"squawk box" begins right now. ♪ these eyes are crying ♪ these eyes have seen a lot of love but they're never gonna see another one like i have with you ♪ >> live from new york where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" here on cnbc andrew ross sorkin along with melissa lee. we've got your ticket to omaha becky quick will be reporting live from the berkshire hathaway meeting. often called woodstock of business tens of thousands of investors waiting to hear from warren buffett and so many others the ceos of berkshire companies benjamin moore, as well as investor mario gavelli joe moglia, reddit co-founder

will be there along with sue decker coverage starts tomorrow at 6:00 a.m. eastern i'm flying out right after that. if you have questions i should tell the audience, if you have questions that you want myself or becky to ask of mr. buffett saturday, send them to us on twitter. >> you're leaving after the show tomorrow >> after the show tomorrow, getting on a plane i will be in omaha, ask the questions. >> then back on monday. >> back for you on monday. becky will be out there in omaha. >> if there's any question about whether you're cutting it too tight or something, it's okay. what time do you -- i mean, we're doing the show tomorrow. >> we are. >> but you're going to be here. >> with you. >> i know that i got that i appreciate that. okay. >> i wanted to be here with you. becky is out there so we have a -- >> you wanted to be here for him even though he would prefer to be alone >> i don't want to be alone. that's fine.

>> you are urging him to leave >> wait. that's not what i'm doing. i just want to make sure that he has all the time he needs to get things squared away. >> looking out for andrew. >> got a direct flight. >> becky is there. >> the weather might be iffy tomorrow, though. >> on the oxi jet. >> no, on the delta jet. >> on the delta, okay. >> on the delta. let's get a check of the markets here this, after u.s. markets closed lower on the back of chair jerome powell's news conference yesterday. looking at a higher open, s&p looking to be up 5%. dow jones looking to add 35 at the open and nasdaq looking to be higher about 20 points right now. overnight in asia, japan and shanghai markets closed for holidays they're back online. hong kong up by .8% and south korea higher by .4%. pmi showing stabilization continuing in europe german dax higher by .3%

as for treasury yields we see them crossing 2.5% on the ten-year yield 2.57% is the yield there facebook and ftc are negotiating a possible settlement that would require the company to create an independent oversight privacy committee. it would require facebook to place privacy-minded executives, that's the phrase. privacy-minded executives at the company's highest levels and ceo mark zuckerberg would take on the role of, quote, designated compliance officer that would make him personally accountable for facebook's handling of privacy issues those changes would reportedly come in addition to a record-setting fine of somewhere between $3 and $5 billion. you're making faces. what are you -- >> no, no, i think that he's doing this to satisfy regulators he is personally in charge of privacy at the company. >> so the question is, would you

like him to be personally in charge of privacy or would you like a sort of ethics officer that is supposed to hold everybody else accountable >> probably somebody else that's removed that doesn't have a fiduciary responsibility to shareholders if you truly want somebody to look out for privacy issues for the company. >> how do you effectuate that? >> i don't know. that whole situation is deep, but i want to go back to -- you didn't know him, right >> i went to harvard way before mark zuckerberg. >> see, i thought you were similar ages. >> that's very kind of you, joe. >> did you hear about him having been there or anything >> after the fact, sure. of course. >> do you know where his room was and stuff? which one of the little -- it's not the quad there what's it called >> the yard. >> the yard. >> do you know exactly where he was hanging out and stuff, spiderman, andrew garfield and those guys >> there are many, you know, important figures that have

graduated from harvard, not just mark zuckerberg. >> right i touched a guy's toe. >> which guy >> oh, you're supposed to rub the feet for good luck. >> i did have you seen it you can actually see where -- >> it's tarnished. >> have you seen this? spoiled brat traders does anyone really think they're going to cut rates where they are? >> markets are pricing at a 25% -- >> stock sold off because he said he's not going to -- we just raised. we're not going to start cutting rates now. >> didn't even open the door, though, joe, for a summer cut. >> stocks pulled back. >> surprised. >> stocks pulled back from all-time highs after the fed left rates unchanged how many jobs? maybe it will be a crappy number tomorrow maybe the data sucks and it will be -- because it's a good -- that's a big data point

tomorrow, given the gdp, previous jobs number we saw. >> that's right. >> this one came so fast, didn't it it seems the way it's structured, first friday of the month. seems like we just had that. >> still a month ago. >> was it really a whole month there's only 30 days in april. >> always thinking, joe. >> right fed chair jay powell making the central bank's position on inflation clear. recent weaker inflation readings as transitory. here, in fact, is what he said in response to a question from someone named steve liesman. >> the committee would be concerned if inflation would be running persistently above or below 2% it carries the sense of something that is not transient, something that will sustain over a period of time in this case, as we look at this, at these readings in the first quarter for core, we do see good reasons to think that some or all of the unexpected decrease may wind up being transient. if we did see a persistent inflation rate persistently

below, that's something that the committee would be concerned about and something we would take into account in considering policy. >> the fed held rates steady, citing solid economic growth and low unemployment it really is a goldilocks scenario if you can keep rates low and have the economy growing at 3% or above, with someone that has watched much higher rates for the past 30 years, it's just hard to get my head around it. i think we talked about it before the show. the internet changed everything in terms of transparency for prices. >> right. >> you combine that with the globalization and lower, you know, labor costs everywhere else and it's just the advances of technology that i think that must be part of it, too. but it's just a different -- really, are we tight at 3%, really so you can just let the good times roll let the punch bowl keep filling it up, with grain alcohol and

not worry about reflating or debasing the currency. >> that's the issue, whether there's an asset bubble that's forming when you take a look at assets versus gdp. it's at a higher percentage than it has been a long time. there is an argument about the fed trying to counteract this asset bubble from forming. but i think what's interesting is the discussion about inflation being transitory, pressures on inflation he mentioned investment advice and portfolio management being a transitory drag. that scenario feels like it's in for a real change, that these lower prices to buy an etf or to pay your money matter is lower forever now. >> having grown up within like sort of the vulker era, watching what's necessary, or the wheelbarrow full of money in germany just to buy a loaf of bread, you sort of get

conditioned to that. it's hard to sort of imagine that inflation -- japan is a good example of what can happen, i guess. right? i think that's partly not having, you know, enough kids and everything else. >> demographics. >> demographics, but trying to get any inflation. and then you look at where rates continue to be in europe we're swimming against the tide as we're raising rates weren't we >> right. >> all right this is still me update now on trade. sources tell cnbc that the announcement of a u.s. trade deal with china is possible as soon as next friday, apparently. could be china's vice premier will travel to washington for some talks next week. will that be the top in the s&p? >> could be. >> yeah. sell the news. >> up 17% this year. where was that >> yesterday was weird. >> it's been like that. >> apple.

>> that's on point. >> do you think it's china >> part of it is the expectation of a trade deal. >> what is that, 5%, 10% >> that, i have no idea. joe, you bring up a really good point. >> apple >> apple if i told you the fed would be on hold forever, perma pause, and up 5% on earnings, what would you say s&p would do knock down .75%. >> yeah. >> dow inc., chemical maker separated from dow dupont. it did not give a per share earnings number but said it had 1.9 billion in ebida. >> dow component, dow, i don't know that's tough that's confusing. another day, another ipo to tell you about beyond me, $25 a share at the top end of the range they make meatless alternatives

to burgers and is expected to begin trading today under the sticker bymd. cruise ship with nearly 300 passengers and crew has been quarantined in the caribbean after a case of measles was confirmed on board st. lucia coast guard tells cnbc that the ship is owned and operated by the church of scientology. measles patient has been isolated on board but st. lucian officials won't let anyone disembark for now, the ship is scheduled to leave midnight tonight. usually they say don't miss the boat this is one of the times you might want to miss the boat. >> when we return on squawk this morning, two analysts initiating coverage on uber with different ratings. we'll tell you about them both here and explain their calls on the hottest ipo of the year. as we head to a break, here is a look at the biggest premarket winners and losers in the dow. ♪ hey i just met you and this is crazy but here's my number

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welcome back to "squawk box. we are looking ahead to the uber

po among the first firms initiating coverage joining us to talk right now about that coverage, daniel ives bush, director of management and research, and senior research analyst tom white is here, to my right so i'm going to go with you first. what do you think? >> look, in my opinion, it's a transformational company in other words, we view it as sometimes these companies have hype we view it as a three-headed monster. we believe valuation of $100 billion plus is warranted under some parts it's more than a one-trick pony. uber is the real deal in terms of the platform and ultimately where they come out. $65 is our price target. >> that gets you $100 billion?

>> about 109 that's the sum of the parts. >> if the price actually goes higher, you are, therefore, bullish or think it's over valued >> no, we continue to think this is a name that's going to continue to rerate as they execute. i think this is just the start in terms of from where this thing -- >> what i'm asking is on day one or day three or day five -- >> your price targets hit. >> your price target is hit you say you're going to go rerate it and raise the price or say to yourself, okay, my sum of the parts analysis is what it is and, therefore, it will be overpriced talk about what happens if the stock goes below that. that's a different story. >> right that's a good point. we view it as a sum of its parts. we view it as 65, sort of a base case on a bull case you could get to 75, 80 to where this thing could trade. ultimately supply and demand, what customers want to pay the

value is fundamentally on the distribution platform. >> we're going to break that down in a minute tell us your view of this. >> clearly a revolutionary company. they're disrupting food delivery and trying to disrupt freight. >> when you start like that, there's a comma and a but. >> it has to do with the near-term trends in the business long term we think there's a decent chance, decent shot that these guys can achieve kind of a premium margin in the category that's something we tend to see with the category leading companies in terms of category leading market share in virtually every major region they operate in. that gives them sort of premium margin near term revenue growth is slowing quite slowly they're having to take rate down, fighting a lot of battles on a lot of fronts and the

margins are deteriorating in the core platform. last year, they're able to point to this nice positive 9%, what they call core platform contribution margin, which is basically like adjusted ebida, but it's been sliding steadily. >> you're initiating at what price? >> $53 target. >> mutual rating >> yep. >> you look at his price and say it doesn't make sense to you because? >> well, for us, we're not arguing that uber doesn't deserve a company say like lyft and, in fact, our target multiple that's implied in our price target does give it a premium. >> multiple on what? >> well, revenue that's really the only positive number that we've got to go on here. >> premium multiple, neither company makes money and may never and you're assigning multiples. that's part of the problem, isn't it >> you're doing revenue.

>> and price value to sales. >> all right. >> to my point, in uber, you have to look at a sum of the part. >> let's do the sum of the parts piece of it. that's how you get to your price. >> ride sharing piece worth about $75 billion. when you look at the uber eats, that's worth about -- >> how do you get to $75 billion? >> ride sharing in terms of from what you're willing to pay on where we think revenue as well as the modernization of the platform. >> and are you a believer that it is profitable and how long from now >> we believe ultimately five years is where i think you can start to get the profitability but very similar to how we beat amazon, if i go back a decade ago. >> explain to me, though, the math of how you get to profitability on the uber business, on the straight driving service. >> straight driving profitability will be an uphill battle profitability ultimately comes from eats, freight and some of

the other areas. >> okay but if you're effectively saying that the driver business, which you just said is worth $75 billion is actually going to be very hard to ever be profitable, how is that piece of it worth the most? >> ride-sharing business will start to be profitable if you look at the next five to seven years in the near term right now for them, as tom knows, it's about investing in drivers it's about take rates being stable. >> isn't investing in drivers sort of a misnomer you are basically giving discounts to these drivers but you're not investing in them they also drive for lyft there's no investment where there's a return on that investment necessarily except they're going to take that one next ride. they're not with you, necessarily, for the next year it's not like investing in capital. you're investing in an asset that doesn't work for you full time so how is that -- >> it's a great point. really what you're trying to do as uber, it's any nod or consumer what they're trying to do, once you get a consumer or driver into the platform then

there's the modernization on uber eats, on freight and ultimately on autonomous you're trying to put more of a fence around your backyard of an uber versus lyft or other competitors. 91 million active users in a month versus a lyft. that continues to be the value of the uber platform that's why investors are looking, can this be the amazon of transportation? can you monetize it? it's a different distribution model than a lyft, which we continue to view as a little brother of uber. >> do you invest -- do you cover amazon >> no. >> that comparison has been made. >> i think with amazon, what was pretty clear relatively early on is that it was simply a drastically better experience. it wasn't necessarily the cheapest but a fundamentally

better experience. i don't know that there is that opportunity to differentiate the product as much in ride sharing. so, you know, i maybe resist that analogy a bit when uber tries to sell itself that way. ultimately, what they want is when people are looking to travel anywhere, you know, that they would presumably use a car for maybe, they're going to go to uber first and i think they've got a shot at that in terms of really that amazon kind of franchise value differentiation, i'm not sure that you have that in ride share. >> it's a longer debate. we'll have that not only for the next week before they go public but many years afterwards. >> tesla's ancillary crap just costs money, subtracts a sum of the parts, right how do you know you shouldn't subtract some of these -- they're putting so much money into this stuff that you say is additive these could be loss leaders. >> that's a great point. solar and some of the areas have

actually taken away from here the reason is that they're able to actually monetize from a distribution platform. you can't monetize from solar. >> wondered about that. >> not always good to be all over the place. >> 100%. >> flame throwers. >> leaf blower. >> the leaf blower is pretty compelling. >> silent leaf blower. yes. i want a leaf blower with the flame thrower attachment to burn the leaves sorkin, right? >> i hear you. anyway -- >> anyway? anyway means move on. >> that's exactly what i meant. >> that's good. morning's big movers why qualcomm stock is under pressure and we'll show you a recently ipo'd stock that's a verb. plus what tesla just announced

toat is weighing on that sck "squawk box" will be right back.

stocks to watch. qualcomm's stock ---o we found it revenue fell short do you remember that, melissa? >> barely. >> really? >> qualcomm. >> i only know it because you keep doing it. >> oh, because i say it? >> yeah. >> you do it. >> i say it, i hear it that's what we're referencing. there was a time 15, 20 years ago we talked about it almost every hour company sicites a weak smart phe

sales in china it will get $4.5 billion from that recent settlement with apple. apple had that laying around like here, take it shares of square are letter today, first quarter earnings topping forecast but payment volume missed expectations and company's second quarter outlook was disappointing. shell's first quarter profits fell 7% due partly to lower oil prices and refining margins but still easily beat forecasts as the company benefited from higher sales of liquefied natural gas and from stronger trading tesla could soon be seeking to raise new capital filed for mixed shelf offering according to a new document that's just hit. a dead offering that may hit the market at some undetermined future point size and terms of the offering, no other details have been announced along with this document we are watching tesla shares,

232.50, the low 231.15 tesla bonds have been holding in and that sort of indicated that bond holders believed that some sort of capital raise would be coming because that, in turn, would be good for bond holders. >> all right coming up, powell's inflation indicator will dig into his comment yesterday that made wall street sit up and take notice. as we head to break take a look at s&p 500 winners and losers. this is the couple

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good morning welcome back to "squawk box. open up 10 points higher, moved up marginally right there. s&p 500 looking to open a little over three points higher right now. >> update on boeing. federal aviation administration says it is mandating new flight control software in part for the 787 dreamliner to address unsafe operation settings on the plane. for certain areas in the tire and wheel zones that may be susceptible to damage which could result in the loss of braking and steering power on the ground faa directive makes those changes compulsory boeing says the work has been completed on existing 787s and incorporated into the manufacturing process. fed chairman jay powell bursting the speculation bubble about a possible rate cut any time soon. instead he painted a rosie

picture of the economy and called recent low inflation readings transitory. >> the committee would be concerned if inflation were running consistently above or below 2% it carries something that's not transient, something that will sustain over a period of time. in this case, as we look at these readings in the first quarter for core, we do see good reason reasons to think that some or all of the unexpected decrease may wind up being transient. if we did see a persistent inflation running persistently below, that's something that the committee would be concerned about and something we would take into account in setting policy. >> joining us now global head of rate strategy at td securities and steve aulf at federated investors. pria, let's start with the sound bite we just ran looking at your analysis, and there is a benefit of hindsight

here but rates in the equity markets have been disconnected because stocks have been rising and people are still thinking that there's a chance for a rate cut. >> exactly. >> and if you go back to december, it wasn't totally clear that a recession was off the table. >> right. >> so stocks and the sentiment about the economy have both moved in the same direction. we realize the economy is better as the stock market was rising but you're saying we should have never thought a rate cut was coming >> so, i wouldn't say never. i think late last year, i was pretty nervous because global growth was decelerating. china seemed to be in free fall and financial conditions were tightening then we have this dovish bit of news from the fed, banks have eased. china has eased. i think the recent data has actually shown that the gloeth growth seems to be picking up.

we haven't really seen that in europe we've seen china and u.s. data come on better this fear, i think, that the market had earlier this year that have global central banks extended the cycle or actually signaled that the cycle is over, i think the equity market ran with they've extended the cycle. bond markets say no, actually, they've significant nald that, you know, they're going to start easing i think that's what we went into this fed meeting looking for t cuts from the fed. we were basing in 25 base point cuts this year and next year. >> you were? you got to that? you mean we as in -- >> we as in -- >> the general collective. >> you didn't buy in >> i didn't. if inflation is notoriously volatile if it's transient, there's no need for the fed to ease financial conditions have eased significantly. so the market has done some of that work for the fed.

no reason for them to ease the market switched in feb and march saying risk is high to last month saying the fed needs to put in insurance cuts why insurance cuts here? >> right we started off the show where -- like i said, a bit of in hindsight. the spoiled brat traders, crack addict, free money, mainlining, easy money they were disappointed yesterday that they weren't going to get their way with a -- but no one really, by yesterday, i don't think anyone really thought after the jobs number from last month. >> exactly. >> gdp number, adp, no one thought that rate cuts were -- most people, scott miner, goldman sachs, were now saying we've pivoted back to when the next move, whenever it is, will be higher, not lower. >> what we heard from chair powell, there was a lot of sort of expectation of inflation being transient. if inflation doesn't pick up, what if there are structure forces, automation, technology if that's keeping inflation low,

the fed may not need to hike, but then i still don't see the reason for the fed to ease. >> cut. >> exactly. >> could be great. levels like this, inflation stays low because of though factors. these are great interest rates for expanding businesses and for borrowing money and paying off, you know, managing the debt the federal government has globally as well. steven, i don't know, you're taking a big victory lap you say everything you predicted at the beginning of the year is coming true, is that right >> we've been at 3100. >> not everyone has been. >> yeah. we stuck with it you can go look in the baron's round table. we were at 3100 and we didn't move our view was, whatever he's saying, his mandate is not the cause of recession he's going to go on hold, which he did and instead of talking about tightening, which is what we're all talking about in the fall, we're going to go syncronous

ea easing how can it be late cycle when you're reaction el rating? the economy has come to a soft patch and by the summer will be reaction el rating we're going to get this china deal soon and that's been holding back the industrial material sector because everyone -- that's a very important element of the global economy. europe is a levered play on china. you're going to see all that start to move. so, you know, that will be the last straw for the bears from our point of view. that's why we're talking now about a possible melt-up i know it sounds crazy because, you know, we've had this sharp move all we've done is reachieve the old highs. we haven't done anything, actually and if you look at the situation from six months ago, everything is better. >> right and multiples, you just address where those could go if rates stay low and you also think that the

earnings recession was faux? maybe it was a real worry at some point but now earnings have stabilized >> they've stabilized. back in the fall finally earnings numbers were coming down from last year, first time in 12, 18 months now they've stabilized as we go through the earnings season, they're ticking higher. >> right. >> that doesn't happen late cycle. >> you combine that if you're not worried about multiples contracting, then -- >> well, okay. i mean, you know, honestly, what's going to happen next is the multiples are going to expand it always happens after a scary event like this. people start to say what was i worried about and why should i not pay more for stocks, not less in an environment where the fed is probably on hold for at least the rest of the year and if they do hike again it's going to be because the economy is roaring. >> right. >> but stocks are probably worth more all this worry about, you know, the end is nye is fading

when you come out of that, actually, multiples expand when was the last time you had a taxi driver give you a stock tip? >> uber driver. >> maybe uber drivers know more about stocks. >> they should steve, thank you priya, thank you. >> thanks. coming up, this morning's biggest stock movers, including a recent ipo getting crushed in early trading hitting new lows. later plenty from the fed as to how the markets reacted as to what the fed should do in the rest of 2019 you're watching cnbc.

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welcome back to "squawk box. time now for theexecutive edge iporeaching a new low, eventbrite, the stock tanked after a first quarter loss, worse than the nine cent loss analysts expected. guidances with well short of forecast as well shares trading out the latest levels since the company's ipo in september last year i don't know if this portends to

anything ton this new space of unicorns and decacorns but a lot of these companies aren't making money. >> shares fell 24% unfortunately this becoming a theme here. shares of another company, volkswagen, reported earning in line with expectations, confirmed its full year guidance and said they expected sales to increase 5%, addressing the threat of tariffs and european cars they said it would continue to hope for the best possible outcome. it would monitor prospect of changes with a sense of realism. >> oh, good. oh, good we're hoping. >> i like when they say. >> hope is not a strategy, folks. maker of wearable devices, better than the 22 cent loss analysts had expected. shares were up 2% free market. and the maker of mobile games

zynga beat expectations. empires and puzzles. mobile revenue 35% of the first quarter as the company transitions to making smart phone based games. based on the strong slate of offerings for the second half of the year, including a harry potter game and a "game of thrones" game. the stock is up 18%. coming up, which major bank is behind this mystery chart and why it's one of our next guest's top picks. >> let me guess. >> teases have gotten a little better what can you glean from that

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♪ ♪ joining us now with a couple of squawk picks all hovering near 52-week highs is ryan

payne. great to have you with us. >> great to be here. >> it's a mix of company let's start off with pepsi. >> yes. >> and some would argue that maybe the valuation relative to itself is pretty high at this point. >> well, i call it the ironic trade. pepsi, they don't make anything really healthy we talk about how millennials want healthier snacks and everything else. their quarter earnings were very good they beat estimates. you think about chips and unhealthy, drier market right now. that's where a lot of their growth is coming from and they're doing a lot of marketing there, too that trend will continue and it's a trend that no one really expected. >> what do you think is driving that trend towards crunchies and the ability for consumer staples companies in keep price firm >> it's hard to do that in this environment, too i think americans have a sweet tooth and it's something that gets discounted because we have this mirage that we like health

food and it's actually not true. >> it's the carbs. it's not necessarily sweet have you tried to do the carb free diet and when you need a snack and everything that you want is a snack you can't have there's one thing they tell you can have and have three of them never again. park rinds you do eventually break down, typically, don't you you need a snack you can't eat meat now it's not going to be meat. but beyond meat. have you thought of payne capital no payne no gain have you used that >> joe, that is the name of our radio show every saturday on wabc >> do you think that people are always going to have unhealthy chips and sodas and things >> anything in moderation, andrew. >> i think it's one of those things that has been unexpected. right? i think the world kind of

thought that in america we don't eat that way anymore it's untrue. the earnings speak to that and the fact that they'll continue to market to that means it's still a good buy in the short-term. >> kale chips. >> do you know what a quest bar is >> yeah. >> but quest is now making potato chips >> i got to try that then. are they potatoes. >> they're beyond potatoes. >> they're called protein chips and they taste like potato chips. they're really good. >> quest bar is like a snickers bar for millennials. >> stevia. >> is stevia really healthy? we don't know. >> this is a mystery chart jp morgan. >> jp morgan i came on the show last time i talked about jp morgan and had the inverted yield curve they still made money on their net interest margin. as the economy continues to pick up, interest rates will rise and that will be great for the stock

as well which is already doing well banks in general look good here. >> it has proven itself that it's really above the rest of its peers in terms of execution and the ability to navigate this flat yield curve environment >> yes and the yield curve -- it is flat, but remember interest rates were hiked four times last year and banks are a little slow to raise their rates. you know, the way the fed did, so there is still money in there and i do think again as the economy picks up this year, if you get more of a steep yield curve they'll make even more money on that and the price earnings is really attractive. >> why go pipelines as opposed to an emp company or an integrated >> because they're dominant in the space of actually owning the pipelines. more production from the u.s., we're dominating in that space now, they'll be the ones who have spare capacity. another 5.7 billion project coming up and i love the cash

flow, 5% yield, increase another 25% next year. and richard kinder who owns the company or owns a large portion of the company he just bought another 73 million shares since april. so a lot of inside buying really optimistic view of the company. >> ryan payne. coming up when we return on "squawk box," we'll talk with senator pat toomey and get his talks on yesterday's fed decision and what the fed should do from here. plus, take a look at shares of tesla this morning. you can see right there, they're down a little bit. we'll talk about the next debt offering moving this stock this morning. we're right back with two more big hours "ua b." ♪ofsqwkox

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there are burgers.

>> hamburgers? >> no cheeseburger i want a hot dog i want a milk shake. i want potato chips. >> you'll get nothing. >> will investors like beyond meat the company is set to make its market debut a preview of the investor's menu is coming up. and democrats shooting themselves in the foot when it comes election and salt tax. new analysis may have some on the left shaking their heads robert frank will join us with the numbers and debate as the second hour of "squawk box" begins right now ♪ >> announcer: live, from the beating heart of business, new york this is "squawk box." good morning welcome back to "squawk box" here on cnbc with joe kernen, andrew ross sorkin and melissa lee. becky is out today

u.s. equity futures pretty flat at this hour after a late session selloff in the dow after the fed comments were up about ten points this morning. the nasdaq is indicated up 16 and the s&p indicated up about 4. let's tell you what's making headlines at this hour takeover deal involving dow component 3m buying wound care technology company acelity 3m has scaled back its projected 2019 share buybacks and expects to buyback 1.5 billion in shares and previously expected to buy back $4 billion. the stock down marginally on that news. square shares are tumbling this morning they were given weaker than expected outlook for the year as deals with falling transaction volume the bank of england just out

with its latest statement following its regular policy meeting as expected the bank has left benchmark rates unchanged and lifted its growth forecast joe? among our stocks to watch, dunken brand reported quarterly profit of 67 cents a share, 5 cents above estimates and revenue beat forecasts as did a same store sales increase of 2.4% later this morning, david hoffmann will join "squawk on the street" at 10:00 a.m. eastern. earnings just out from under armor earning 5 cents a share for the quarter compared to expectations of break even the apparel maker raised its full year forecast stock is up almost 5%. and update on trade sources. announcement of u.s. trade deal with china is possible we're being told by next friday. china's vice premier will travel to washington for talks next week when that deal could be

signed the fed deciding to keep interest rates where they are, ignoring president trump's urging to lower rates. this is what fed chairman j. powell had to say about the economy. >> we have an economy about the expansion is continuing. growth is at a healthy level the labor market is strong we see job creation. we see wages moving up inflation is low which gives us the ability to be patient. we do expect it to move up and we want it to move up to 2%. so i see us on a good path for this year. >> joining us now senator pat toomey senator, thank you for being with us. good morning. >> good morning. thanks for having me. >> the markets were little bit disappointed with fed chair j. powell yesterday the s&p 500 closed lower by .75%. what your your take on what he said particularly about the economy and the inflation? >> his characterization of the economy and inflation are probably about right i probably differ a little bit with the chairman about -- he

worries a little bit more than i do, let's say, when inflation runs below 2%. that doesn't cause me to lose sleep. i don't think it's causing him to lose sleep either in fact, he points to what he thinks is a transitory issues that are keeping the inflation rate below 2%. i'm not sure they are as much transitory, but in any case, here is my take away, how far off could we possibly be the market is kind of repriced at its expectation we're not going to get any rate cut at all this year, so we had a modest selloff in the scheme of things. equities are nearly at all time highs. we just printed a 3.2 number for gdp growth in the first quarter. everything about this economy looks terrific i just tip my hat to the fed that has normalized rates from an unprecedented experiment and done so in a way that really hasn't done any damage so i feel good about where we are. >> you said that you are not sure whether or not the factors

pressuring inflation in the latest read were in fact, transitory i wonder what your take is on that the implication is if they aren't transitory and inflation remains where it is or sub 2% the fed theoretically may never move on rates. >> no. if it turns out they're not transitory and inflation goes lower, i think they probably will and i think that could be -- greg has an interesting column in today's "wall street journal" where he points to some of the sort of one-off events cell phone plans repricing or changing the mechanism of inflation in apparel it seems these one-off events always skewed in the same direction. i also think we don't really fully account for the improvement in products. when we look at inflation. if a cell phone comes out and does remarkably new things but cost the same, well, should we consider that no inflation or is that actually deflation?

so, we can have these debates. but again, i go back to a fundamental point. the economy is doing really, really well with interest rates where they are maybe they overdid it by a quarter of a percent in november i get that argument. look how it came roaring back. at most we're quibbling about very small differences. >> senator, wanted to ask you your thoughts about stephen moore's nomination, whether you would vote in favor of him joining the fed. >> let's see if there's an actual nomination. it has not yet occurred. my view is steve has been a terrific champion for growth, a terrific champion for supply side way of viewing the economy and the world. i think that kind of point of view would be a good departure from the way i think most folks at the fed think let's see how it proceeds. >> would you support his nomination

>> i would be inclined to support his nomination. >> there was some reporting yesterday that suggested that during a meeting of the senate gop caucus you suggested you did not think he would ultimately be nominated. >> i don't discuss private conversations. we have a conversation, i consider that a private conversation. >> how concerned are you about some of the comments and writings he's made related to women? >> so i think people ought to take a look at those i think they were intended to be tongue in cheek. i don't think he -- i don't think he's a misogynist or anything of the sort but, you know, people will evaluate that, if in fact, he's nominated. >> in terms of your own evaluation, that's not going to be part of your support for him? >> from what i have seen i don't think that's disqualifying for him. >> what do you make of the other economists out there who, i hate to say it, don't appear to have respect for mr. moore? >> well, look, i don't know too many economists who have always

gotten it right. steve moore, like many of us, myself included, thought that there was a very significant risk that the massive, unprecedented quantitative easing of the last decade was a big risk for inflation we were proven wrong inflation never really materialized on the other hand, the fed has been dead wrong on their gdp predictions for i don't know how long, consistent overestimating for growth underestimating more recently so i think a different point of view would be helpful. that's all. >> do you think there's an argument to be made that this would politicize the fed >> i spoke with steve and he assured me that he would be an independent voice, an independent fed governor i think that's very, very important. i have urged the president not to attack chairman powell. i do think it's important that the fed would remain independent. >> when you say you urged the chairman not to attack --

>> no, the president. >> the president not attack chairman powell, does that include the demand or the urging that the fed cut by one whole point? >> yeah. look, the president is entitled to his opinion about this. i don't share that view. i think, look, if we lower the fed fund's rate by a full percentage point, we would have a negative real rate on the fed funds with the economy at 3.2% and with the labor market as tight as it is, should we really have negative real short-term rates, i don't think so. but the president is entitled to his opinion. i think it's probably better for the president not to push too hard because it will unfortunately probably in some minds raise questions about the independence of the fed. i think they are independent right now. i want it to stay that way >> okay. senator, thank you so much for joining us we do appreciate it. >> thanks for having me. >> senator pat toomey. coming up, beyond meat beyond meat going public today i have an idea for this. the plant-based meat alternative pricing at $25 a share at the

top end of the range here is my idea, it's working. >> yeah. >> those cows for chick-fil-a, eat more chicken, they can't spell worth a damn, but why not hire those cows for this, for this thing you know what i mean do you remember how the verizon guy, sprint hired him away >> no, the cows and the chicken should work for beyond meat. >> exactly recruit the chicken. but get those cows, the guys with the signs like i said, they can't spell. but get those cows, eat this beyond -- right? you think -- >> you're really thinking. >> you know the verizon guy? suddenly he's got a job with sprint. >> the ceo is going to be around we should talk to him a little bit later. >> you're with me on this. >> i'm with you. >> you guys can find common ground on something. >> i tried i won't propose -- >> it's touching. >> any way it's the top end of the range. much more on the big ipo n'think sprint hired that guy.

cat get anyone else? >> straight ahead. stay tuned oh, wow. you two are going to have such a great trip. yeah, have fun! thanks to you, we will. aw, stop. this is why voya helps reach today's goals... ...all while helping you to and through retirement. um, you guys are just going for a week, right? yeah! that's right. can you help with these? oh... um, we're more of the plan, invest and protect kind of help... sorry, little paws, so. but have fun! send a postcard! voya. helping you to and through retirement.

at the open. i don't know if we're going to show the s&p board, but i'm sure it's following suit here nope, up two points. the nasdaq up by 11.

coming up, beyond meat getting ready to go public today. we'll get a taste of what the plant-based burger company has to offer investors before ordering up shares today "squawk box" will return in just a moment a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

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welcome back to "squawk box. beyond meat going to public today. here are some of the details of this hot ipo, food >> food. >> food. >> plant-based meat, andrew. and now we have a $1.5 billion alternative meat company beyond meat pricing shares for its ipo at $25 each. that's at the top end of the marketing range they had hiked earlier in the week and the company maked plant-based products that substitute for meat, pork and poultry and can be found in grocery stores and restaurants around the company i'm told the deal was very much in demand, 30 times the amount of stock being sold in the offering so why so in demand? sources tell me that investors were largely consumer and retail focussed and not used to a company like beyond meat which is doubling its revenue every year some investors also viewed it as a potential takeover target, which could help it trade at a premium one source said.

i heard ethan brown tried to avoid flying private to all the road show stops like we see most executive teams do in order to reduce his carbon footprint. guess what was served at all the investor meetings, the beyond burger so all the investors were able to try it. >> have you had one? >> i had one years ago. >> me too. it's not the veggie burger they reconstitute -- >> it's made to cook and look like beef. it bleeds like beef. >> it has a similarly bio chemical competition to meat. >> yeah. it's not a healthy burger by any means. it doesn't -- if you look at the nutrition content, it's not necessarily any healthier than eating red meat, but it is better for the planet because you're not raising all these cattle. >> it has no cholesterol. >> they're not farting. >> that's a separate issue. >> methane issue. >> the cows still.

>> they're alive. >> who isn't >> they're not burgers >> do you like my idea to hire the chick-fil-a cows for the advertising campaign >> i think that's brilliant, yeah but you could also hire chickens, too. >> we already said that. great minds. >> but the chickens, i don't know if -- they don't really have -- they can't carry signs. >> why they have wings. they have wings. >> if there's like a pack of them, they could work more as a team. >> do they get along >> do it that way. will it be spelled correctly >> i said that, too. they're awful spellers. >> awful i think the chickens will be better. >> all right as i said, i want eight-wing chickens i think is good >> people want wings >> they're so popular. >> you go beyond meat -- >> right

>> eight wings why not breed them -- >> good point. >> to have more. >> yeah. that sounds very healthy. >> might want not to see them before you eat them. let's go we have bigger fish to fry. >> fish or chicken >> are we frying chicken. >> beyond meat to fry. leslie, thank you. leslie picker. tesla seeking to raise new capital. tesla filed for a mix shelf offering shelf offerings is a dead offering that may hit the market some undetermined future points. coming up, what is beyond the earnings beats this quarter. we have a phoner on tesla, colin rush will join us here a tesla analyst. colin, great to have you with us. >> good morning. thanks for squeezing me in. >> how much do you want tesla to raise? >> you know, as much as they need to pay for this china factory. that's the big concern here is what the cap x number really looks like this year and how

they fund that given the working capital needs. obviously they used about a billion dollars in working capital in the first quarter as they had lower volumes and some of the positive working capital dynamic unwound for them somewhere a billion and two billion. >> how should equity investors take a look at this? >> you know, this is really going to put a near term bottom in the stock if they do finalize the raise. this has been one of the major overhangs over the last couple weeks with the stock the autonomy bank had some impressive targets the reality of that, we're all waiting to see and then really the real story for tesla is how it looks in the second half this year. and we think there's some meaningful upside to that should they be able to keep prices at elevated levels, which they have been able to do pretty successfully on a historic basis, but this raise has been an overhang. the potential to raise capital. >> what's your take on the decision to go mixed shelf, go

to the debt market as opposed to convertible or straight up equity raise. >> we don't know exactly what they're going to do here we have this shelf out this morning. we're waiting for a lot more detail i think the structure of this historically they looked at convertible notes and obviously just retired some meaningful notes recently but those markets would likely be open to them and would allow them to raise capital bit of a premium from the equity price right here. >> colin, thanks for phoning great to have you here. >> no. what's the impossible burger, sorken >> we'll let you go, colin thanks. >> i had both. i also had -- >> i thought the impossible burger is pretty good. >> they have it at burger king and other restaurants. >> they do are these -- i don't remember which i had. do you know for sure >> i don't know what you've had. i know what i've had. >> how is a beyond meat plant burger >> there were two versions of them. >> are they both similar idea, both trying to constitute -- >> they are. plant-based. >> you know, my viewers are telling me -- >> your viewers are telling you.

>> that the impossible burger they like but they were not so crazy about -- >> really? >> i'm not sure i had. it was okay i had. it was kind of like meat. >> would you choose it over meat >> me, no. i would not. i'm fine with the cows i like cows. i don't like cows when they get mad. then there's a problem coming up, what's behind the earnings beat this quarter we have a look at the winners, losers and what you need to watch. then democrats find themselves stuck between a rock and a salt place while they try to tax the rich, the middle class see no gains. we break down somef othe analysis and the bills floating in washington and what it could mean for the 2020 elections. kevin kevin kevin kevin kevin kevin kevin kevin kevin kevin trusted advice for life.

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♪ welcome back to "squawk box. futures right now have turned negative on the dow down about 15 points right now as you can see. the nasdaq, though, remains in positive territory up about 7 and the s&p is in the green but by the slimmest of margins up a .22, .22. a quick programming note, be sure to catch citi ceo michael corbat at 9:00 a.m. eastern. let's talk about facebook because the facebook negotiating a possible settlement to create an independent privacy oversight committee. according to report from

politico as part of that it would require facebook to place privacy minded executives at the company's highest levels now, as part of that, ceo mark zuckerberg would take on the role of designated compliance officer make him personally accountable for facebook's handling of privacy issues those changes would reportedly come in addition to what is being called a record-setting fine of 3 to $5 billion, of course, the question is, by putting mark zuckerberg in charge of this type of compliance, does that put him -- is that a better option than having a separate sort of ethics or compliance officer that's -- doesn't necessarily have a fiduciary duty to the share holder does that create a conflict for him or does it suggest that having the top guy and the founder of the company in charge of this make him ultimately accountable? which would you prefer >> they're doing what regulators probably want to see that he takes personal ownership of this committee and is responsible for it but i agree with you, i think it

should be somebody independent with no -- >> it may very well if they have this independent committee that that committee can report back to him and even on him if they felt -- but maybe not. i don't know this is where it gets tricky >> take a look at the stock. the stock has really come back from the privacy scandal and with the last quarter it's done pretty well. let's get to don chu now with today's market movers good morning. >> good morning, melissa we'll start our movers off with shares of dow dupont down on thin premarket trading the agricultural sciences and specialty products company posted earnings in line with estimates and sales missed expectations dupont was hurt by the recent floods in the midwest and slow-down in the auto and smart phone market interesting commentary also shares of dunken brands are up on thinger volume as well the quick service shifting its

image beyond just donuts posted profits and sales both better than consensus estimates sales growth at existing restaurant locations, the highest level in four years. dunken was help aid long for more customers opting for frozen beverages and we will end with shares of under armour, shares of that athletic apparel company up about 4% or more with a voting stock that class a share range trading 18,000 shares premarket. profits and sales both came in better than expected and raised its full year forecast as well and helped along by better results an international sales in its operations and those shares up 5% back over to you. >> commentary, dom, on the international sales and where they saw that sort of pick up? >> we're seeing some more of that we're going to dig into it more, but it offset some of the slow down they saw in the north american markets which is interesting only because that north american market is really key for under armour but as long as it was under those international sales are

coming in just a little better, it's starting to offset things a little more. underarmour has been on a come back of sorts. we'll see if that can continue even though the north american market may not be doing as well as some of those global marks out there, melissa. >> dom, thank you. dom chu. earnings expectations have turned slightly positive despite fears of a earnings recession though less positive than earlier that month mike san toely, what are you watching >> i'm watching the way the market stays in balance near the highs when we have all these big supposed bell weather earnings reports. two days ago the big miss by alphabet yesterday apple, big pop on earnings no coat tails really the rest of the market stayed more or less flattish until we got the fed reaction we're at the point of earnings season where the vast majority of market value already reported investors say, look, we got this we're a third of the way into the second quarter so, all is good. we came into this earning season

feeling like the first quarter estimates were too low we were going to give a pass to the overall market and i think that's happened. just watching right now, though, the way the market is also rethinking the fed always happens, right, the day after the fed. you have a little bit of a overdramatic reaction to the press conference and now we're bouncing. >> in terms of the forecasts, since we have gotten most of the market cap out in terms of earnings the forecasts for the year come down overall or gone up? >> they have come down into the reporting season. >> right. >> second quarter has not moved very much. so guidance has still been slightly conservative or down beat i hear people kind of playing both sides of the second quarter, saying, well, look, the full year still seems like a challenge. still seems back end loaded. on the other hand, maybe second quarter expectations will still be very low, the way first quarter were so therefore you have kind of an easy to beat scenario not sure how that works. i don't think that there's a lot of pins and needles waiting to see if ultimately we come in at

minus half a percent or plus 2%. i think in general, flattish earnings near highs is okay for the moment much more looking at the way the other elements of what the market is up to is sentiment is looking like it's getting a little bit comfortable and maybe in pockets a little complacent without really having any effect on the market except to slow it down right now. then look at look at the leadership groups that might be wobbling here. all of which is to say we could be pausing in the markets. >> thank you, mike. >> see you. coming up, a big debate this morning. democrats launching an anti- salt campaign, but will it be the right message for voters in 2020 got some new analysis and it may suggest no robert frank will be here to explain and debate the issue. then in the next hour, uber investor and venture capitalist mitchell green will be or ryve special guest and talk about how much uber is really worth. back in a moment

♪ look at the white house. we have some breaking news for you this morning a second s.e.c. filing now regarding tesla just hitting the tape the filing says that ceo elon musk indicated his, quote,

preliminary interest in buying up to 41,896 tesla shares of the auto maker earlier, tesla filed for a so-called shelf offering that's a registration of a future debt offering and undetermined date. of course, this would be a show of confidence, if you will, by elon musk in the shares of tesla which, of course, have been bouncing around all over the place. and we were just discussing he also, of course, has been living on margin for quite some time. he doesn't get a lot of cash so, space x i believe has been quite profitable enterprise for him and the company, but we debated his own cash needs >> uh-huh. tesla shares up 3% they just hit 52-week low last week, april 26th, i believe is the date, 231 and change was the level. so it bounced off of that. you know a lot of technical analysts were saying you clear

below that level about 230 or so and go down to 150 this has really put a floor, at least for now, under the stock as we continue to get some more details here again, if we look at other inside buys in the past from other companies, sometimes they mark a bottom. jamie diamond did that with jp morgan stock steve wynn did that with wynn shares i don't know if you put elon musk in that sam category. >> elon has bought at other levels and higher levels over time how do you think about that? tesla is sort of different situation. >> animal. >> different test case i don't know i don't know what to think >> you're a skeptic. >> i'm not a skeptic i think tesla is a great company. i think what they're doing is great. i'm skeptical of perhaps some of the economics right now. >> uh-huh. >> it's hard to think otherwise, right? >> yep shares up 3.8% here on this

news caterpillar just announcing dividend increase. increasing by 20% to 1.03 a share. those shares are higher by three quarter percent premarket. >> wonder what the yield is actually it's 2.5% that's what you would want to know 2.5% it will be 20% higher than that. so it's not really a big yield stock. starbucks is recalling its bodum coffee press it breaks and causing puncture wounds and cuts. if you have one, call the hot line number available on starbucks' website returns are not accepted in stores, by the way some returns say if every press is returned the chain could lose as much as 5.3 million there's people that still do this, huh? >> press coffee, sure. >> even with the keurig. fast, easy. >> the packaging. >> you can have an espresso machine now with starbucks

capsules. >> all those capsules, though, so much waste. >> i know. we're in an espresso house. >> if you just press it. >> balance that with my impossible burger. >> what's that called? >> you saw george clooney marketing those stupid espresso. what's the name of it? that fufu -- i saw him clooney had something to do with that. >> with espresso >> i think so. wasn't it him? >> i don't know. we had an espresso machine for years. >> there's one called -- i can't remember i'm going to look. what is it i don't know >> okay. let's talk to robert frank. >> democrats launching an anti-salt campaign, but will it be -- it's not what you think. we're talking about taxes here will it be the right message for voters in middle class because we don't whether salt is good or bad at this point. that you ingest. robert frank joins us now. >> it's a bizarreo world where

the democrats are now supporting -- this has turned everything upside down. >> do they have some donors perhaps in the high salt stakes? >> are you saying that the wealthy influence government --? >> hard to imagine i can't believe that as part of their efforts to roll back the new salt limits democrats are now in the rather uncomfortable position of fighting for tax cuts on the wealthy. bills being introduced by democrats in the house and the senate would lower taxes on the highest earners, lower revenues and create little or zero benefits for the middle class. representative lauren underwood have a bill to increase the salt limits to 10,000 to 15,000 for single filers and 30k for joint filers it would also index that cap to inflation. underwood says it, would, eleavuate this burden for middle class families in our community. but analysis by the tax policy center found that middle earners would see zero benefits from the change the biggest gains would go to the top 5% would see an 82 basis

point increase in after tax income the reason, of course, the biggest earners take the biggest deductions bill pas cell and bob menendez would eliminate the cap entirely but to offset raise the top federal tax rate back to 39.6 from the current 37% the tax foundation said that plan would reduce revenue by $500 billion over ten years and those in the top 10% would see the biggest gains. of course one choice the democrats have here is they can just wait since the cap and all these other parts of the tax code expire in 2026. >> okay. >> amazing situation here. >> it is. >> because the administration really did put everybody in a bind this whole situation puts everybody in a box in terms of what they want to fight for. you want to fight for your state. you think you want to fight for your state. >> what's your income to get to 10,000 >> so it's well over 200,000 because again people say, well, if there's some property taxes in new jersey that are more than

10,000 but you remember, you deduct at your tax rate. so it's like a third of that amount >> what about to get 30,000 cap? you're talking really a lot. >> then -- >> a million dollars >> probably. well, let's see -- probably somewhere over 500k, well over 500k depending on how expensive your house is. >> let's bring in our guest. maddy dupler seth handlin your heart is not in this dude i read your notes. you know what this is. can you make a case for this that's not based on donors and liberal states of new york and new jersey that need -- that you're just trying to curry favor with as a democrat isn't that all this is >> look, i think there's good reason to think that parts of the tax bill was politically motivated. when they were looking for ways to pay for the corporate tax cuts and the estate tax cuts and the other tax cuts benefits

extremely rich people, they singled out blue states or hunted for offsets that disproportionately affected people in blue states. there's no doubt that's where i think democrats are coming from. i think it's understandable. however, i do think that fully repealing the cap on the salt deduction actually doubles down on the worst flaws of the tax bill, that it drains revenue and that it's skewed to people with the highest incomes. so i think there really need to be very targeted in how they approach this issue. >> maddy, you have different viewpoint on this or do you agree more than you disagree with seth? >> i agree on the mechanics there which is that this is a tax benefit that benefits the wealthy, but i would say that it's less politically motivated and this is actually the right tax policy the salt deduction obscures bad tax and spending policies at the state level and more to the upper side of the income scale that's because, of course, those higher income earners get greater relief from being able to deduct their state and local

taxes from the federal ledger. so i think getting rid of the salt deduction entirely is the right way to go and certainly having a cap is a good start. >> mattie, there's hypocrisy on both sides the democrats are fighting and republicans say well these states just need to cut their budgets and cut spending but the federal government feeds at the trough of these states. new york puts in 35 billion more a year than they get back. new jersey 20 billion. florida held up as this model of fiscal responsibility gets 15 billion more back a year from the federal government so, you could argue, the states need to cut taxes but it's the federal government spending that relies on these state's high taxes. >> robert, i don't disagree with you if we could move our tax policy allows for less redistribution from the federal level down to the states that would be good for taxpayers at the state level as well. but if you look at what's happening with the amt and the salt deduction, moving backwards on the salt deduction, it is

laughable to say that this is a middle class tax cut because we know that high income earners use it but also because the tax cut and jobs act and as a result of diminishing the amt 5 million people who weren't benefitting from the amt before who are those high income earners are people who are now -- who weren't benefits from salt before are now able to claim that salt deduction. if you're increasing that cap, their salt deduction goes 0 to $30,000. >> what do you think is the long-term implication for the states themselves but for the federal coughers given they think you will have a lot of movement in terms of where people ultimately -- i think people are more mobile especially at the high end and what do you think that ultimately portends for the federal coughers >> well, i don't know, andrew. if your argument is that people should be entrapped in states with bad tax policy so the federal coughers could grow, i would disagree that's sound tax policy it is good to have states

exposed more that requires states to really scrutinize whether or not the tax decisions they're making are best for the taxpayers i would argue that's a win. >> seth, in general, the democrats give very little credit to the tax reform plan for really anything. do you think there's a total disconnect or no relationship whatsoever to the recent numbers we have seen in the economy to helping corporations that are now more competitive globally or how about deregulation is any of that helping with the jobs numbers or the gdp numbers or the new highs in the stock market do you really want to run against that in 2020 >> i mean, i think people understand we're in the ninth or tenth year of recovery that's continued along the same trajectory. >> really? the gdp numbers don't confirm that you never got above 1.9%. >> i think you're right. when it comes to gdp, there's no doubt that both the tax cut last

year and the very big increase in both defense and nondefense spending injected some stimulus into the economy and gdp was probably bigger in 2018 as a result however, we're already seeing that -- or at least projected to see that decline precipitously which is exactly what the critics said the promised benefits of this bill remember, this bill was sold on -- >> they said it was going to happen in the first quarter, too. i've had people tell me the first quarter was going to be below 1% and it was 3.2% you can't take a victory lap that this is going to peter out until it peters out, seth. >> that's fair but we can look at what is actually happening and what was predicted to happen. this tax bill was sold on the trickle down premise of a boom in business investment that simply hasn't panned out you know, we're seeing consumption up, but the boom in business investment that was supposed to justify all these corporate tax cuts and make the bill pay for itself in the long run just hasn't happened so what clearly has happened is that the deficit has increased

corporate tax revenues have fallen off the table and that's ultimately going to leave us in a bigger hole and of course, you know, as the critics predicted the tax cuts overwhelmingly went to people at the top. >> you must be ready for those talking points because i heard them at least 1,000 times. delivered the same way >> they're accurate. >> listen, the business investment that was above expectations but you also have a wage story that i think belies this argument there's no investment happening more over, you saw yesterday from powell, two of the criteria he said showed there's strength in fact economy is both consumer confidence but also business investment he continues to see that as being strong in the american economy. so i think you're right, joe, to say that pessimism now about future business investment is not an indictment of the tax plan at all and i think that wage story is super important. we'll see more job numbers tomorrow. >> do you think the tax plan pays for itself? >> i have never argued the tax plan pays for itself i thought it should be revenue

nuch to begin with. >> the point is i can make things look good if i hand you money, right >> you can also make -- >> life can look much better. >> you handed 10 trillion to obama policies that made nothing happen, andrew it doesn't always look good. thank you. go ahead, robert. >> i just had one more question for seth you know, this idea that andrew mentioned before that there are wealthy people moving because of this change. moody just put out a report -- and andrew cuomo the governor of new york now sounds like art laugher when they're talking about, oh, these high taxes are chasing people out of these states moody put out a report saying there's no evidence of that. so when you look at what the democrats are pushing for here and they are all saying the wealthy will move unless we do something. is there any hard evidence that that's happening >> no. there's no hard evidence that it's happened in the last year and then also when you look back over time there's been plenty of studies that basically suggest that the tax flight is

essentially a myth it's far overblown only a tiny, tiny percentage of people move states in general every year. >> right. >> we have had some high net worth people who left new york, though. >> that's very sporadic and very anecdotal. broadly people who move tend to be the lower income people who can't afford to live there anymore. so that's why there's a lot of hypocrisy on the parts of democrats saying the reason we need to change this is because the wealthy are moving and yet despite some signs in the real estate market, we haven't seen that. >> you did stories about the state of connecticut how do you explain connecticut then >> connecticut is a lot of companies moving and again it's a small decrease in population but the makeup of that population is largely middle and lower income as opposed to yes, there are three or four high profile billionaires who left and that does affect the top line. >> what about all the folks we know are counting their days in new york city, 183 days and they fly in and fly out they fly in and fly out.

>> i have no doubt that anecdotally there are people now considering or doing it it just hasn't shown up. >> what would happen in the state of new york said we're not playing this 183 days game anymore. we're going to play 120 day game if you low ter number -- it would make the decision to live here or not or try to live in florida and try to come in and out a lot more complicated would it actually anger people so much they would never come to new york and hurt business or would people say, you know what, i can't make this little tax dance work >> i think they would come here less often to do business and spend money. >> mattie and seth, thanks we have a jobs number tomorrow we'll see. maybe it will be strong. maybe not some wages i don't know things seem like they're like percolating in this economy, but we'll see. any way, thank you both. andrew, i'm surprised you don't remember nesspresso. george clooney is the global

ambassador for nespresso there was a "game of thrones" ad you saw that clooney is doing this i want this. i have an nespresso but you didn't remember it was george clooney who got you to make that purchase >> he's been with them since 2012 i'm trying to think when we would have got one we had one since 2010. 2009. >> matt damon ocean l11 type stars. >> so you have an nespresso. coming up, when we return, tesla on the move after an s.e.c. filing that shows elon musk may buy nearly 42,000 shares we'll discuss that story in depth. plus, early uber investor mitchell green joins us to discuss the company's upcoming

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♪ the fed stands pat no rate moves this time around but wall street thinks it heard

something new from chairman j. powell. how much would you pay for a share of uber? the company making its way towards a potentially block buster ipo, but are its financials really comparable to anything else in the street? can facebook find its silver bullet on privacy in reports of new plans in the works to protect user data. is it too little too late? the final hour of "squawk box" begins right now ♪ >> announcer: live from the most powerful city in the world, new york this is "squawk box. good morning and welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square i'm joe kerning and andrew ross sorkin and melissa lee becky is off today dow down 10 points the s&p up over a point, now exactly a point.

treasury yields have spiked -- well, they're below 250 yesterday. got up to 255 at one point they're 2.516 this morning let's talk tesla right now because tesla shares are on the rise after detailing some capital raising plans. the auto maker filing to offer common stock shares 2.7 million. elon musk expressing interest of purchasing 42,000 for $10 million. tesla also filled in some details from an earlier filing saying it would offer 41.35 billion in convertible debt. all in all, tesla would raise $2.3 billion from these actions. jean munser will join us later this hour to discuss tesla's latest moves and try to break down what all of this means and that stock moving 5% higher this morning over what has been a wild ride for that stock. dominic chu has a look at some of the morning's biggest movers and how we got here in

this current market rally. hey, dom. >> as we talk about the movers, tesla playing to that factor, but if you look at the s&p 500, 17% year to date gains, every single sector in the s&p 500 is in the green so far. and technology discretionary industrials, the most cyclical sectors are doing the best mean time, utilities, materials, consumer staples doing some of the worst. in terms of stocks, take a look at some of these moves because on a year to date basis we have seen some massive surges in share. check out what happened with kper rox and cody and petroleum on that takeover battle that's brewing over them. those shares up huge so far this year, up more than 50 to 60% at this point, probably 60% plus for these names. but it's not those stocks that have really been powering the s&p. if you take a look at the meg cap names, the three biggest stocks in the s&p 500, of course we're talking microsoft at this point, we're talking apple and we're talking amazon those stocks are all up huge

during this course of this year. so, if you look at the market cap weighted s&p 500, yes, it's a great move that xerox is up 60 plus and chipotle is up in that 60% range but depends on the large and megacap technology communication services and retail stocks have gotten us in this rally to the record highs we now sit at. melissa, back over to you. >> thank you, dom. stocks pulled back from all-time highs after the fed left rates unchanged making the central banks position on inflation clear. they see recent weaker inflation ratings adds transitory. here is what he said in response to a question. >> the committee would be concerned if inflation was running persistently it carries the sense of something that's not transient, something will sustain over a period of time in this case as we look at these readings in the first quarter for core, we do see good reasons to think that some or all of the unexpected decrease may wind up being transient. if we did see a persistent

inflation running persistently below, that's something the committee would be concerned about. and something that we would take into account in setting policy the fed held interest rates steady, siting a solid rate of economic growth and low unemployment gentlemen, good morning to you both joe, i'll start with you the feds on the sidelines clearly now. it's going to be an earnings story. that's not going to pick up until the back half. >> that's right. i think the markets as a result will have a tough time in the second half of 2019 making any meaningful headway you think about the 17% appreciation we have seen year to date, that's largely driven by central bank policy, the shift back to dovish or easing conditions but the question becomes what's next and with near flat earnings growth, this quarter and probably next quarter, i don't think that's good enough for markets. we have valuations that are rich from historical perspectives and we have some cracks in the

earnings cycle where we're seeing profit margins coming under pressure and the number of companies that have missed their earnings is actually on the increase, it's higher than it was in the third and fourth quarters of 2018 so all that at a time when earnings growth is basically slowed to a halt it means that markets will be at risk for at least a pullback in the second half of the year. >> powell made it clear there was no impetus to move rates up or down if he opened the door to a 25 basis point cut in december which the markets anticipated would your view of the markets be a little more constructive? >> well, certainly that would help valuations because it means your interest rates would go lower so when you're valuing companies it comes down to profits and interest rates, but the fed might actually begin easing by default and that is because number one, as they end their balance sheet reduction, they'll have all these bonds maturing on a monthly basis and reinvest those on the short end of the curve and secondly as they talk more about this idea of inflation targeting, it think it pushes the ten-year treasury

yield up higher and that will be good for equity markets. in the short-term, it will be this tug of war between really dovish central bank policy but an earnings problem. >> you're shifting lower on u.s. equities right now why? >> yeah. we wouldn't say u.s. equities are overvalued or richly valued. we would say they're full to fairly valued comed from being understood valued at the start of the year back to a long-term average. we would agree you need to see something now drive equity higher and we're not going to rely on valuations if the fed did cut, that would be raise valuations but we don't see the impetus for that they'll be on hold for significant period of time so we think the volatility is more a second quarter thing and you start getting some positive impetus in the second half of the year when the stimulus oversees monetary policy and significant stimulus by chinese policymakers start to play into the global system and that can be the next leg higher in the meantime, we would rather go overseas where we cansee better valuations and short-term catalysts for earnings growth

before we see it in the united states. >> so do you go china or do you go derivative and china and that would be europe? >> we're doing direct investment in china. >> in companies? >> into the a-shares and into greater china. chinese equity markets the asian markets sold off 25% last year, seen 15 to 20% bounce this year but it's still below long-term fair value and it's going to take six to nine months for the stimulus really to kick in in china you're starting to see positive news we think we'll get solid evidence of that story in the second half of the year and then you'll benefit from that next leg higher in chinese stocks. >> how do you position, joe, for earnings that will come back later in the year? >> it's a good question. i think we will see volatility the good news it's not the end of the bull market we have an economic cycle that will go on for a lot longer than most people think which means we have an opportunity to see corporate profits recover. in an average calendar year, the market will fall 13%

so who knows if we're going to get that correction or not, but the data tells you it seems likely so, if we do get that type of volatility or pause, the way to position is cyclicals, energy, industrials, materials, discretionary, and even technology because these are the most globally exposed. they're the most -- the highest exposure to the underlying economic environments. so i think if we do get that shorter term weakness, i would buy into those more cyclical sectors. i think they're more attractively valued than defensive sectors. so i think that would be the play but the bottom line is even if we do pause in equity markets for the second half of 2019, it's not the end of the bull market because i think the economic runway is still a lot longer than people think so i think we will have an opportunity to see profits recover. >> not the end of the bull market but in terms of risk/reward to the upside or downside, is there more risk to the downside at that point >> well, we have to grow into valuations at this point because what we're seeing is revenues are roughly still growing at

about the same level as 2018 but profits are coming down. it tells you that companies are having problems dealing with higher wages, they're having other sort of problems that are causing the sort of margins to roll over and eps growth to slow i think we will need time to work it out but the underlying economic environment will be healthy. it will be good for corporations over the long-term so i think we just need to grow into a market that's trading at about 17.5 times forward earnings versus historic average of about 15.5. >> cnbc has reported that perhaps there will be a china trade deal as early as next friday should that be the case, eric, does that change your view on u.s. equities at all >> that's largely priced into the u.s. equity market china gets a little bit of a pop because it has kind of retraced over the last month or so. i would say that the other way to bolster your risky assets position is to -- because we don't want to be adding equity exposure in the u.s. in the short-term, but there are a lot of o opportunities with the fed

basically on hold for the foreseeable future just to add carry in portfolio we're seeing that as a really interesting opportunity when there's not as much upside with equity risk as has been pointed out in the short-term. so adding exposure in emd debt where you can pick up 6 to 6.25% yield, pick up exposure to some undervalued currencies and shifting from high yield into bank loans, get 5, 6% in yield in an environment where equities are fully valued that's a nice way to pick up some income to be able to invest once we get some additional volatility. >> within a full u.s. allocation, what does that consistent of sector wise? >> it's more interesting when we disagree, but i agree, we're pivoting -- aside from in the short-term trying to be positioned for volatility, so we're actually selling puts on the s&p 500 to capture kind of attractive premium and protect some of the downside we are shifting towards

cyclicals. we think that's the next leg higher as this cycle extends >> so cautious but let's be in cyclicals. >> we want to take advantage of what we do expect to be short-term volatility to add to exposures. we haven't seen as much volat e volatility as we expect this year it's been straight up. >> thank you, both, eric and joe. >> thank you. >> you're welcome. coming up, fixing facebook's lapses after some costly mis-steps, we're seeing fresh reports of big potential privacy changes at the top of the company we'll explain and talk about what facebook needs to do to protect the nearly third of the world's population that uses its platform each month. i'm in the two thirds. i feel good about that as we head to break, take a look at shares of tesla after its detailed capital raising plans, stay tuned. you're watching "squawk box" on cnbc

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welcome back to "squawk box. the futures right now indicated down 23. these are some of the worst

levels we have seen, although, who knows. that's not a lot obviously down 22 now on the dow up 8 on the nasdaq the s&p is flat down just barely just fractionally. let's talk facebook right now because as facebook struggles to beat back negative headlines on privacy it faces a new multibillion dollar fine the company is reportedly creating or seeking to create a sub committee to safeguard user's data "the new york times" says part of the privacy committee would come in in addition to an external overseer and head of compliance officer potentially ceo mark zuckerberg himself being the head of compliance, which raises all sorts of other questions. whether this is finally the silver bullet that facebook needs to tackle some of the privacy problems and regulatory issues i'm going to go to julia because you woke up early to be with us, very early

will this change the game? is the idea of mark zuckerberg being the head of compliance, is that something that you think is going to go over and win regulators over in washington? >> well, look, shouldn't mark zuckerberg be in charge of compliance any ways? he controls all the voting shares of this company as ceo and chairman what we're seeing here, andrew, the reason the ceo is going to fine facebook as much as $5 billion because they had an agreement with facebook back in 2011 to try to enforce privacy, to sort of punish facebook for failing to comply, to protect with their efforts to protect consumer privacy and it didn't work what they did in 2011 didn't work now they're trying to take more dramatic measures to make sure it actually makes a difference i absolutely think it's in the best interest of the fdc to go big on this and also from facebook's perspective after the news came out about that $5 billion fine a lot of critics said that's chump change for

them it doesn't matter. and they really need to do something more dramatic to show they're really going to change when it comes to -- >> let me ask you this do you refer to have an independent om budman that's funded by facebook but maybe in some kind of escrow account, unfiring hubie mark zuckerberg -- >> that kind of structural change om budsman sort of funded thing, that doesn't always work in the long run. it's not a natural part of the mechanism. it's sort of this weird outlying thing that doesn't always have the right sort of authority to sort of enact change i think julia is right i think the issue is the fdc needs to go big and the fine big or small however you want to see it the bigger issue is the structural issue you can keep fining them as they go forward if they go in violation from the agreement way back when but it's how they operate is the big deal. >> what about putting regulators

inside the company in the banking world, in the banking world, after the financial crisis, even before the financial crisis, there are people from the s.e.c. and elsewhere that literally live inside the bank. >> and then at a certain period that, does that continue on, it goes away. that's the point. >> no, but this is the question. >> if there is the idea that there should be a data regulator the way that there's monetary and currency regulators, that's something maybe. and that would cut across not just facebook but google and snapchat and everything else on the internet i think that could be a sweeping and interesting way of going about it of course, whether it's political wolf or something like that is much, much harder. that is the solution that this weird interim stuff is trying to hint at without it being the actual solution. >> let's pivot topics. another big media topic we want to get to this morning is cbs set to report its earnings after the bell today coming as the company is still exploring that merger with viacom

we have been waiting on that merger for a very long time. >> yeah, sherry redstone controls both companies. she indicated in the past she wants a merger sources tell me she still wants that to happen. >> isn't that clearly the indication in terms of what's going on at management with cbs and viacom >> they extended contract for another six months counterintuitivety tells you he's not going to get that job at this point, if he doesn't get it, then they're looking for someone else. >> it's not that there's a new ceo coming but that there's a merger coming. >> well, yes look, they had a deadline said they were going to find a new permanent ceo, they got rid of concerns about that immediate deadline, but it's interesting because bob was just at the conference here in l.a. and said, look, there have been these reports before this is the third time we had these wave of reports that were in talks but i think something is very different now, andrew. that's the fact that cbs and

viacom are both sub scale compared to all the other media players or some of their old rivals now that you have disney fox merge and at&t and time warner and not to mention our own parent company nbc universal part of comcast. things have changed. there is more pressure for scale and what i've been hearing from sources is that backish is the guy who would lead the combined company and that's why it's been so hard for them to bring an outside ceo to cbs. >> wild card question, is there any chance any world rather than merge these two companies that -- >> they're sold? >> one or both are sold separately >> well, that has been something i heard is an option and that there actually might be more value for each respective company to do it that way, but i also heard that sherry redstone would like to merge the companies. ed, what have you heard? >> yeah. i heard the same thing i think if anything there is this idea that she wants to get even bigger and bigger because not just the landscape as you pointed out correctly but it's

her time to really sort of step into the shoes her father's shoes and run it the way she wanted to. >> what does a combined company get you? >> fundamentally that is the bigger issue. >> you compare to the giants that julia outlined and still looks like a tiny speck. >> if you're trying to bulk up on networks at a time when paid tv generally is flat or declining, what are you really getting out of that? either viacom is the more challenged company in that respect and neither company has shown real strategies around digital distribution direct to consumer, bob iger took a big step with disney. we need to go direct to consumer that's a pretty bold move. i don't see cbs or viacom going deep on either side. >> do you think we'll hear anything this afternoon on any of this? >> i don't think we'll hear anything. >> no. >> i don't think we'll hear anything on the emergenmerger we don't have to worry about the succession issue

we just extended cbs said it has taken its own strategy when it comes to direct to consumer by going directly with these more a la carte product which is is showtime as well as cbs all access and those have been growing fast but one might argue those are the types of products that might face the biggest threat from a disney plus and all the other players coming to market. >> don't those products get layered on top of hulu >> they could be cbs all access is sold through -- you could buy it through hulu or amazon or apple tv the forthcoming apple tv. that's a fair thing to say at the same time you're right, if i'm a consumer, i'm a household and going to buy into disney service and have netflix and maybe hulu, do i drop cbs or buy cbs at this point. it makes it that much more difficult going forward. >> only so many products that people will subscribe to. >> exactly. >> we'll leave the conversation there. julia, thank you for waking up early. ed, thank you for being here. >> you woke up early. >> i've done it before, right? come on. coming up, a trio of

important economic reports are on the way at the bottom of the hour we'll be watching closely along with the market. ♪ >> announcer: tomorrow, "squawk box" has your ticket to omaha. we'll take you live to the berkshire hathaway annual shareholder meeting, also known adds woodstock for capitalists. we'll show you what it's like to be there with tens of thousands of investors and bring you interviews with buft watchers, berkshire board mbmeers and coverage starts tomorrow at 6:00 a.m. eastern.

♪ welcome back to "squawk box. the futures right now indicated now dow down 30. the nasdaq pairing some of its gains down 5 and change. and the s&p 500 is now down a point. vacillating between just down a little over and under a point. among today's big movers to talk about, earnings are out from underarmour, came in the last hour the company earned 5 cents a share for the quarter compared to expectations of a break even performance. and revenue beat the apparel maker also raised its full-year forecast we're going to go back to break, andrew then we have --

when we come back, we have a lot to talk about, key economic data of the morning. we're awaiting the latest read on jobless claims and productivity those out in a couple minutes. still to come, tesla is out with new capital raising plans including a big potential share purchase from elon musk. is he calling the bottom here? gene munser wille re i bhen a couple minutes to break it down. back in a moment we're carvana, the company who invented

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♪ welcome back to "squawk box. we're just seconds away. it's happening the read on jobless claims rick >> yes, 230,000, no change from last week. 230 unrevised f you recall it popped a bit i thought maybe there was some holiday issues going on there with seasonality, but it looks like it's sticking at 230 and continuing claims move from 1.654 to 1.67. so a bit higher. hey, first quarter preliminary productivity, the secret sauce, up 3.6%. that is a beat we're looking for a number slightly north of 2. we did lose .6 on our last look,

1.9 turns into 1.3 unit labor costs half of what we were expecting matter of fact more than half of less than we were expecting. boy, that's got a lot of negatives. down .9 of 1%. down .9 of 1%. now that really plays into all this notion of pricing and issues along those lines from yesterday's fed meeting. we did see a revision from 2 to 2.5% that 3.6 is the healthiest pace going back to september of 2014, '14. we she yields right about where they were yesterday except for a period right after the announcement 2:00 p.m. eastern when it started to go down hit 245 and today the two-year hit 220, 221 intraday yesterday. so there was a big rebound, a big kind of reshaping of the yield curve from intraday extremes, but at the end of the session, if you just connected the dots and forgot some of the intraday volatility, you would think not a lot really happened

yesterday. joe, back to you. >> you know what, i'm going to start -- i will not use at the end of the day because people such a crutch. i'll start using at the end of the session. i mean, that's -- >> perfect. >> at the end of the session what about while i have you here, just quickly -- we're going to talk about the fed. but tomorrow, a jobs number is coming and we had some weird discussions yesterday about the adp and actually the guy that puts it together doesn't believe it, doesn't think 275 is reflective of what it's going to be tomorrow. what kind of number do you think we're going to have tomorrow, rick >> for all practical purposesi think we're going to have a healthy number. >> 200 >> i would say 200 200 is pretty much my baseline, joe. you know, i do have a few aspects of the previous month's data points i try to plug in and morph a little bit, some rolling moving averages, but all in all

200 is my baseline and i'm disappointed that the adp doesn't believe their own number i'm disappointed that analysts didn't believe 3.2 it's like they just discovered that inventories were created, like last week but i think there's good things going on in the economy. we all have to be realistic, though i mean, at some point i just don't know that we can keep creating the type of employment horsepower that we have. it's really quite stellar when you think about it, joe. >> you have to believe that there's people that are waiting to come back in the work force, i guess. that's the only way we can -- >> that's the key. that's the key that's the key is looking back over kind of what we thought we understood in the rear-view mirror we might not understand as well as we think. and i agree. those we stopped counting, i think they're going to be coming back a bit i understand there's demographics. >> that's the only thing that explains the last two years really is the same guy who didn't believe his own number is saying there aren't going to be

enough people for jobs for two years andy has been saying that. >> yeah. there's been a lot of goofy things going on for a couple years, joe, but that's for another day. >> rick stick around joining us now for more fed reaction barry nap, he doesn't embrace the k. >> it is a german name >> i say this all the time you don't want to use it, retail guy, bald retail guy doesn't use his -- >> yeah. he doesn't use it either niffen >> managing partner at iron side santoli uses every one of his letters are pronounced did you have any notion that the fed was going to pretend it was going to cut yesterday >> no. in fact, in steve leesman's survey i still have a hike at the end of the year pencilled in because i think that the fed is still really wedded to the phillip's curve model. but perhaps the most important

thing that was said yesterday was powell's response to the final question, which was look, there may have been a real expansion of the supply side and the productivity gains look like they may stick this morning's productivity number takes the year on year rate up to 2.4%. that's golden era productivity-type gains. and it's pretty clear that there was a surge in investment that innovation adoption has been driving greater productivity growth we had a proxy discussion about that last week after gdp and it was postulated, well, maybe it's just booking profits back in the u.s. that were previously booked in ireland s&p 500 cap x went from 2% in 2017 to 17% in 2018. investment in software research development is absolutely surging. in that environment, the fed, they don't need to do anything the real bottom line is i don't think those factors, those particular factors may be

transitory, but there's transitory after transitory factor, right? as greg epp wrote this morning but i would disagree with the prognosis for the whole thing that you actually would need to ease if inflation was at 1.5%. their mandate is stable prices they're pretty stable right now. a low standard deviation of inflation price stability is what creates an environment to drive capital investment great environment. >> he knows a lot of stuff i want you to give him your best counterargument. >> i don't have a counter to that. >> he has all these facts and numbers. >> what i'm more interested in is the way the mark has wound itself up or some aspects of the market has wound itself up into thinking it can have the cake and eat it too moment where it's we don't really need a cut the economy is fine. financial conditions are loose we were complaining in december that financial conditions were too tight. they're perfectly loosened up but maybe we can do this

insurance easing gesture barry, powell himself at jackson hole last year in august kind of dangled that scenario of the late '90s, saying green span allowed the productivity revolution to happen didn't really follow his models that had proceeded him, so i don't think it's necessarily the rest of the world having to argue two j. powell that this is a possibility. he just doesn't see an inflation emergency that he has to react to. >> no, i would agree with that so if you listen to his press conferences through the course of last year, he kept hinting there might be supply side effects from the tax bill, but we haven't seen them yet i think what he basically did yesterday was admit, yeah, they're there. in which case the fed could be on hold for a really extended period of time like the late '90s in which case we are in a perfect environment because keep in mind these emergency cuts or asset purchase plans, every business cycle since world war ii we had a correction related to when the fed has started

normalizing policy this cycle we had eight. eight policy, five of them were related to asset purchase plans. so, that's in a way it's like a keynesian stimulus plan that pulls demand forward, cash for clunkers type of thing but as soon as their programs are done you get this nasty sell off. last fall was one of them. we don't want the fed doing anything we want them absolutely out of the game like a quiet referee you have never seen before and then the markets can go on their way. >> can the markets really go on the way? your view is full or fairly priced you need something to happen and a fed cut and lowering of rates could help extend this sort of market rally to enable people to comfortably buy. >> yeah. where i'm going with this though is that we have -- because we started to have this surge in capital investment particularly software, which is driven productivity gains through the service sector finally, you have all of that productivity gains

in the pipeline. >> to cut. >> the other thing that was discussed a little bit earlier, joe, with you and rick about the labor market is the thing that really happened in the last two years the labor market was not that, yes, new bodies came into the labor force, it was that the dynamism, the turnover of the labor market picked up a lot that drives wages up but productivity growth up as well and that -- all of that being in the pipeline means that, you know, you have -- you could have an extended period where you don't need any stimulus from the fed. you just need, you know, quiet inflation and a quiet fed and things will get better all on their own. >> all right thank you, both. thanks, barry. see you again soon mike santoli. coming up, when we return, gene munser will talk about tesla's new capital raising plan. plus, how much should investors be willing to pay for a share of uber? an event tomorrow on "squawk box," we have your ticket to omaha. becky quick will be reporting live from berkshire hathaways

annual meeting we'll show you what it's like to be there at the tens of thousands of investors who make their pilgrimage every year we have a huge lineup of guests, special guests, including buffett watchmen, coverage starts tomorrow at 6:00 a.m. eastern time stay tuned "squawk" returns in a moment

♪ tesla shares at a sharp turn

around this morning on this news from their recent lows really. the auto maker detailing capital raising plans that would generate about 2.3 billion proceeds in gross. elon musk expressing interest in purchasing nearly 42,000 shares from a new common stock offering that's about $10 million if you do the math. here is musk on the company's conference call on april 24th talking about raising capital. >> i think raising capital should be a substitute for making the company operate more effectively. at this point i do think there is some merit to raising capital. that's -- but this is sort of probably not the right timing. >> joining us now on "squawk" news line is gene munster. i guess it was coming, wasn't it, gene >> yeah. it's all relative to timing, joe. based on that call absolutely it was coming six months ago we would not have

expected this, but essentially the company two things have happened one is that the overflow dipped after the model 3 launch i think the company has some questions about what ultimately demand is going to be this year. that's new in the last few months then separately this lyft and uber and focus on autonomy bid that's out there and the company was astute to move to capitalize on that with their autonomy event. so i think that riding on the tails of that and some of the demos that they have shown, you're absolutely right. this was the writing more recently was on the wall >> it feels like, gene, you know, bulls and bears can walk away with this with an argument for their cases. i mean, bulls will say, oh, yeah, this is great because this will allow tesla to spend money, get that shanghai factory up and running without worries about its cash burn and the bears will say, you know what, this is an admission that they are concerned about demand and that they need this capital desperately. where do you fall? >> well, the debate is going to continue to rage on, melissa

no doubt but i think that this does effectively derisk the business. i want to put some perspective on that. the company has 2.2 billion in cash if they raise 2 billion -- they haven't raised that yet. assuming they do raise that, that effectively doubles what their working capital needs are. so just to fund the growth it's expensive to scale an auto motive manufacturing they need about $2 billion in the bank so effectively that gives them call it 100% cushion, that's one way to think about it. so to put that demand trajectory into perspective here is that their guidance is for 360 to 400,000 vehicles this year if they do raise the 4 billion, they could deliver somewhere between 275 and 300,000 vehicles for the next two years and be solvent. so that is -- that will probably give the bulls a little bit of breathing room here. >> right. >> but won't extinguish the bear caves.

>> it's never good to talk about a company and use the word solvent raises questions unto itself my question to you is whether you think that there is a demand problem here, there's -- is there a long-term demand problem? i'm not sure this is a supply problem right now. >> no. manufacturing has ticked up. i was recently at the factory and it is -- the line is moving along at a good clip so i think that they are manufacturing bottlenecks have been released. you are correct, andrew. they worked through that the demand question i feel strongly that this is -- there's not a long-term demand question. vehicles simply should not be gas powered. it's a little absurd on many levels which we won't get into take for the future cars will be electrified, 70 million vehicles will be electric 1 or 2 million last year were electric

on the solvency piece, what is the slope of that curve? there is unprecedented pent up demand for model 3 this is a three-year build up of demand so we really don't know what demand is. >> the question is was that demand built up and was that demand relieved at the end of 2018 that's the fundamental question here, right? >> yes. >> i'm with you. i think a lot of people want to buy electric cars into the future that is a working trend. the question is the models that tesla has without having to redo the line all over again, by the way, to actually refresh some of these cars which haven't been refreshed in some time, minus the model 3, of course, is there that much investment that necessarily has to be made to create additional demand at this point? >> no. this is the slow part of the demand curve which we'll start to ease into and so, i agree with you i don't know what the underlying demand will be for this year because of all that pent up demand that was effectively

relieved we're below their guidance we're at 340 we think they'll miss that 400 number the reason this capital raise is so important is this basically is -- could be an emission, could be an insurance policy but by buying a company like this a couple years to navigate, i think is critical as you essentially buy time to really ride this curve. and one just thought on the curve is we spend time talking to other automotive companies and do a lot of analysis on the different specks and what they're doing. i think it's safe to say is that tesla has call it a three or four-year lead on the competition. >> right. >> i think that's important. >> gene, thanks. gene munster and i'm sure gene -- musk is going to buy up to 42,000 shares for 10 million, 420, 42,000, so that number comes up one again that's interesting. >> that's interesting. >> it's kind of cheeky, right? >> separately let's talk uber ipo widely expected to be one of the biggest in years

but a lot of questions remain among investors, particularly when it comes to what the shares of company are worth leslie picker joins us now with more leslie >> good morning, andrew. uber revealed a 400-page per speck us the and yet some investors are lamenting disclosure is limited. that's making it more challenging for investors to model out the price that they're willing to pay for uber's shares once it goes public. take, for example, this chart on page 114 of the per pekt us, in many ways this is the closest an investors will get on economics on a per ride basis. the trend line for gross bookings stabilized around $9 per trip while the number of trips has been climbing but there are no clear numbers that an investor can plunk into a spreadsheet. now investors were also hoping for more of a breakdown between ride sharing and uber eats per trip level and want a sense of how the trips change since markets outside of the united states accounted for 74% of trips last year, but tend to be

less lucrative for the company that's those of the united states but these investor obstacles may not matter for the ipo due to the hype and anticipation when you have that momentum, models can get tossed short-term but this is important the complexity surrounding their financials could create volatility in the stock in the weeks and months following its debut as the market tries to srt out the appropriate price for this stock. >> thank you leslie. i want to bring in one of uber's early investors, mitchell green, founding partner of lead edge capital good morning. >> good morning. >> we have been having a wild debate over the past weeks with many people coming onto our set with different views over the future of uber this morning, we had two guests, one with a bullish call and the other with a bearish call. explain your take on exactly how this company gets to profitability. >> i think there are a few ways.

one, i think you will see them continue to do to consolidate regions like kareem. two, they are investing a huge amount of money to roll out things like uber eats and uber freight. similar to what amazon did, they started with books and moved into lots of different areas those businesses are growing insanely fast. i think additionally you will see them -- i think you will see in the u.s. at least you will see companies like uber and lyft start to operate like due onlies i think that's coming. i think investors will drive them towards long term profitability as being public companies. i think being public helps both of them get there. >> sometimes we say we are going to be in a dopoly situation, lyft and an uber and they are going to compete with each other maybe like airlines today, then

we forget there are taxicabs, taxicabs in many of these cities and there is no duopoly at all and if you want to raise prices in san francisco or new york city or london or france you are not just competing against these two companies that have an app n. fact some of the taxicab companies are using curb and their prices will be cheaper. >> i think the taxicabs in most cities -- they are not irrelevant that's not fair. but i think what is important to realize is if the average ride is $9.50 -- let's use a better example. if you are in mid toub manhattan and you are going to la guardia, say it cost $20 for an uber x. you can make it 27 and the economics work then. if they were raising it from 20 to $40 then people would get

into a taxicab i think there is pricing ela elastici elasticity in other words, you can raise prices and demand really doesn't change that much. >> what do you think the risk is if there becomes a labor issue that is a try risk i don't think is necessarily calculated in all of this. true of also lyft and others. >> exactly i think it is always a risk. i think it is going to be state by state there has been some regulation in california. a huge amount of people living for lyft and uber and doing a lot of these gig economy jobs are really part-time employees, doing it part-time not part-time employees. they are part-time you get into a lyft and ub he were and ask people what do they do a huge amount of those people, this is a secondary income for moms, college kids

things like. i think you will continue to hear noise in the employee versus independent contractor debate. >> the author of a piece suggests it has been terrible for labor, terrible for employment and terrible for the culture of silicon valley. i am curious where you come out? >> i think companies like uber or lyft or airbnb for the hosts are allowing people that otherwise wouldn't be able to -- it created a huge new work force that are enabling people to earn more money i think it is good for the economy. i think it is a trend here to stay i think it is a fool's errand to think that these companies are

fads and not mega trends over the next ten to 15 years. >> mitch, thank you for joining us this morning. >> for sure. get down to the new york stock exchange jim cramer joins us now. tesla decided they needed to raise a little capital, jim. the stock likes it. >> yeah, well they need to sell stock. but you can't do better than have a firm that has a sell on it to sell stock goldman sachs. they picked it obviously, elon is more than 40,000 shares. the guy is putting his money where his mouth is what can i say the guy managed to get it so it didn't hit 230 which the shorts tell me is a magic level. >> yeah. that -- it's -- it's been there before then the next stop was 150 supposedly. >> i know. i mean, he's looking at a quinn up theel bottom. yeah, he raises the money and

they get to play again it is been a great story that and the fact that they are producing a lot of cars. i know you were questioning the demand side. i have been working all morning on dow and how bad autos are in china. looks like tesla is not bad. i think demand there is better than people realize of it is hard to believe. what a good story. >> how about -- i mean any surprises for you with what powell was saying yesterday? >> what were people expecting, he was going to come out and say i was going to raise rates but i read the tweet, now i am going to cut and you should buy stocks that was stupid. the sell, the futures came in. they blasted it down powell is probably saying what, what, i didn't say anything. futures term this market $3 million not the whole market. what a play. sell on tesla. >> okay. we will see you in a couple of

minutes. don't miss an interview with ceo of citi group michael corbat don't miss it. stay tuned "squawk box" coming right back it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

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check on the markets this morning on "squawk box." right now the dow looks like it will open down about 44 points nasdaq, now it's down about three points s&p 500 looking to open off

three points a quick look at the ten-year, then a tesla chart before we go. 2.514 on the ten-year. let's show you the tesla stock getting a bounce after news this morning. >> jobs and buffet tomorrow. >> a big show. >> big, big show joan us tomorrow for that big, big show "squawk on the street" begins right now. ♪ ♪ goods thursday morning welcome to "squawk on the street." i'm carl quintanilla with jim jim and david faber. coming up the biggest drop since march 22 on the heels of this fed press conference tons of news from tesla to qualcomm, to square, to caterpill caterpillar. future is red as company q 1 productivity, 3.6 the fastest pace in five years stocks poisefo