but i'm very proud of the way we're executing against, you know, operational excellence, digital excellence, and really communication excellence >> so, brian, this stock obviously has been trading near its all time highs, comps close to double digits do you believe the food safety issues that the brand had dealt with in the past are now behind you and how are you continuing to ensure that >> look, you know, all brands and companies have challenges. i think we learn from those challenges and the goal is to be better i think we are a leader in, you know, the spaces around food safety and as a result, you know, i think our restaurants are better than ever and our employees are engaged in this space better than ever. but it is going to be

relentless we always want to improve. and i think as long as we have that mentality, which is built into our culture, you know, one of the key values that we have rolled out to jim's question earlier around the culture is, you know, the line is the moment of truth and i mean that in both ways because the digital line as well as when you come into our restaurant and see our consumer facing line, that is really our moment the food looks great, our team members are engaged, they get you through there quickly, get you to order accurately, people are delighted and that's how we continue to keep people engaged and excited about what is possible and then, you know, the other key value we have teach and taste the details. these cultural values are what really i think makes chipotle a special brand. and we fundamentally believe this movement around real food is the real thing. and that's what we're going to stay after, because it is what makes chipotle unique and hopefully we can change the food industry for the better against this approach.

>> well, brian, we appreciate you taking some time with us this morning thank you. brian nichol, ceo of chipotle. thanks to kate rogers. >> kate has been on this the whole way. you've introduced brian to america and just congratulations on staying on the story, which is what you've got to do. >> thank you so much appreciate it. coming up, a lot more big ceo interviews, we'll have an exclusive with lululemon's calvin mcdonald. "squawk on the street" coming right back [ alarm beeping ] wake up! there's a lot that needs to get done today. small things. big things. too hard to do alone things. day after day, you need to get it all done. and here to listen and help you through it all is bank of america. with the expertise and know-how you need to reach that blissful state of done-ness. so let's get after it. ♪ everything is all right what would you like the power to do?® ♪ all right

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it is just too quick goes by too quick. so many things we didn't even get to. >> sara told me i could have her hour. >> she did i think you should stay. >> it is the eisen hour. >> it is the eisen hour. what do we have on "mad money" tonight? >> align is the company that does invisalign. i was thinking about getting it, but the guy told me i'm too old. half life. i don't like that. michael neideorff, we're going to dig in, with joe biden and --

>> they're in a deal, right? >> centene, great deal, but no one cares. everybody hates managed care. >> curious to see what he has to say about it there is always more time, one day, somewhere >> why don't we do a show on saturday make put some makeup on like brian nichol had. >> when we come back, lululemon ceo calvin mcdonald in an exclusive interview with sara eisen. who else - the world's central banks added more than 27 billion dollars of gold to their holdings in 2018. that's an increase of 74% compared to the previous year. in times like this it just makes sense.

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♪ you drive around this town let the cops chase us around ♪ ♪ something might be found good morning welcome back to "squawk on the street." i'm sara eisen here with david faber, ruffling through his notes. from the new york stock exchange carl quintanilla is on assignment today look at the markets. big part of the dow plunged, down 211 points, 3m, on pace for the worst base since october 1987, shaving 150 points off the dow.

nasdaq positive, bright spot in technology today, up half a percent, ahead of amazon earnings out tonight road map for the hour starts with stocks. major averages taking a hit as earnings season gets fully under way. 3m, facebook, microsoft, chipotle, many more out with results. >> former white house chief strategist and capital management kyle bass is with us. we'll zet theget their take on and talk about the global economy as well. also exclusive interview with the ceo of lululemon, calvin mcdonald, he rolls out his company's five-year growth strategy it is his first broadcast interview since taking the job we'll start with earnings though a ton of movers to get to this morning. startinging wi ining with faceb. top and bottom line beats and user numbers that hit record highs during the quarter facebook says it expects to pay at least $3 billion, possibly up

to $5 billion in a privacy related fine to the ftc. microsoft also moving higher this morning, after beating the street surge in cloud revenue and software subscriptions the company's market cap did surpass the $1 trillion mark this morning and then on the flip side, shares of 3m plunging, weighing on the dow, missing estimates on both earningin inings and reven cutting about 2,000 jobs 3m issue or global economy issue. >> that's a key question, sara, one that jim and i were addressing earlier it may be more about execution at 3m, unclear but as you point out, sales overall top line down 5% and then within that, you're ta talking about an 11.8% decline on electronics and energy, 6.6% in industrial, 4.2% in safety and graphics the press release begins with ceo mike roman saying first quarter was a disappointing start to the year for 3m they claim they're facing slowing conditions in key end

markets which they say impacted both organic growth and their margins. the stock is getting hit badly at this point. alternatively as you point out, facebook, of course, quite strong, though off the highs of the morning, had begun up almost as much as 9%. but the reviews, well, almost uniformly positive, at least those who i spoke to who own the stock in terms of managing the revenue decline, that's the decline in the growth rate obviously, revenues up sharply shifting ad load, instagram, which everybody now sees as a true growth engine and as they change that platform to allow users to buy directly, to shop directly, more potential power there. yes, an enormous potential fine from the ftc between $3 billion and $5 billion the fact they quantified that seems to be all investors sort of wanted because you talk about a company that generated $3 billion in cash just this quarter, has $41 billion in cash on hand. the concerns -- >> $66 billion in annual revenue, that's a drop in the bucket >> it is

the first quarter in a long time in which they spent less the fact they lowered operating expense growth guidance that they took capex down by a billion, all of that adding up to a very positive response to facebook and as you pointed out as well on technology, microsoft for a brief moment there had eclipsed $1 trillion after a positive response to its numbers, in particular its cloud revenue. >> azure, growing in the 70% range. not the 90% or so range we were at last year, but still continues to just show that it is cementing its place in the cloud business against aws or amazon web services. >> server and cloud services revenue is actually acceleratinging in terms of the growth rate. people like that >> industrials in general are lower. 3m not helping u.p.s. not helping either. they blamed weather, a miss there. that will be interesting given some more positive signs from other industrials, especially the defense companies so far this earnings season. >> let's dig deeper into facebook's earnings. joined by citi's senior internet

analyst mark may i went over some of the numbers there, but i would love to get your take here was there anything negative in this quarter at this point, anything that concerns you because i got most people saying positive, positive, positive. >> it is hard to really find a lot of fault i think you picked out a lot of the positive things that came out of the quarter if you look back at 2018, what really drove the world of stock forum ans among internet stocks that i covered, google, amazon, netflix, et cetera, was really negative earnings revisions driven by kind of expanding expense growth and what we're seeing now is an improvement in that arena. you're right, revenues were strong at over 30%, ad revenue growth at facebook really the key takeaway here is the company is beginning to rein in some of the expense growth. a lot of that was related with trying to deal with the safety and security issues that we all know about and the -- that's a signal, i

think, that we're starting t see the ftc settlement or nearing a settlement, the expense growth starting to slow. these are all signals that maybe we can start to put some of this behind them. the company hasn't been talking about this publicly, but behind the scenes, they continue to invest heavily in new products and new innovation and that's what i think investors are excited about is things like shopping on instagram, even virtual reality that we don't hear a lot about the company behind the scenes is investing heavily, feels optimistic and that's reflected. >> how big an opportunity is shopping on instagram. not that you can't do it now, it is going to change in terms of the experience is my understanding or they're working on that. >> yeah. we're taking steps towards -- i wouldn't think of this turning into amazon or click a button and a product shows up at your home i think what all media companies including google for the last 15 years has been trying to do is close the loop make -- from ads to transaction,

closing that loop, the more you can do that, the more value you can distribute -- attribute to the ads, to the advertiser, the higher the ad prices go. you think about the drivers of facebook's ad revenue growth, if it is user growth, engagement growth, ad load and pricing, really the main thing that you have to bet on is pricing, how do you get pricing higher? you show greater value of the ads and the way you do that is helping advertisers better measure the return on those ads. and that's really what they're trying to do i i thinking of this being an online retailer or e-commerce company is many, many years down the road and maybe not even something the company is trying to achieve. >> on that ftc number, clearly the number itself didn't spook investors. and seemed to indicate they're getting close to a settlement there. is there any chance or risk that the ftc could require them to change behavior when it comes it dealing with user information privacy? >> i think it is a great point

everyone is focused on the number they're not thinking about what kind of consent they may have to enter into. >> they have done that before, google. >> absolutely. you're spot on that it is good to get that number out there it is 1% of the market cap at most it is, i think, you pointed out earlier in the program, it is a quarter's worth of free cash flow it is more about what -- i don't really have an idea. i don't think any of us really know but it is still a bit of an overhang there the market may be ignoring a little too much right now. >> valuation, some people want to talk to me about a 20 gap number that could be higher than $10.50 a share i don't know where you are what is an appropriate multiple in your opinion for this stock. >> i think we're in the $8 or $9 range, we're lower than that but the stock is turning somewhere in the 20 to 24 times gap earnings, a couple points

off for cash, ex-cash, low 20s, high teens number for a company that is growing 30% top line, and importantly earnings should start to more closely grow in line with revenue growth like i said earlier, the costs are starting to rein in. we see a path over the next 12 to 18 months where expenses should start to grow more in line with revenue. and with 30, maybe 12 months out, you're talking about 25% growth you're looking at maybe closer to 25% earnings growth for a company trading at 22, 23 times gap earnings that's a great value for investors. >> if you zoom out and see what we have learned so far this earnings season, facebook had a good quarter, twitter had a good quarter, snap had a pretty decent quarter who is taking market share from whom on digital advertising? >> one of the themes coming out with the social media or internet media companies you referenced right there is an improvement in mau trends, user trends either because of product

improvements, which we're seeing from snap and twitter, or because some of the regulatory overhangs and the news headlines for a company like facebook are starting to get behind us and the users are starting to engage more so that is certainly a theme coming out the other theme is reining in of expenses that were kind of out of control for some of these companies last year. that's another theme and the overall theme is the ad market is strong these companies continue to put out very strong 20, 30% ad growth so the ad market is strong despite the fact that some of the comps are difficult. we had -- >> fighting for a share. >> don't seem to be fighting for a share. amazon is not, you know -- >> amazon, but i also want to ask about alphabet can we expect a strong quarter given what we have seen so far >> out of facebook, twitter and snap, we have seen good indicators of the health of the digital ad market. the correlation between facebook's results and alphabet's results tend to be

high, well over 90% correlation between revenue growth there the read throughs are typically quite good there so youtube has been a star google, like instagram, a star, facebook, the search business continues to be kind of the engine that continues to deliver, you know, 15% plus growth no matter what. we're pretty optimistic. in fact, earlier this year, i demoted amazon and upped google as my top pick and i'm pretty constructive on alphabet right now both because of the top line ad trends we're seeing, and also again for they're benefitting from the same expense die nammics i talked about earlier. >> we'll be paying close attention to those earnings and appreciate you joining us. mark may. when we come back, the ceo of lululemon as he rolls out the company's new strategy, calvin mcdonald joins us exclusively in his first broadcast interview since taking the helm of this company. and later, another exclusive

this hour, kyle bass with former white house chief strategist steve bannon on china. "squawk on the street" will be right back dow down 211 points. ♪ there are roadside attractions. and then there's our world-famous on-road attraction. if you've never seen yourself in a mercedes, you've never seen these offer. lease the 2019 glc 300 for just $479 a month at the mercedes-benz spring event. hurry in before april 30th.

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since being named ceo nine months ago, calvin mcdonald, the ceo of lululemon welcome. >> thank you excited to be here. >> we're excited to have you and to hear about your plans so this week you're talking about taking growth at the company up to the next level how ambitious do you think the targets you laid out were? >> i think they're reflective of the opportunity we see as we shared yesterday, we believe we're in the early earnings of the growth opportunity behind the organization and when we reset after an incredible 2018, which is going to allow us to achieve our 2020 plans early, it was the right opportunity to set new goals for the five year for 2023 and we feel it is reflective of the opportunity we see ahead. >> you also painted a picture of lululemon getting into skin care and shampoo and luggage. how different is this company going to look in next five years? >> yeah. we painted a picture of really focusinging on our opportunity to grow the core that was the main message. we're going to continue to discipline approach, building

out our business through the core, expanding some of the categories we're in already and testing and learning to some new categories, but the bulk of the driving of the opportunity over the next five years is really focusinging on our core, women's, doubling our men's business, doubling our digital business, and quadrupling our international business. >> wanted to talk about men because you do want to double that business in five years. i know men's pants are growing like crazy do you still have the stigma of being a women's yoga brant when you're trying to sell to men >> our opportunity in men's is our awareness. our awareness is low, which is exciting in terms of the opportunity for growth i think it is less about trying to change the perception of the brand when unaided awareness would suggest you can create the perception so we're actually really excited about the performance of our business so far. and the fact that with that uned a unaided, we can shape the brand we want and drive the success we see being able to

achieve. >> how do you think about the competitive landscape, nike, under armour, adidas, more male friendly brands, they're trying to chase the women's business. how do you go up against the giants >> we have the unique point of view our vision is to ignite a community of people living the sweat life we look at the balance between mind, body and connection. and we want to talk to the guy as we're talking to our female guests that that resonates with. we feel that's very unique and different. and there is a large population and opportunity for us to grow >> are you going after the guy going to the gym or going after the guy going to work in abc pants which are very popular, i will say, at cnbc lately. >> we're going after -- we believe life is a sport. so we're really going after both because we think it is the same individual and the spirit of the sweat life is to and from the studio and at the studio people want technical apparel that performs for them and that's what we provide, that's what we obsess about,

that's what we innovate for. and that's the group we're going after. >> you did recently sign foles as a brand ambassador. how does that come together? >> it is an exciting where with our ambassadors, we have over 2,000 around the globe, we build authentic relationships with them and we're drawn to each other for the shared values and philosophy of the sweat life with nick it is the same thing he loves the brand he represents the same values we do as a brand. it is a perfect relationship in which we both wanted to work together to represent the sweat life he's incredible in the community. he represents the brand well in that way of life it is one of those perfect, very authentic relationships and we're excited to have him as an ambassador. >> he represents the first major sports athlete that lululemon has signed as a sponsor. are we going to see more of that are you going to go up against the big guys when it comes to courting athletes? >> we're not going to pay and

chase high profile athletes. it is not who the brand is but we will continue to look to build relationships. we have some incredible relationships today with both male and female athletes through our ambassador program that represent who we are and we represent who they are we'll continue to pursue those regardless of the sport or activity they participate in. >> something else you laid out yesterday a little bit was sneakers and going deeper into the footwear category, which leaves some investors wondering why. it is a way from the core and very crowded and competitive. >> we delivered a very strong message yesterday, which is, you know, the drivers, three drivers behind our five-year growth strategy will be innovative product, omni guest experience and expanding our markets. that's focused on the core, the disciplined approach that will allow us to drive the growth through those. with that we're going to test and learn. and sneakers, few other categories, a few we may test and learn as we go they're not the drivers of the

growth. >> they're extras. >> they're extras. and as a business, we're going to be disciplined and focused on building our business through the core but we have tested footwear. we did see some very positive results. and in the future, you know, it is a category we'll look at t entering and announce at a later date not in the short-term. >> part of expanding the core big time is expansion internationally. you want to quadruple international business how do you do that >> we see a huge opportunity in the markets we're in already actually i've traveled since joining lululemon and the energy that we're seeing in both europe and asia pacific in particular china is incredible. so when we talk about the vision of igniting a community and people living the sweat life, that really is a lifestyle that resonates with who ur brand is and what we're trying to create through retail, experiences and through our community connections. and it is resonating and it is happ happening in a lot of the markets we're serving today, so we just feel we're, you know,

well positioned as a brand with a unique point of view to embrace that growth and that's where we're going to see -- >> also with the high price point. you're known for not having a discount you talk about that. does that work are people in china going to buy $100 yoga pants. >> i think guests buy quality and gear that performs and we invest in our product we're athletes designing for people that want to live an athletic life. and our technical apparel performs and it will continue to perform. and that's why we invest in our price points reflect that. and the fact that the business is doing so well, i think it is a reflection that guests are rewarding us with that technical performance. and as i said before, performance is not a trend that will go out of style. >> it goes international. >> it scales and goes international. and -- >> how do you get someone like me to pay $108 for a bra how does that work >> that's a particular niche

product that is a high impact bra, which is in our opinion the best bra in the market for runners, that's been designed to provide the support that a runner needs so it performs better than any other bra on the market. not priced at $108 because of an aesthetics standpoint. it is priced at $108 because of the technical performance of that product as i said, because it is one of our top selling bras, the guests are telling us they respond to that type of technology and we price it appropriately because we invest and embed the technology to support the price point. >> digital is the other key pillar here we should talk about. there are -- it sounds like what you're laying out is e-commerce to be 50% of your business over the next few years very few retail brands and retailers actually have that kind of proportion in terms of how much digital business. what makes you different >> yeah. more excited about our digital business we didn't stay 50% across the

market as a total share of our business potentially into the future. but within the five years we see doubling it. but our store-based business continues to grow and will grow at low double digit. so i don't manage the business on penetration because you can get that if something is declining versus something growing. our core is growing. our digital business is growing. we're going to double it we're going to see good penetration in north america, potentially some of our international markets like china will get closer to 50% sooner. that's a reflection of the opportunities that those markets offer up. >> so you're growing like crazy. but there are people out there, we had earlier this week an interview with professor zamarodin who looks at valuations he said i bet on levi into the future over something like a lululemon. he said, which will be distant memories, because i think one of the problems with the brand names of today, he says, is they build up fast but don't have roots and millennial consumers don't have loyalty

why is he wrong? >> i think he's wrong for a variety of reasons one is we're a 20-year-old brand that is showing that our best days are still ahead of us our guest loyalty is above almost any other brand i've seen what i shared yesterday is that 92% of our loyal guests that shop with us continue to shop with us year in and year out i've never seen another brand that has that type of engagement with their loyals. so we're connectinging >> what is it? >> it goes back to the performance of the product it goes back to what the brand represents we are a purpose-driven brand that reflects the values, connects to the community, and brings a spirit through our educators and the ambassadors in the community we connect and i think that's a very unique position to have in the marketplace. it is incredible product that performs and people feel the heart and soul of the brand. and i don't think that will ever go out of style and we're connecting with millennials today as strong as we're

connecting with our current, you know, demographic. >> finally, you know, some people thought the shampoo and the skin care line has to do with your background as head of sephora luggage, all the extras as you call them if you think of lululemon as a lifestyle brand you want to expand and take it to new categories, is there anywhere you think you can't be >> yeah. we view lululemon, i view lululemon as an experiential brand versus lifestyle brand i think the brand represents a way of life. but it is not a lifestyle brand meaning i'm going to, you know, diversify into a variety of categories that don't reflect who we are at the heart and soul, which is people living the sweat life so that's why we're going to continue to focus. we have no intentions of going into luggage we talked about accessories and bags yesterday, to and from the studio that's an opportunity, it is authentic to who we are. and self-care, you know that business has been built up and tested before i joined the organization so the good news is i have

experience in the category, i see an opportunity for it, we're solving solutions for athletes which is unique in that space, but we're going to test and learn. we did last year, we're going to roll out to 50 doors and online this year, but it will be one of those very small test and learns, figure out as we continue the discipline of building our core. >> do you cringe at the word athleisure >> i don't cringe at it but i don't think it is who we are >> thank you for joining me. the ceo of lululemon, first tv interview since taking over nine months ago i paid $108 for the bras but he wants to speak to you >> i know. i'm already focused on my core, as all middle aged men must be >> he focuses on his cores but still wears suits. try some abc pants. >> i think i may have a pair thank you. very interesting interview. coming up, exclusive as well you won't want to miss

kyle bass along with former chief white house strategist steve bannon going to be with us a lot of interesting thoughts on a relationship with china. let's give you a quick look at the averages as we head to break. you can see the dow, of course, still getting hit by that significant declininm. e oader market negative as well to a single defining moment...

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that protects what's important. and reaches everywhere. this is beyond wifi. this is xfi. hi, everybody. i'm kelly evans. this is your cnbc news update at this hour. it is official, joe biden has jumped into the 2020 presidential race. in a video released earlier this morning, the former vice president says he's running for, quote, the soul of the nation. many polls have biden leading the field of at least 20 democratic candidates. russian president vladimir putin and north korean leader kim jong-un meeting for talks in eastern russia later putin said kim confirmed he is willing to give up his nuclear weapons, but only if he gets an iron clad guarantee of security beforehand. former nissan chairman carlos ghosn walking out of prison for a second time since his arrest last year on financial misconduct charges

this after posting $4.5 million bail and agreeing to curbs on contacting his wife. ghosn has denied all charges against him. and climate change protesters blocking the entrance to the london stock exchange this morning by gluinging themselves to a wall and to each other. they wore electronic display signs reading climate emergency. several protesters were led away by police. and that's our cnbc news update for this hour david, back to you >> okay, thank you, kelly. time for our etf spotlight, looking at the industrials they are on track for what would be the worst day in a month. the xli is getting dragged down, well, you can imagine why. 3m is the key. u.p.s. also not helping matters. 3m on pace for the worst day since black monday in october of 1987 the company missing on both the top and bottom lines, lowered full year earnings outlook, laying off 2,000 employees worldwide. 3m ceo mike roman will be jim cramer's guest monday night "mad

money" 6:00 p.m. got that to look forward to. u.p.s. posting weaker than expected quarterly results that stock is also down, though not as much as 3m as you saw we'll hear a lot more about the company's quarter. u.p.s. ceo david abney who we like to say comes on rain or shine, which we always appreciate that, he'll be a guest with us on the next hour on "squawk alley". >> weather was a big theme in that miss. hear former white house chief strategist steve ban within heymann capital management kyle bass take on the global economy, china, russia and more don't miss that interview, coming next on "squawk on the street."

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all right, welcome back to "squawk on the street. time to send it over to braian

sullivan in new york he's sitting down with two special guests brian, take it away. >> thank you very much joined here by stephen bannon and kyle bass. both well known to the cnbc audience and the committee on present danger is the fourth iteration of really an organization that was built in the 1950s to counter russian influence, has gone through a number of cycles this is based on the china threat these two gentlemen are members of the organization. steve, to start with you, listen, i heard your talk, a lot of talk about the china threat per capita income of $9,000, right, agrarian preindustrial economy, demographic cliff, why do you believe china is a threat to the united states and the global economy >> look at what they're doing. look at one belt, one road, made in china 2025, and the 5g rollout of huawei. they want to unite the eurasian landmass

they are the most significant existential threat we ever faced and on a per capita basis may be correct. but a major financial power, major industrial power, and the radic radical cadre, the chinese people are among the most hard working in the world, this is about a radical cadre that has taken charge of the economy that are driving us to really -- they have been running economic war against the industrial democracy, japan, south korea, north america, and western europe for 20 years. >> is it industrial war or is it just exactly what the united states did 100 years ago right, we were the low cost labor producer to england. we had child labor we had all these labor law violations seven days a week. triangle short waist factory how are they -- they're trying to build their economy the same way we built ours. >> 100% different. we still had the rule of law, right. we had the constitution. we had free speech we had freedom of religion

we had freedom of expression we had premarket capitalism. what they have is exactly opposite, right. they are basically, and this is what you see with the uighurs and what the technology and the facial recognition, they essentially run almost a slave camp they are a suppressive totalitarian dictatorship that western -- the west has financed it is totally different in the rise of the united states, the rise of another developing country like india and others. you don't see what china is foisting on the world and right now they got this predatory capitalism like the british east india company that is one belt, one road that they get these companies in death traps, foreclose on the assets and take control. this is a radically different thing. >> you had a line in there which i think opened a lot of eyeballs because there is a lot of wall street people listening and you said corporate america is the lobbying firm for the chinese communist party and wall street is the investor relations firm for it really corporate america is funding the

chinese communist party? >> by the way, the funding -- the entire operation of the chinese communist party and what they're running in china is being funded by wall street, which kyle can walk through, being funded by wall street. pbs or npr had this thing the other day about intrusions into stealing intellectual property in american companies they talked to us, a treasury official went around to 200 companies and not one company would -- had been stolen from would press charges because they didn't want to be blocked out of china. corporate america today is the lobbying arm of the chinese communist party and wall street is the investor relations department you can see this on president trump's -- on president trump's trade negotiation which i say is an armistice on the economic war. when lee hu comes to the united states, where does he go first >> the chinese trade representative. >> he comes, first day he has a lunch with representatives, the governor affairs guys and the coos and presidents of the biggest companies in china to put pressure on president trump.

all the pressure coming from president trump to get a deal is not from the chinese, it is from wall street, it is from industrial america >> okay. kyle, you've been critical of china and the economy and banking system and their currencies for a long time tie in what steve is saying to what you're trying to do, first investor in three years came out today, the quiet panic, talking about hong kong. could do you believe the bl political issues there are bleeding into the market, the strongest performing stock markets in the world this year. >> you have incredible debt led growth in china. i agree with what steve is saying, specifically about corporate america being a lobbying arm of the chinese. look at who fought reform. some of the biggest fortune 500 companies in the united states lobbied together to fight sifius reform, protecting national security from investment from the communist party or by the communist party. steve is right 100% on who is

fig fighting look behind the scenes, it is corporate america pushing trump to do a deal it is the corporate american chieftons with the biggest businesses, let's say most growth coming out of china china plays that card. they play it better than anybody else they open a market to very specific people to basically court influence with that person and going to -- into the presidential office to actually get -- change policy. >> before president trump came, we had a disparate movements and kind of talking to china now we have a whole of government, look at pence's speech at hudson institute, a whole of government approach to really confront china on this economic war this has never happened. whether it is a democratic administration or republican administration, the permanent political class and the pay masters on wall street were all about strategic economic dialogue that allowed china to tap us along while they do more forced technology transfers, intellectual property theft and

this massive subsidies >> corporate america, public companies anyway, have a fiduciary duty to maximize shareholder data can you blame corporate america from going into china and trying to get the best deal >> corporate america has -- i went to harvard business school and worked at goldman sachs and lived in china, i owned businesses over there, cross border deals for 20, 30 years. what corporate america has i h d fiduciary responsibility for is shareholders what trump has done is get everybody focused on and behind closed doors people are saying, the forced technology transfer is terrible, but i can't tap the market and the low production cost. >> don't sell a buick into china? don't sell a cadillac? >> back president trump. that's why the six verticals, he promised he would bring

structural changes to the chinese economy to integrate it more we have two different systems running right now. they're a totalitarian mercantilist system. what he's trying to do with the changes, forced technology transfers, nontrade barriers, currency manipulation, the cyber intrusions, all the verticals, what lighthizer and know variouso avariou navarro are trying to do is the nation state, not just so they're the center of the manufacturing universe people should look at they don't call it one belt, one road anymore. they knew the terminology looked like they were trying to dominate the eurasian landmass don't call it made in china 2025 anymore. they understand the west was starting to wake up under trump to say, look, unless we confront this today, not just tap it along, unless we confront it today in 5, 10, 15 years, they'll be the dominant economic power in the world. >> the newsletter, there two

systems as well economically domestic and hong kong hong kong has got this unique system as a story in the journal the other day about how we can't sell satellites to china, but the hong kong-based companies can lease them because they're under a different sphere i don't want to miscoat you, your newsletter effectively says the hong kong dollar needs to drop because hong kong is, what, like you correctly predicted subprime, is a bubble? >> i think, look, something that was fixed 36 years ago for different economic and political reasons doesn't have the same economic and political reasons to be fixed today. and the thing i point out is hong kong happens to be the place where the chinese raise all of their dollars, right. they do equity offerings, they do bond offerings. >> a lot of american money behind it by the way. >> when american pensions and endowments invest in china, they send the money to hong kong. hong kong has an important free trade relationship with the u.s. that we signed as part of the u.s. hong kong policy act in

1992 but we require -- we as a country required hong kong to live up to a few things for us to maintain that agreement every year they need to have an autonomy in their economy. they need to have an autonomy in their judicial system and they must keep a free democracy and for those people that think hong kong is going to be this oasis of democracy and southeast asia, they're just wrong >> four pro democracy activists were sentenced to 16 months in prison in hong kong. chinese nationals. >> my point isn't as narrowly focused where their currency is going. if you look at hong kong, their banks are now almost 900% of their gdp. their household leverage is 300% of gdp they're the most levered developed country in the world, they're running out of their reserves they spent 80% of reserves defending the 36-year-old peg that i think is going to end up falling because their economies weren't linked to china than it is to the u.s. 36 years ago, they were more linked to u.s. economic growth

and there was a synchronicity. >> you got fame ous because you and a few small groups of others were screaming about subprime. people said you were nuts, you were wrong by the way, a few years later, they made a book about you guys being right when everyone said you were wrong do you believe that's the case with hong kong now >> the numbers are impossible to argue. the outcome is what is under debate and, look, if you look at it, and develop an objective opinion here as to where the imbalances are, you have a 36 year peg that creates a pressure cooker. it looks like the pressure cooker is about to go off and about to in the timeline of 36 years might mean a year, might mean two years, might mean -- >> what is the outcome that you're looking for then in. >> i think you'll see a revaluation of all the southeast asian currencies including hong kong down and china and hong kong >> joe biden >> i think -- joe biden is going to pennsylvania today to try to cut into -- he understands that

he's got to deliver the midwest and the industrial blue collar workers, the reagan democrats that came over and voted for president trump. he's in pittsburgh today he's a total hip croat wh hypocrite in 2013, he took his son on air force ii and the son a week later caught a billion dollar deal with bank of china on a private equity fund. we kicked off -- i worked on clinton cash for years, the thing that got the clintons rolling and put them on the spotlight of corruption. we did one, i took off for the white house and the campaign, but secret empires specifically calls out the bidens and what joe biden has to do is talk about his relationships with senior members of the -- where this fund came from and biden was part of the obama administration they looked the other way when stationary islands were built in the south china sea, the single biggest national security threat to the western democracy, closing off the south china sea, that happened on joe biden's

watch and he didn't say a word what we need to hear from joe biden, he's in pennsylvania, he ought to say why he didn't put tariffs on steel and aluminum when he was vice president of the united states. it is donald trump that did that all the happy talk -- all joe biden is nothing but happy talk. >> i can't verify what you're ta talking about, i wasn't there, i didn't write the book. i'll ask you a more basic question, can he win you said the other day to joe kernen on cnbc the other day, man a month and a half ago, that it was kamala, beto. the combination that could beat trump. can biden win? >> absolutely not. joe biden will not win the primary. you're seeing pete biden right now. no chance that he can take on donald trump one on one. he doesn't have the stamina. he doesn't have the smarts he doesn't have the actual get into combat with somebody like trump. trump -- i think the democrats are going to understand that i think you're seeing pete biden now. what biden has got to -- he starts going around and blowing smoke up, talking to blue collar

workers. >> he's from scranton. >> then why did he not defend these workers? why did it take donald trump to do it? >> we're out of time do you believe -- what is the culmination of the mueller report, will donald trump be impeached? >> zero, the mueller people should read the mueller report there is -- there is absolutely no collusion donald trump said. i recommended don't fire comey there is no collusion. no collusion there is no obstruction. and so i think this thing passes, the democrats are going to try to -- this will be six months of terrible vitriol because they're going after finances, going after his family, they're going after everything because they control the house. donald trump willpower through this but the democrats need somebody that can mobilize. unless you start talking about china, you're not going to be competitive in 2020 against donald trump they had five hours of cnn the other night. the one thing you never hear about is china. >> thank you we'll stick around and do more of an interview for worldwide exchange tomorrow morning.

appreciate that, guys. all right, "squawk on the street," back to you >> that was good to watch. brian, tha y vy chnkouermu and "squawk on the street" will be right back after a quick break. (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills.

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starbucks on a hot seatrk. find out what to watch for more after this.

welcome back to "squawk on the street." relative outperformance from tech and communications service tied to microsoft and facebook strength while industrials dragged down by 3 m. if you take a look at one in particular, among the underperformers of the day, consumer discretionary currently down just about half a percent or so. shares of chipotle, o'reilly

automotive the biggest decliners. and back downtown to you guys at the new york stock exchange. >> dom, thank you. and let's go to chicago and rick santelli with the is an sais asi exchange >> and indeed, this is special former cbo director generally smart cool guy here in chicago with me. doug, let's get right into it. we had a pretty good occurabdur goods number even though it is preliminary. and aircraft really look good and tomorrow first look at first quarter gdp. many thought that it would be weak, but it is coming in a lot better >> i think mid 2s. and i think we'll be in good shape. probably pick up in the second quarter from there and i've been confused by the pessimism on the economy there are some weak sectors. housing, agreed. but there is a lot of stuff out there. and it is strong and i think we'll have a good year

>> i think the lesson of housing is that after the credit crisis hit, even though it has improved, new home sales are still basically half of what they were in '05 and it isn't only interest rates. 2012, we had 135 ten >> we don't want everybody buying a house we made ale polil policy mistak paid for it. >> policy mistakes, that is an interesting topic. i hate talking politics, but i love talking about markets and the economy. sometimes they intersect in a big way. do you see some of the issues, let's pull one out, elizabeth warren talking about forgiveness of student loans, all i can think of is the big issue is more government, less government, what did they promise, how did it turn out about. >> they promised they would make money on it and it would pay for the affordable care act. it has been a disaster it has the same quality of underwriting as the mortgages did. the forgiveness does two really bad things

number one, it either ises up the notion that we'll forgive a lot of government loans and the government is loaning money everywhere and number two, you will have to pay for it and that is a lot of taxes. >> just out of curiosity, where does the money they loan come from >> that would be the u.s. taxpayer >> just wanted to make sure because thinking free, that there is some like entity thato. >> we haven't found that we need it >> and on trade, global trade, everybody thought that it would be much worse with respect to how it might impact for example the dow, nasdaq, s&p or the economy at large is this a counter fact all isn't the economy -- is there more strength there that has been able to overcome that is the weakness >> the rest of the globe has been slowing down and the u.s. has been pulling it along. and so i think that that is a real tribute to the strength of the economy at the moment. one reason i'm optimistic about 2019 and that will bring trade along with it.

it could have been worse and it is not >> ultimately do you think a trade agreement will give more horsepower to the economies of the globove oversometime >> really important. the thingses in there are the future and we have to set the rules for the future >> doug, a pleasure. really enjoyed it. david faber, it is all your. >> i'll take it. thank you, rick. sarah, you have a truly big afternoon ahead. not that you haven't had a big morning. >> big morning big afternoon. we've have had than exclusive with oak tree co-chairman howard marks, a new investment letter out. and a push for responsible kaptslism. >> steve bannon referring a little bit to that not sure what it means, but interesting. >> we want to get his thoughts on the markets, where the froth is usually has some opinions of

faang. huge afternoon of earnings amazon, intel, star buck, ford, t-mobile just to name a few. we'll bring you the numbers. and had a six box up yesterday might have to go there again >> no kidding. >> a lot of earnings >> when we come back, shares of u.p.s., they are down this after reporting results not well taken by the market. and winter weather may have been an issue u.p.s. ceo will join us. "squawk alley" straight ahead. the ai i need? it's gotta scale across my business. starting here, in procurement, helping us find the right suppliers. then here in logistic, to avoid disruptions! here in sales. even here! i'm talking about ai we can build to work... here, predicting trends.

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it is 8:00 a.m. at facebook headquarters and 11:00 here on wall street and "squawk alley" is live. ♪ good thursday morning an