"squawk box" starts right now. >> announcer: live from new york where business nerve sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" here on cnbc we're live from times square i'm becky quick along with joe kernen and andrew sorkin good morning good to see you. >> it's great to have you here, kevin. we've got a lot to talk about with kevin here today. we have a lot to talk about. the markets have been struggling this month the dow jones industrial average down for the last five straight weeks. that's the longest losinging streak we've seen in eight years. we've only got four trading days left in may, and for that, all three of the major averages are on tract to pose the first

losing month for 2019, first may decline for 2012 this morning you see modest green arrows s&p futures up by 2 points and the nasdaq up by about 9 points. overnight in asia markets slightly stronger. president trump coming back from japan. you see the nikkei closed up by a third of a percentage point. similar gains for the hang seng and the shanghai deposit up about 0.6% in europe it's a mixed picture. the ftse up by about a tenth of a percent. stocks are weaker in it will i and in spain as well if you talk a look at what's been happening in the treasury market in the united states, you'll see the ten-year is yeeling, wow, 2.89%, so below 3%. this morning alibaba deba debating whether to offer new public shares in a second offering, this time to hong kong reported will i they could raise

up to $20 billion. they're currently working with financial vuzers to offer the listing as early as this year. the company initially listed in new york in 2014 raising a record $25 billion shares of alibaba up 13% year to date. we're following a major developing story in the auto world this morning fiat chrysler and french company renault are teaming up shareholders are soaring on this news fiat chrysler shares up 5%, renault, 10% phil lebeau has more on this phil, good morning. >> negotiations picked up speed over the past couple of weeks and especially in the last week. that's when john elkin, the head of the ya nelly family, sha shareholder of fiat chrysler started talking quite a bit with

the chairman of renault. officially it isfiat proposing this merger. but let's be clear the two sides are talking. this is not like they're saying, hay, do you want to get today? jean-dominique senard who's the chairman would be ceo. annual says, 8.7 million vehicles worldwide that would make them the third largest automaker in the world so in terms of investors, why does this deal make sense? why would you look at this and say, hey, why not put these two companies together you get $5.6 billion in cost savings. that's the estimate at least on paper from fiat chrysler there's little overlap yes, they're both in europe, but the areas where they're strongest and the product

markets they play in in europe don't overlap as much as you would think. $8.9 billion in net profit in 2018 we're going to show you three stocks to watch here first of all, let's start off with renault when it comes to renault, keep in mind the board is reviewing the merger proposal. it won't be long before we hear something from the board in terms of whether or not they believe this to go forward to shareholders then take a look at fiat chrysler the shareholders at fiat chrysler, by the way, so they can make the valuations match here, they will be sharing in a $2.8 billion one-time special dividend so for many fiat chrysler shareholders, that i will get part of that dividend. the $2.8 billion and finally take a look at shares of nissan and the reason we're showing this to yo is because nissan/renault are part of an alliance nissan's stake in renault which

is 13% would be cut in half, dropped down to 7 pn 5%. nissan, to a certain extent, they're boxed in here. they're not crazy about doing a full merger with renault that's the reason why the situation that developed over the last sex months with carlos ghosn and nissan executives and japanese authorities, that's one of the factors that many believe caused the situation with him being arrest and charged with a number of financial crimes that he denies. so what does nissan do from here, guys, because they don't want a full merger yet at the same time if they don't go forward with one. their influence on renault, especially if it's a merged fiat chrysler, it would be diminished dramatically. >> phil, though, see, to me, i spent a lot of time over the weekend about this transaction it seems to me on the nissan piece, which i think is actually the most interesting piece, especially given that trump was

over in tokyo and apirnlly there were conversations -- >> president trump. >> president trump was over in tokyo that it cuts both ways in that nissan was always upset about how much power the french government had vis-a-vis renault and by turning into this transaction, the french government gets deluded. it becomes alarmer component, but in terms of the ownership structure, in terms of a government stake, that that changes. no >> you're correct that that does change, that the french government does not have as much influence on the nissan/renault alliance. >> wasn't that always one of the biggest points of contention >> it was a huge point of contention, a secondary print of contention was the feeling that carlos ghosn and the people that, you know, he worked -- who worked closely with him.

it was not a japanese corporation. it was a french company that worked with them, and as a result, increasingly you could tell there was strain from the japanese perspective that it was not losing cell of the company but that its influence was not as great as it should be. >> this would mean it was even less of a japanese corporation, that they would have less of an impact is that a good thing or a bad thing? >> i think in the grand scheme, given how upset they seemed to be about the french role -- >> but that seems like it could be -- >> now that it gets consider. >> that's a red herring so to speak. >> i'd be surprised. i'm surprised they're upset, except i think some of them thought it was being done behind their back, right, phil? >> yes you're right on all those point, andrew the other thing to keep in mine, however, if you're nissan, things have not gone well, take a look at that chart that just is symbolic of what's going on with this company over the last six months. ever since the ghosn affair

exploded, they have had a rocky time in terms of the financials that they've posted, and this is a company that is in many ways at a crossroads. i'm talking strictly nissan. i'm not talking nissan/renault it's at a crossroads whether you're looking in the united states, japan, or other markets in asia. this is a company that needs direction and it needs people to take control of it, and there's a feeling that that is what's lacking right now. >> look. shareholders are pushing that up it's up 2.3% so shareholders look the initial news on this what about management there? >> they won't like that. >> they were part of this, right. >> no. they won't like i it look they might ultimately sit there and say we would be the world's largest alliance worldwide, $15 billion in sales annually. but nissan's component within that -- >> -- is going to be small. >> -- is going to be less, a

smaller percentage than before. >> hey, phil, then the last piece of this, the pledge that's been made and this is the political hurdle is the pledge by fiat chrysler that they won't be closing plants, that they won't be losing jobs, that all of the synergies in value will come from the ability to, you know, basically collect the supply chain so they would be able to get lower fees for product, et cetera is that realistic? >> no, no, it's not as realistic as they're portraying it on paper. first of all, let's talk no job losses they're not going to close any plants there's too much auto capacity in europe. that's not just renault and fiat that's all automakers. there's too much capacity there. that has to be stripped out of the system while renault has done some of that over the last 15 years, not as much as people believe it should be done. >> if that's true, do you think the french deposit will

ultimately approve this deal >> they will if they get those guarantees they say, if you're guaranteeing it, i think we will agree to this deal. in terms of your second point, andrew, we hear this all the time whenever there's an alliance, partnership, merger within the auto industry bother going to save "x" billion dollars. never happens. if a company says we're going to save 3 billion dollars, we know the synergies on paper, it rarely ever happens. that doesn't mean they're not going to save some money they will. they'll say, okay, you're going to get some of those savings, not a all of those savings kevin, what do you think >> this is a sign of weakness. this sector is a miserable place. basically we're building cattle cars do you think ten years, 15 years, do you think a car

transports you if you don't own it i think these miserable mid markets have to face ability excuse me, don't shoot me for this i would never invest in this this is going to be cost-cutting, head-squeezing, margin crushing, and all they're ever going to make is a box with four wheels on it. who cares. this would be a miserable place to invest. maybe you can keep a story going like a ferrari or maybe a bmw. but the rest is a cattle car business. >> certainly not a renault. >> i don't know when is the last time i was in a renault taxi i haven't seen one it doesn't matter. i think the industry has to look at it and say, we're at a tipping point here. >> that's why we're doing this. >> it doesn't help the investor. if they guarantee the french jobs -- >> what do you prefer they do in. >> nothing i'm telling you as an investor,

it's a miserable place. >> wouldn't you imagine it's better that they be tied up together than to basically be doing everything separately and spending "x" amounts they can hold onto each other while drowning >> this is a misery loves company. it's going to be a poop show that's what it's going to say. >> you're allowed to say that. that's okay. >> hey, phil thank you. it's good talking to you i'm sure we'll check in with you later in the day. >> you weren't looking at the dod stuff this weekend you were doing this? >> i was doing this. >> you had to set the dod stuff on wowway over here. >> that's true i did. i was ready to wok on my dod huawei stuff. >> you had three days. >> i did then i got waylaid by this news. >> they called it a long weekend. >> it was. >> not long enough for joe. >> did it seem so?

it was so long. in other deal news, sources tell our own david faber that global payments and total systems services have agreed on a stock merger of equals an official announcement could come as soon as this morning jeffrey sloane has more. if you put them together, they're worth 40 the merger, tss market cap is around $20 billion, so call it like a $20 billion, $21 billion merger acourses to sources, total system will receive 28% of the merged firm. the merge comes as they look to better compete with newer technology players like square, paypal, and the likes. and cleveland cavaliers owner dan gilbert remains hospitalized as he recovers from a stroke on sunday in a statement dave varner said he was not feeling well and take top the hospital by a family

friend while in care at the hospital he suffered a stroke and was immediately taken in to a catheter-based procedure and send to recovery he's awake and resting comfortably. obviously we send our very best to him he's a good friend of the show, a regular. >> just here. >> somebody we all know well dan's only 57. >> is he 57. >> only 57 and a man responsible for rebuilding all of detroit, right? >> and the cavs, et cetera. >> he's a good friend. we wish him well >> we do wish him well, but as long as you're here and you already made the comment and we're talking nba -- obviously this is an aside -- raptors -- >> you know, you have to be there, joe, to feel the electricity. >> i know. i feel it, but they're big underdogs, 320 -- >> yes, they are i think it's be iter to be the underdog in a game like this when going against a team --

>> the first game or all series? first game, i think it's in toronto, isn't it? >> it was impossible somehow they won four in a row. >> i know. >> how often does that happen? never. now we face an impossible uphill climb. i wasn't that big a basketball guy until i got watching this. now i'm just hooked. i mean there's nothing like it it beats hockey. >> be like drake drake is excited have you seen him? >> i know that. >> i figure you'd be next to him, both of you high-fiving. >> he's a super fab and his brand adds to the excitement he was as told, you've got to get into the sport. >> it has so many riches. >> i have to thank him for helping me get tickets. >> who who? >> mark. >> cuban. >> yes or his guys did. he's got a fantastic team there. look bottom line is i'm hooked now. i'm totally hooked

i think what's going to happen is there's going to be a good morning on thursday and a game on saturday and if they pull either of those off, this is your next big champion we'll see. >> we'll see and the automakers are all on shorts. >> why can't we tell the truth >> with or without kevin durant, i don't want them. not a big fan of the coach the golden state guy he's awful. coming up, trade headlines over the weekend from president trump in japan we're going to show you what he said in a deal with china. we'll talk about a potential market impact. as we head to break, here's the market of winners and losers e ecifical spifically 3m, still in a dark moment

>> announcer: this cnbc program sponsored by suntrust bank confidence starts here guys, get in here!

who's a good boy? it's me. me, me, me. hey guys! you're gonna want to get in on this. i know how to those guys in here. let's pause the internet on their devices. wohhh? huhhhh? [ grumbling ] all: sausages! mmm, mmmm. bon appetite. make time for what matters. pause your wifi with xfinity xfi and see the secret life of pets 2 in theaters. in trade news, president trump says the u.s. is not ready to make a trade deal with china. he made the comments as he concluded an official visit to japan. as for as china's concerned, they want to make a deal i think they probably wish they probably made the deal that they had on the table before they tried to renegotiate it. they would like to make a deal we're not ready to make a deal,

and we're taking in tens of billions of dollars of tariffs, and that number could go up very, very substantially very easily, but i think sometime in the future, china and the united states will absolutely have a great trade deal. >> over the weekend, a commentary piece by china's state run agency accused the u.s. of making air gabrrogant rs specifically trying to make a development of state-owned enterprises which touches on china's fundamental economic system. the dow is down for five weeks, first time since 2011 greg hodges and charles campbell, mkm partners managing director and trading desk specialist just looking at those two things, the weakness in equity,

charles, and what we're seeing with the ten-ier, why isn't that indicating some type of issue in the future, some kind of slowdown, some type of break in the goldilocks scenario? >> what's interesting, joe, good morning and thank you for having me, last year was distinctively different. this year it's not an issue of rate hikes everyone knows they're on hold for a long time. it's an issue of what are the earnings going to be and how are the bond markets going to perform. the stockmarket is within a couple of parnl points of the all-time high. the bond market, the curve between the three-month t-bill, it's inverted three months ago it's inverted a little bit again. if this goes on for an extended period of time, people will say there's a concern about recession. they ore not telling us that the ten-year is a pretty low

yield. >> which is the right one? which is the right story >> both can't be right >> which one is right? >> president trump is a great at building billings on the west side and great at licensing his name, but dealing with chinese policy makers is a different game, and it reminds me of the michael situation where he became part of disney. you put a guy with a didn't job, different skill set, and it raises the question to me whether he understands his audience people who are very familiar with the chinese say they're very smart, say they've done business with them for years. >> like a former peanut farmer or former actor or former baseball -- joe biden has been a politician since he was 29 years old. would you rather have one of those? >> no. >> oh, okay. >> because they had a former life doesn't necessarily make them bad, but it doesn't

guarantee success also. >> let me get to craig. >> nothing else works. i have lived with the chinese guys for 15 years. they don't play fair i'm okay with the new guy trying something different because i get screwed every day. every single day >> people wouldn't dispute the notion that prior trade deals need to be renegotiated. i think what people are concerned with is the tactics that the administration has elected to use to achieve desired ends to say if you try to push the chinese into a corner and they're a proud people, strong, high conviction, oriented, they might say, we'll stick this out. we'll go beyond 2020. >> let me get to craig craig's all excited. he's been telling us this for years. recent volatility in the

stockmarket is driving stock picking comebacks. you've been saying that. it's not a stockmarket it's a market of stoxx i don't want to get you mad. he turns green and turns into the hulk. >> don't turn me green. >> you were talking about stock picking. you were right all this time. >> the market, we believe, is setting up for potential big things it's been a difficult year you get the starts and stops the economy is somewhat from our channel checks we're doing -- we do about 2,600 over 850 companies. things seem to be pretty good. there's optimism out there, although it's not showing up necessarily with investors, and there are the have and have-nots of the investment world. there are a lot of stocks that trade in high amounts and there's this whole other part of the market that's been left for dead, trades, ten times earnings going much faster than that.

it's a stock picker's market it's showing up this year. we're having a tremendous year. >> o'leary is getting out of the a u toe ownings. he hates them. >> he could use some of owes those. capri holding, michael kors, jimmy choose, and versace. >> versace. >> did i mispronounce that >> how about something boring like cisco systems, procter & gamble. >> versace is down 20% in the last month trades about eight times earnings, one times sales, and has three tremendous brands that all the negative is already factored in. expectations are looking very, very low. >> he sees you j & j and raises

you one texas pacific land trust, craig >> not many people know about it we've been in the stock for 20 years. they've got 900,000 acres of laid in the permian basin area there's a battle going on for cell of this thing there's an investor group that owns about 25% of the stock that wants to make it a kre corporation. instead of making it passive, they want to make it more of annive organization. >> i've got to get to waiter holdings because it's spelled wrong, w-a-i-t-e-r. >> they're in the small markets. it's a real crowded space with grubhub and doordash on the upper end. this ire in 24 cities, restaurants. very small market. it's backed by -- the biggest

holder is tillman fehr tia we think that's one of them? that's one of our colleagues thank you craig hodges. >> my pleasure. >> looking good. he didn't get mad. >> don't make me green. >> no, i don't want to make your green. are you all right, charles >> yeah. >> all right thank you. when we come back, in the courts, day one of the opioid crisis on the stand, johnson & johnson, and kevin o'leary will talk on this we've got more details right after the break. ♪

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time now for the executive edge the first big civil trial on the opioid crisis beginning in oklahoma johnson & johnson and several of its subsidiaries in the hot seat they're accusing j & j of the widespread opioid crisis in part with a tablet that was divested of in 2015 oklahoma has settled with them the case is a bellwether, taking the angle that j & j violated public nuisance laws and j & j

disagrees. it could spread to other states depending on what the result is. >> do you have any concerns? >> it makes sense to go after j & j. but you can draw an analogy of the tobacco litigation with the exception that this is a viable and important drug it's unfortunate what's happened to it, but for pain management regimes, there is nothing like it, and that's not going to change any time soon so, you know, in terms of how it should be regulated, distributed, i can see the arguments going through. these cases will keep coming forever. each state will try. in the end if you're an investor, in my case, i'm going to stay the course the company is a remarkably beautiful thing. it can sustain 30 years of litigation, not that that's good, but my point is this is not tobacco. this is a drug that will remain in society and perpetuity for what it does and how we regulate it is up to state and federal

mandates otherwise that's why you're not seeing them do mitch for investors and people who want return of capital, this is a thing of beauty. it's a beautiful company. >> all right we'll move on. an iconic magazine, american magazine was just sold for a second time in over a year what's an iconic -- truly iconic magazine worth must be billions no it's print iconic magazines, the like of "sports illustrated," meredith corporation just sold it for $110 million the buyer, authentic brands. meredith will still public the magazine "sports illustrated" was sold last january meredith acquired sports "sport illustrate illustrated" what do you think the most it was ever worth i guess you'd have to do it in

today's dollars. ten years ago what was it worth? >> a billion >> is that all >> is that a lot, you said >> is that all. >> do you u think more >> what i don't know about this transaction, it's a two-year licensing deal back to meredith. so meredith is going to produce the magazine for two more yours. the question is after two years do they produce it the swimsuit issue is clearly what this is about and the rights and image, that's whau authentic wants. >> i can attest to the swimsuit edition. we had the rights to produce it on disk. it was extraordinary we would put it on disk version. it would sell out it was a marketing event. the brand guys here are doing this deal. they've don remarkable work on

marilyn monroe, taken these brands and put them on a global plat tomorrow. the problem is teams are doing this themselves. >> by the way, on the swimsuit brand, you've seen the "playboy" brand diminish completely. all of the "mad" magazines and even victoria's secret has stopped doing its annual show. there's something -- you don't think there's something in the air? >> i think the "sports illustrated" edition is more of a high brow top-of-market location-based travel story with some attractive -- and they're evolving too you saw the most recent one where they had a muslim. >> $110 million is nothing. >> you don't think it's more a puritan cal view of sew tight frmg i think you can figure it out. >> a bikini is --

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good morning, everybody. among the stories that are front and center, we've got some deal news this morning. fiat chrysler and renault are working to create the third biggest auto dealer. they would save $5.6 billion annually much more on the proposed deal a little later in the show. disney's live action re/max

of "alladin", according to comsco comscore, it took in an additional $121 million and the summer driving season is officially under way americans are finding alile rew e leaf as gas prices have eased following their biggest seasonal spike in eight years aaa says the average price of regular unleaded is now $2.82 a gallon that's down two cents from last week and 14 krenltds from a year ago. in the meantime, check this out. we have seen the dow down for five weeks in a row. only a few weeks left for trading in the month of may. this morning dow futures are indicated up by about six points, s&p about 2points and nasdaq about 1.5. we're going the talk with mikabrzezinski and one of the

producers. jo later, more deals on the potential automaker that would create the third largest ayunmaker. ck with mika in a moment

welcome back to "squawk box. mika brzezinski joins us

she ee the co-host of "morning joe," and the author of "earn it." they join us both this morning good morning to both of you guys. >> good morning snow i'll start with you, mika how did you get involving with daniela to write this book together. >> she has been working with "morning joe" for years and i admired how fast she was at running skrifts and getting coffee i had a nickname for her it was adderall. the bottom line was we were on a plane toke and she use thad moment to pitch. andrew, i was blown away, i thought the lens through which we should tell this story is through her. she grew up undocumented she paid her way through college, had multiple jobs in lima, ohio, four siblings, not a lot of money, lied on ufl her

applications to get a job in new york city. got one callback to p. diddy entertainment. they said, can you be here tomorrow she said, sure, no idea why. she's telling me this story and my heart starts to beat. she gets on greyhound buses through the night, washes her hair at port authority, nails the interview. the job is unpaid. no other problem walking dogs, hostess, baby-sitter, whatever, figures it out starts at the bottom again at "morning joe." she earned it. she found her way. she made her success i already knew she was a great worker and an incredible employee and this would be an amazing project. i was inspired on the spot to give young women advice through her story. >> i love that story, daniela. here's my story for you. clearly you had the passion and persistence to do all this i feel like there's a lot of millennials these days who don't necessarily want to tack the bottom of the rung job part of this book also talks

about knowing your value and this idea of when to ask and when not to ask. and so help us with that a little bit how much can you push? >> yeah. well, i think for young people starting out, it's really important to know that the second or third job or even the third job is not going to be that perfect fit or perfect dream job, so take it one step at a time. i think young people now have so many choices it's kind of a job overload. take one step at a time. focus on growing your network, building that professional brand and using it through every action that you do, and when it comes to negotiating, you're right. you're not going to get a raise in six months, but it's understanding the environment you're in and working with that. >> mr. wonderful, do you have ned? >> that p. diddy gig, you got paid nothing for it, but it sounds like everybody should do

this it's a learned apprenticeship. you learned something. is that not what basically happened >> yeah. >> the message is work like a slave and stop whining about it. >> earn it. >> for me in my situation i was in a small town in ohio, i didn't have professional mentors, i didn't have access to any job opportunities. for your me it was more of a risk not to take this opportunity. and at the time i was still undocumented so i didn't know how these things were going to pay out. it was unpaid. i didn't know how i was going to survive in new york city but the key lesson, it's not -- you know, it doesn't necessarily mean you have to be undocumented or living in the middle of ohio. but it's leveraging your network and finding opportunities that others don't see because they're opportunities that will pay off if you work hard and you're scrappy. >> danniela, you mentioned you

were undocumented. you've got papers now? >> i'm a daca recipient. we're taking it one day at a time daca is something that has held a lot of us in limbo i'm doing the best i can, which is what i've always done, take it one step at a time, working really hard with the hopes of having some permanent solution. >> that's great. >> mika, before we go, what about when daniela came to you i assume at some point there had to be a discussion of how much dani daniela is worth. >> i gave her everything from the book you have to show women their value. i find that investing in women in any way that i can always pays me back just with the joy -- sheer joy of it, but then pays it forward so many times over daniela is never going to let me down on that respect

for the rest of her life she will be investing in other women, so it's sort of my call to action to anybody who's sort of made it to high-level jobs. if you're a woman or a man, invest in a young woman who needs a boost. it will dividends. >> fabulous message, mica. thank you for joining us this morning. >> thanks. >> for more, go to knowyourvalue.com. the book is called "earn it. thanks. when we come back, we'll talk to the man behind last year's white house memo proposing nationalizing the country's 5g network for security reasons we'll hear what he tnks thiofhe u.s./china relationship right now. "squawk box" will be right back. . they're changing by the nanosecond. that's why cognizant created a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪

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welcome back, everybody. 5g wireless is being called the quantum leap in technology, but it's also a global hot-button issue in terms of security and geopolitics. the "journal" this morning publishing an article saying that any actions by the administration against china and huawei could end up hurting america's 5g ambitions as well joining us to break down some of the pressing arguments around 5g

is robert spalding, senior fellow at the hudson institute and robert, thanks for being here today. >> glad to be here. >> we should point out, you've played a very large role in this you're a former national security council senior director for strategic planning, and you wrote a proposal in a memo that was leaked and that people have kind of picked up on why don't you just talk a little bit about your work on 5g and what you think's important. >> well, first of all, this narrative that, you know, i was proposing nationalizing 5g is completely incorrect it was actually a technical review it wasn't a policy review. it was asking the question -- the chinese have gone so far ahead of us in 5g, what could we do as a nation to actually leapfrog and drive the future of global technology development, which is what 5g will lead and so, that's what the study was about. one of the things i think you have to look at with 5g -- it's the first network that's not built for people, it's built for machines we think of it as, we're going to get faster phones

no, it's going to be for machines to communicate with each other and for us to communicate with machines. and so, if you look at what's going on in the world wide web world today, it's kind of like the wild west. and so, the idea was, if you're going to have this increased level of connectiveness with things that are moving around you, some of them are big enough, like self-driving cars, can till you, then we ought to think differently about how we secure that system so it was really about thinking about how national security is different in a globalized, 21st-century, hyperconnected world. >> but it would require -- i think you think that it would require some pretty massive spending from the federal government's level. >> no, i don't think so. i think once you open up the spectrum and once you begin to deploy it, the capital's there to finance the network that's not an issue. so, some of the numbers that out there, they said $270 billion deployed across the united states -- completely incorrect, because they were izing the

highband, which is millimeter band, to deploy, far too dense for the network. the study said you need to deploy midban because it has the best combination of capacity and coverage when you do that, you drop it down to probably $50, $60 billion for a nationwide deployment, which is actually quite good when you think about all of the economic growth that's going to come on the back of that. >> what does this move against huawei mean for china's ambitions? what does it mean for our ambitions? >> well, what i wrote in the "daily telegram" last week is it's not just executive order. what's more important is putting huawei on the list, and it's not just important in the united states there's 42 countries that are part of the wasanar arrangement. those countries are obliged to match the u.s. actions in terms of exporting equipment to huawei. >> was it the right move or not? >> absolutely the right move, but it's not sufficient. we need to continue to do more to actually secure our future in 5g networks. >> robert, i want to thank you

very much for being here we'd love to have you back this is going to be a continuing conversation. >> absolutely. governor asa hutchison is our guest of the morning fm m oudog hiabt in business in. aare that's what happens in golf nothiand in life.ily. i'm very fortunate i can lean on people, and that for me is what teamwork is all about. you can't do everything yourself. you need someone to guide you and help you make those tough decisions, that's morgan stanley. they're industry leaders,

but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team. i'm justin rose. we are morgan stanley.

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home from a visit to japan highlights straight ahead. plus, taxing wealth. why the irs is pulling back on audits of the richest americans as the second hour of "squawk box" begins right now. ♪ go on, take the money and run ♪ ♪ ooh, ooh, ooh >> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ good morning, and welcome back to "squawk box" here on cnbc i'm joe kernen along with becky quick and andrew ross sorkin our guest host this morning, mr. wolf, "shark tank's" kevin o'lea o'leary. got the red in the pocket, but also the -- >> joe, i can work with you. i can make you a new man stylistically -- >> what about the watch band people have not seen that. >> oh. >> wow. >> that matches the -- >> and of course, you want to marry it to the pen. you want to get the little inflections of red on the pen.

it always works together, joe. i'm working on andrew. i can't bear looking at that apple watch anymore. >> ooh. >> that is just brutal. >> what should they do, andrew does it matter >> it's a utility situation. >> utility. >> i don't think it looks bad. i just don't -- i mean, i accept that a rowy, as the kids say, looks better, but -- >> you look like you have a small iphone strapped to your wrist. >> here it is. >> it's a millennial look. >> a lot of people are wearing them, though -- >> pair it up. put it beside this there you go shame on you >> all right. >> come on you've got to step up stylistically, you really do. >> what happens if i just got a cool band? would the band do it >> listen, there's nothing you can do with that you look like a robot, like everybody else wearing that thing. you have to bring your own fashion to it. >> exactly. u.s. equity futures positive again on the dow, although you can see it's because of the close last week.

but it is -- now everything's positive, in fact. and earlier, we just had the dow in the green everything else was in the red, but we're up a little bit. it's early it's tuesday, too, i keep hearing. i thought it was supposed to be a nice day today i was looking at my monday accuweather. don't you prefer three-day -- i prefer three-day weekends where it's the monday that you get off, because you go into the next week with only four days left but you have to pay your dues the previous week with the five day. >> that's all right. >> still went too fast. we've got a couple big headlines to bring you now this hour fiat chrysler proposing a merger over the weekend with french automaker renault. each would become an equal partner in the combined company, which would be the world's third largest auto producer behind toyota and volkswagen. french officials say they are looking at this tie-up, and they say it must protect french jobs. france currently has a 15% stake

in renault and we'll watch that one. also, news coming in moments ago. two payment technology companies set to join forces this morning. global payments and total system services have announced an all-stock merger of equals sources had told cnbc's david faber earlier that the deal was imminent. also, a high-profile trial beginning in oklahoma today. lots of people will be watching it the state saying that johnson & johnson's marketing practices are responsible for widespread opioid addiction this is the first of 2,000 lawsuits brought against drug companies over opioids over the weekend, teva pharmaceuticals said it agreed to an $85 million settlement with oklahoma over opioid-related allegations. president trump is on his way back to the united states after a four-day visit to japan. trade was a big topic of conversation eamon javers joins us with the headlines. good morning. >> good morning, becky that's right, trade was a big topic of conversation, but not a whole lot of specific developments out of the weekend in japan the president spent memorial day

weekend in a mostly ceremonial role in japan, playing a little bit of golf with shinzo abe, the leader of japan, and also having some ceremonies relating to the imperial family there. and of course, this moment, presenting the sumo wrestling championship trophy to the championship sumo wrestler there, and then, of course, meeting the new emperor and the new imperial family in japan over the weekend the president was able to offer some thoughts, though, on exactly where things stand in terms of negotiations with china while he was in the neighborhood here's what the president had to say. >> as far as china's concerned, they want to make a deal i think they probably wish they made the deal that they had on the table before they tried to renegotiate it they would like to make a deal we're not ready to make a deal, and we're taking in tens of billions of dollars of tariffs, and that number could go up very, very substantially, very easily but i think some time in the future, china and the united

states will absolutely have a great trade deal >> so, the president there with some optimistic rhetoric, but not particularly predicting anything specific in terms of an outcome of a trade negotiation with china he's also talking about trade with japan, wanting to get the trade imbalance right, he said, but ultimately, no deal with the japanese either. the president predicting the u.s. and japan might come up with a deal of their own in the coming months, guys. >> okay, eamon we'll stay tuned it's a daily occurrence, reading body language, tweets, comments, et cetera. >> that's right. >> all right, thanks joining us now to talk trade, arkansas governor asa hutchison. governor, it's good to see you you're highlighting your effort to bring global companies to arkansas and i just wonder, who do you consider to be your biggest competition? do you consider it to be like new york or illinois or florida and texas, because those are the two states that we hear about

that are really trying to get people to move from the high-tax states down to florida or texas, but arkansas, too? >> we compete. and first of all, you have an expanding economy. businesses are looking for areas to invest. we compete with other states on it obviously, some of those low-tax states are competition to us that's why we have in this last session had a very pro-business legislative session where we lowered individual income taxes. we also lowered corporate income taxes in arkansas, becoming more business-friendly, but it's also about the relationships that you build. that's why myself and my secretary of commerce, we've been to multiple countries, including china, japan delighted to see the president in japan, because that's a very important investment partner for arkansas we have -- that's our number one foreign investment source is japan right now in terms of job creation in the state of

arkansas so, we're expanding both in terms of our existing companies, but recruiting industry, most recently a czech republic company, cz, located in central arkansas, their first manufacturing facility in north america is going to be right there in arkansas. >> when you're cutting taxes, we see what happened in illinois, we see what happened in connecticut, or wherever you want to look at the exit, but then people always bring up kansas to me they cut taxes too quickly, didn't have the revenue. how do you replace the revenue for things that arkansas needs for its citizens what do you do >> well, one, you're a little bit careful about it and we have cut taxes over the last four years, gradually we do it every session, and we do it carefully, so we don't disrupt our education delivery and our investment in education. in fact, this year, we cut taxes. we also raised teacher pay $4,000 over the next four years.

and so, the other thing that we're doing is that we're setting aside money. we have a balanced budget and we're setting aside money in savings every month as a state, so our long-term reserves are increasing so you do that carefully, but as a growing economy. we've created 80,000 jobs. 65,000 people have moved out of poverty up the economic ladder over the last five years personal income growth is going up and so, that's the kind of economy that you can lower taxes, but we're also careful in case this long history of economic expansion slows down. >> you know, just looking at arkansas's rankings from u.s. news best states, you come in 49th in terms of health care, 42nd in terms of education, 43rd in terms of economy and 47th in terms of infrastructure. how do you combat that how do you fight that? is it part of what you've been talking about? >> first of all, we are moving up on those scales and in those particular categories, but whenever you look at the

investment in arkansas, people are choosing to move there our population is increasing, businesses are expanding you look at the investment in our infrastructure we passed a highway bill as well this last session of the legislature, not waiting on washington, but we're investing in highways. so, we're taking control of our future we're improving education, computer science education we're considered one of the leading states, if not the leading state in a comprehensive computer science education program. >> raising pay for teachers i'm sure is part of that effort, too. >> absolutely. so, we're investing in the things that make a difference for the next generation, making a difference for our economy and the growth of it and you know, you've got to have that balance, a diversified economy is very important to our state. some people are surprised by the fact that while agriculture's our number one industry, our second one is tourism. people are coming to arkansas because of the quality of life, because of our incredible

outdoor activities that are available -- >> the state park. i've been camping there. it's a beautiful place. >> there you go. >> soybeans, though, is your biggest crop, and that's been potentially hurt by these trade talks. what do you think of the situation? >> well, we have 90% of our soybean crop is exports. of those exports, 60% of those exports go to china. so, obviously, we're being hurt by the tariff increases and the trade war that we see right in front of our eyes. it's not sufficient just to say we're going to put more money -- give it to our farmers we want a long-term solution and all of our farmers understand the importance of getting it better with china, more balanced trading relationship there, but we want to know what the end goal is and if the end goal is zero tariffs, then hang in there, let's get there. now, if the end goal is some kind of an agreement with high tariffs, then that's not a good

end goal >> red-state governor sticks with trump on china trade. this was "can't take much more pain." that was july 9th of 2018. governor asa hutchison told cnbc that he sticks with trump, not much longer. it's going to be a year this july, so where are you now are you sticking with him still or are you ready to throw in the towel and say, let's, you know, let's do what we need to do to end this >> listen, he's done so many good things that are out there and give hats off to him that we have a new nafta agreement we want the senate to ratify that. >> so, are you glad he did the tariffs on china >> no. >> you're not. so, you would not have taken on china with -- you would have done it some other way, or >> well, first of all, the key to our negotiation with china is enforcement, and we have to have better enforcement tools and part of that is the lack of transparency in china.

the president has done the right thing by negotiating he had an increase in the tariffs initially. china came to the table and said we will buy mooring cultural products that was a good win right there. >> that's only one sector. we want access to their whole market that's what the pain's all about, right >> that's right, but let's look at the steel tariffs right now i mean, the steel tariffs are hurting arkansas in terms of our manufacturing capacity, because much of it is not just china, but it's also south korea and other places that we're getting our steel, and that's -- there's companies that are not expanding because of those existing tariffs. >> are you willing to stay the course and i'm speaking as an investor now. i want a deal that gives me access to their markets and protection of my ip. those are the two things i want. if i don't get those, there is no deal, as far as i'm concerned. keep going how much pain can you take on

soy? how much pain can you take until you say i can't take it anymore? >> well, that's an undetermined answer right there as to how much you can take. i don't think it's a solution to say, well, every year the federal government will give our soybean farmers more money that's not what they're interested in. they're looking at markets that they can expand to, and there's a challenge that right now you've got china and the other global markets going to brazil and other places once we get back to a trading relationship, are we going to be able to rebuild those markets and those relationships, or have we lost them so, there is some urgency to getting to the point that we're going to have normalized global trade. and i agree with you -- we want the open markets there, but we also want to have that enforcement capacity the president's trying to negotiate that a lot of it's behind the scenes we don't know about, but hopefully we can get there sooner rather than later. >> governor, i have a social

question but i think has an economic impact, which is this -- alabama earlier this year tried to ban abortions. earlier this year, in arkansas, there was an effort to restrict abortions. how do you think that plays in terms of bringing business to the state? and the reason i ask is, even over lgbt issues and everything, north carolina and elsewhere, and this is something i think is starting to bubble up as a conversation in the c-suite. >> well, these are issues of life that we shouldn't just measure by economic impact and how hollywood's going to respond to it. these are the values that people of arkansas feel dearly about. and in arkansas, though, i think we handled it in a better fashion. we did include -- we went from 20 weeks to 18 weeks in terms of abortion prohibition we also had the exceptions of rape and incest in the

legislation. we have a trigger law in the event roe versus wade is reversed, then we can go back. we will have a stronger prohibitions on abortion but i think we handled it in a measured way this year that has the best chance of influencing the debate nationally as well as recognizing the improvements that science have made in terms of viability so, i think we had good legislation this year that was balanced, and we've seen absolutely no repercussions in terms of businesses being concerned. >> governor, thank you thanks for joining us on set this morning you're trying to steal some new york companies that's why you're here, i think. >> well, we can do that. i am getting back to worrying about the flooding i'll be leaving today, going back there it's a problem in arkansas and we'll address that. >> good luck. >> good to be with you. coming up, a big weekend at the box office wl ing u the numbers and a bit of controversy as well, next [beep]

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welcome back to "squawk box. the futures this morning have been a little bit higher right now the dow futures indicated up by about 23 points, s&p futures up by less than a point, the nasdaq up by just over 2 points. and of course, this comes after a pretty rough streak for the markets. nasdaq and the s&p 500 have been down the last three weeks in a row. the dow has been down the last five weeks in a row. only a few days of trading left in may to try and improve the

records, but to this point, all three of the major averages are down for the month of may. also, take a look at what's happening with oil prices. wti this morning up by about 67 cents, a gain of just over 1.1%. last tick at $59.30 a barrel. making headlines right now, disney's live-action remake of "alladin" topped the weekend box office the film debuted at $112.7 million domestically over the holiday weekend and internationally took in an additional $121 million. and basically, everything else after that -- i don't know if you saw it -- tailed off i mean, it was really -- there were a couple of other movies, including, what was it, "book smart" that came out over the weekend, under $10 million. >> how good is he at picking this content he's a rock star he's killing it! coming up, many states expected it to reap big rewards from legalized pot sales, but reality hasn't been so generous in all places. what investors need to know when "squawk box" comes right back. ♪ every day, visionaries are creating the future.

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that understands my business. dear tech, dear tech, dear tech, dear tech, let's champion data rights as human rights. let's use blockchain to help reduce poverty. let's develop new solutions with the help of quantum technology. let's show girls that stem isn't just a boy's club. let's make a difference in people's lives. let's do it all. together. let's expect more from technology. let's put smart to work. welcome back, everybody. california is not seeing the tax revenue from marijuana that it once expected. meantime, some politicians in the state are looking to create

state-chartered banks to help the budding industry get better access to banking services a lot to try and figure out in this industry, and joining us now is brett hundley, senior research analyst at seaport global i know you just went across the west coast, you spent time in california and washington state trying to figure it out. what'd you come away thinking? >> well, you know, california has some issues on its hands, certainly, with tax revenues being lighter than expected. i think a lot of that is related to the elillicit market law enforcement has done a bad job closing down illegal operations these aren't guys in backpacks selling baggies of weed. these are stores standing up illegally, competing against legal operations, so that makes it hard to bring in tax revenue. and secondly, tax rates themselves a lot of times you're getting to the checkout counter in california, and you're spending

45% or 50% in taxes, and so that moves people from the rec market into the medical market. and although we don't have good data on this, we do think that the medical patient count in california is starting to really skyrocket, and we think that that's hurting tax revenues as well. >> that's a really interesting point. i wondered how that was going to work out with taxes so high on recreational does that keep people -- i didn't realize moving to medical. i wondered if it would keep the illicit drug supply in business because it'd be so much cheaper. >> yeah, the tax rate is definitely part of it. and california looked at this. they thought about reducing some taxes recently and they decided against it but by our count, the medical patient count for medical marijuana in california is over 3% of the population there, and that's one of the highest in the u.s. >> kevin o'leary is our guest host today and kevin, i know you've been doing a little bit of research yourself what have you come away with thinking what are your thoughts on the pot stocks overall >> i had the unique opportunity

to sit at a table during the raptors intermission with pretty well the cannabis industry in canada all of the ceos were there this lawyer, perry delease, is kind of the guy up there taking these companies public but here's what i learned -- they're all teasing me that i don't invest in this, and i can't. it's a schedule one narcotic by regulations. i can't touch it what's going to happen in the next two years is these companies are going to split themselves in half, one side medicinal, one side's recreational the recreational market, who cares? the medicinal market, which requires up to 2.5% thc molecule to be effective, is the big issue. they're going to be sitting down with the fda and other regulators and start these trials to prove the efficiency of the medicinal side. me as an investor, once it comes off these schedule one narcotic, i would love to invest in this on the medicinal side. this industry is going to mature into a medicinal business. i don't care what happens to recreational

my wife won't even let it in the house, so i can't invest in it but if it could help mey back pain and it was legal, i'd take it and that is where this industry's going to go and i think those smart ceos up there that are figuring this out are going to bring these deals here to the u.s. and fund them here once they get regulatory approval that's what's so interesting >> hey, brett, i know you've got a neutral rating on both canopy and aurora what's your hang-up? what do you know >> well, the valuations are pretty expensive on a number of the canadian lps, licensed producers, and part of that's because they receive capital flows thus far and i kind of agree with kevin i do think that the industry is going to bifurcate i think you'll have that recreational piece that's centered around thc, but there is a larger market opportunity, and we're calling it mainstream delivery of health and wellness products i used to cover packaged food for a while. there's not a boardroom in packaged food that isn't

thinking of sprinkling some cbd or something like that into their products to try to revitalize growth. and historically, that's where we thought that the canadian lps are best set up. increasingly, though, we do think that big food, big beverage, big pharma, big tobacco, we think they're increasingly looking at hemp manufacturers, we think they're increasing looking at biosynthetic cannabinoid producers. and so, the canadian lps are starting to say, you know what, we need to go out and buy it or build it ourselves instead of having these strategic tie-ups with big cpg and big pharma. >> can i ask you just outside of the canadian companies that are listed, if one wanted to take a position in one that was forward thinking, as you suggested, it's going to go after the bigger market, which names? because there's so many tiny companies public in this space that i'm sure aren't going to make it, but if you wanted to take a 5% weighting in can bus, what would you buy give us three names. give us two names.

give me any name. >> well, canopy growth is -- would be at the top of our list. again, at seaport, we do have a neutral rating on canopy, but they're very well run. they have a ton of money to spend. and they sit back and think. a lot of these companies today, they're just moving at blinding speed. we don't feel like they're sitting back and doing the thinking part. and canopy, you can really tell that they think strategically about this industry and they'll be there in the end. back in the u.s., you know, we actually -- when we talk to investors, they really like the dispensary channel they can figure that out better. they know the regulation that's going to be around that they know people have been using cannabis recreationally for the past 100 years and they know that will continue for the next 100 years. so, from an investment standpoint, it makes better sense for them cure leaf, green thumb, they're two of the best operators in the u.s. green thumb is particularly responsible with capital

allocation. >> brett, thank you very much for your time today. good to see you. >> thank you. okay, coming up when we return, ipo caution. will high-profile problems with uber and lyft make other unicorns think twice about going public we will have that debate. but first as we head to a break, take a look at u.s. equity futures this hour dow up about five points nasdaq off about seven ckn 50oftw ba ia moment

♪ still to come on "squawk box," ipo valuations are unicorns thinking twice about going public some new numbers, right after this plus, taxing wealth. why the irs is pulling back on audits of the richest americans. and then later, behind the wheel. a proposed deal would create the third largest automaker in the world. ayuned you're watching "squawk box" here on cnbc guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade,

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welcome back to "squawk box. we've had some rough ipos in recent months, and that has some unicorns thinking twice about going public leslie picker is running the numbers for us what'd you find out, leslie? >> hey, joe. good morning venture-backed companies are raising more capital and waiting longer before going public, and many are wondering whether that's actually creating an imbalance between the public and private markets and whether it's on the verge of becoming a problem. at the time of ipo, companies

last year had raised on average $250 million privately across 6.5 rounds, compared with a quarter of that fund-raising level and just 4.6 rounds in 2010 the average age for companies going public in 2018, nearly 13 years. so, it used to be that companies would debut only when they run out of cheaper financing options in the private markets these days, their rationale is somewhat different the most frequently cited reason is to create a public market for their stock, giving employees an early investors a chance to cash out, but that then gives them the flexibility to, yes, procrastinate. as more mature companies finally decide to do ipos, they're often plagued with slower growth, which may require lower valuations in an ipo than they raised privately, something that can be dilutive to newer shareholders, or they could just see their stock prices tumble, as was the case with uber and lyft, guys >> okay. thank you, leslie. appreciate it. we have a unicorn on set he's not really a unicorn. he doesn't have a horn or anything

with us now, transfer wise recently hit a valuation of $3.5 billion. it's a european-based fintech company waiting to go public and we have the ceo and co-founder with us. the company is ranked 23 on cnbc's disruptor 50 list this year good morning to you. thank you for being here what do you make of this idea of what leslie's talking about here >> well, what we just did in transferwise is raised the money fund-raising as a private company and what we intended with this is to be able to choose when to go public we don't have anything against public companies, but we're just really in the very beginning of our journey, and we feel the focus is much better in the private markets. >> that may very well be, but the flip side of this question is, are companies just staying private too long and ultimately, is the investor base quasi public anyway meaning, i don't know where you are yet, but at some point, if you want to stay private, you're going to ultimately probably

bring in so many of these other funds, whether they're private wealth funds, whether it's the blackrocks or t. rowe prices or others, so that when you actually go public, there's nobody else -- there's no additional market wanting these shares >> i think you're right, there is something happening here where the borders between the private and the public are just blurring a little bit. you're right, when we raised our latest round now, we had companies like lackrock investing in our round, and it allows us to kind of shift the base we started with folks who are investing in c-stage, a couple of people to get the company off. but now in the later stages, we have practically public market investors also looking for opportunities in private markets. >> so, what is that going to do to -- does that mean you'll never go public? >> not at all. i think public, it's a good place to be eventually, but we're just so early, and at the

moment, execution speed is what really, really matters. >> how much of your delay is because of the cost of compliance and the burden of compliance, particularly in dealing with compliance in the u.s., which is probably the most stringent market there is? because it seems to me the advantage of being public would be a lower cost of capital, for sure even this last round you did would have been cheaper in the ipo market, but you elected not to do it is there a hidden reason about compliance that's keeping you away >> i don't think it's compliance, actually i think it is focus. and i don't think that kind of -- we believe there is some distraction in the public markets, from founders to pursue their mission with their companies. i don't think it's coming from compliance or just compliance. the interesting nuance here is transferwise is a profitable company, so we're one of those tech start-ups that has been already profitable for 2 1/2 years, which in some ways gives

us the kind of opportunity to remain private longer. >> but i guess the question that i'd ask is -- and you said you didn't want your company to remain private -- are you worried about demand on the other end if and when you ever want to be public? because i'm assuming the blackrocks of the world eventually do want to have some form in exit >> sure. i honestly don't know what the markets are going to look like in even a few years down the line and whether stock markets are going to work exactly as they did today or five, ten years ago, or -- >> -- voting class shares, when you do go public, whenever that is, will you have a dual voting class structure? >> that's a great question i wish i had an answer -- >> don't do it what am i, a second-class citizen, i shouldn't have a vote to kick you out if you're doing a bad job? >> that's your advice, thank you. >> to andrew's point about the crossover investor dilemma, meaning the blackrocks of the

world who invest both privately and publicly -- it used to be that having them in there in kind of later stages would help with valuations, because they could say, you know, i'm a public market investor, here's what i'd be willing to pay publicly, but i'm doing it privately, which should create a smoother transition into an ipo. do you still believe that's the case, even though we've seen some high-profile examples recently where crossover investors weren't really kind of in line with what the public markets were willing to pay for the stock? >> valuations are a very, very difficult topic. i wouldn't be able to comment on those, how they differ in private and public we've seen examples go both ways where companies are overpriced in private or underpriced in private. it's an amazing question, but i don't really have an answer for this i think the crossover point, that's also blurring now i don't think we have crossover investors. we just literally have public-market investors starting to look into the private as well. >> before we let you go, what about the opportunity for somebody to buy you and just take you out completely?

there are so many different financial transaction companies these days, whether it's paypal or somebody else would you be open to an acquisition? >> i mean, we try to think everything from our users' perspective. so, users, do they care under which brand you operate? maybe not as much. they just care about the product. but then again, if you think as a founder about an acquisition, what are you getting from it like, how does it make it your product better >> i just wonder whether a paypal or an ali pay or someone would give you distribution that you wouldn't otherwise have, and that could actually turbocharge the business. >> that's a very good question we're not particularly interested. >> how did you become profitable when 80% of fintechs never get their acquisition costs below lifetime value how'd you do that. >> very good question. the thing is we spend very, very little on advertising. it's mostly word of mouth. and especially in fintech -- or financial services -- i find it's very hard to follow ads

you follow what your friends say. if your friends use your product, your friends use transferwise, they'll tell you you're nuts to go to your bank and do international transfer for 35 bucks -- >> a profitable fintech that is a unicorn. none of these things make money. >> kristo, thank you, good luck. irs audits of wealthy americans are dropping we'll tell you why robert frank will be here. first, here's a look at friday's s&p 500 winners and losers ♪ a little bird told me you

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now the fastest, most reliable internet can help you save on your wireless bill. that's simple, easy, awesome. taxi! should i have stopped her? save hundreds of dollars a year when you get internet and mobile together. plus ask how to get $250 back when you switch to xfinity mobile. welcome back to "squawk box," everybody. mckenzie bezos has signed the giving pledge. this comes months after finalizing her divorce from jeff bezos. the giving pledge was launched by warren buffett and bill and melinda gates in 2010. more than 200 individuals and families have signed on so far, pledging to give a majority of their wealth to charitable causes oh, by the way, in order to sign it, you have to be a billionaire. in a letter announcing her disc, mackenzie bezos writes in part "i have a disproportionate amount of money to share my approach to philanthropy will continue to be thoughtful, it will take time and effort and care, but i won't wait and i will keep at it until the safe is empty."

so, yes, this is a pledge that jeff bezos has not signed yet. mackenzie bezos signing it just within months of that divorce. >> interesting you think it suggests, though, one of the reasons, and we talked about his philanthropy -- robert frank is here -- is it because you think he's planning on spending a lot on blue origin that's what he does now every time he cashes in shares -- >> and you think he sees it as charitable as it's a loss-making business and he thinks he's going to change the world. >> yes, exactly, and he thinks he can do that through a for-profit enterprise, which will take a lot of money, but that will be better than just giving another check to philanthropy. >> interesting. in other wealth news that affects as far as people here, only o'leary only 6.6% of those making more than $10 million a year got audited by the irs last year, down from 15% the year before. i don't -- do you -- >> do you pay u.s. taxes >> oh, you bet i pay taxes. >> you do. >> you bet and i have been audited plenty of times, and i've had all my

companies being audited. any company shifting out of a high-tax state gets audited on the way out. i'm moving out of california, florida, audit massachusetts to florida, audit. >> i would audit you every year. >> but -- >> just from the looks of you. >> they're state audits. >> they're state audits. >> not federal. >> so, here's why you can cheat more on a federal level. we'll explain that now audits of the nation's highest earnings -- this is federal audits now -- fell to their lowest ever recorded levels in the most-recent period irs data showed that the tax collectors audited a little over 6% of returns for those making $10 million or more, down more than half from a year earlier and down about 80% from the recent peak in 2011. now, the drop was across the board for the wealthy. those making $1 million or more, those making $5 million or more, all of those guys saw lower audit rates. now, it's unclear how much revenue has been lost from these lower audits, which have declined for seven straight years, but studies show the top half of 1% of americans account for 20% of underreported income.

that's about $50 billion a year. now, the data comes during a battle in congress over funding the irs. the irs and many democrats say the agency is being starved for funds. its budget is 19% below its peak in 2010. the number of auditors falling by a third the irs estimates that every dollar spent on enforcement generates $5 in revenue. so, it's a good return, but each elections officer generates about $2 million a year in revenue. republicans say they don't want to keep throwing money at a large and wasteful bureaucracy president trump is proposing a 1.5% increase for the irs budget this year and adding over $15 billion over ten years for enforcement. so, he's on board. congress still fighting it out. >> okay. joining us now to talk a lot more about this is adam brandon, president of freedomworks, also jesse eisinger is here, senior reporter at pro publica. i'm going to you, jesse, since

you're sitting right next to me. what do you think the numbers should be? >> the irs is a walking dead bureaucracy. it's been eviscerated. the budget is way down and you can see it in these numbers. you are more likely to be audited in the united states if you make $20,000 a year than if you make $500,000 a year you're more likely the most audited county in the united states is humphreys county, alabama. that's disproportionately poor, disproportionately black this is a question of equality and equity and we're leaving huge amounts of money on the table because poor and black people don't actually cheat on their taxes as much as the vastly wealthy, because they don't have the opportunity. >> adam, i assume you're taking the other side of this you think we shouldn't be spending the money. >> i just look at -- let's go back before this last tax bill that was passed. back in 2017, almost 47 million people itemized on their tax

returns. now in 2018, that's down to 16 million. what that tells me is the more we simplify the tax code, the easier it is going to be to collect. and i look at the costs to the economy of tax compliance, that's almost $400 billion every year 8.9 billion hours in compliance is spent so, in my vision, simplify the tax code you make it real clear and then you're not going to need the size of the bureaucracy that you have today. in fact -- >> do you not believe the numbers that suggest that spending more on audits actually creates real revenue and that we have people legitimately and genuinely cheating the system? >> that's -- if you have a complex tax system -- i felt so bad for the irs that they had to become the implementers of the obamacare system you have this much complexity in a tax code, you're always going to be having problems. that's why we should simplify the system -- >> i don't understand this

>> i don't -- i think it's easy to understand. the more you simplify and clarify a tax code, the easier it will be to collect. >> but adam, here's the problem -- you've simplified it for the portion of americans that are the lowest earners. the top earners, that system can the new pass-through rules, everything has gotten more complicated. there are more loopholes and the wealthy are now more like companies with offshore, they've got llcs, they've got trusts most of the money earned in this country does not come from the simplified w-2 forms so -- >> well, then let's go there maybe that's something we could agree on let's close loopholes. i think loopholes is the devil in the detail where k street lobbyists and the corruption ends up living if we make a simpler tax code, we can make it easier to collect. >> the simplification of the tax code is the long-term talking point, but the complexity's not an accident. what happened is complexity was lobbied for by the wealthy, by

corporations and they put in a huge number of loopholes, and then they gamed the system through the loopholes. so, we can't simply talk about complexity what we have to do -- and in fact, the wealthy will never have easy taxes. so what we have to do is enforce. and one of the ways you enforce is you audit and if you're not going to audit, you're not going to find any lost money you need -- >> wait a second let me put up my hand here i don't like to -- you know, my mother told me never brag about money or you'll never have any but i fall into that category of people that have to deal with a huge level of complexity, and i have to hire all these professionals to do it and i would prefer to just have a very simple, maybe a flat tax of 33% or 37% and let me pay it, because right now i have an army of people, and i don't consider it productive. it's a waste of time. >> amen to that. >> and when i do pay taxes, i have to go to court to get it back and i have to hire lawyers and all that i mean, the whole thing's crazy! >> so, we have a principle in

the united states that the wealthy pay a greater share of their income because -- >> well, i don't necessarily agree with that -- >> they have more. well, i understand that. of course you would want a flat tax because it would be beneficial to you -- >> what's wrong with a flat tax? >> the problem is that the wealthy have much more money and benefit disproportionately from the infrastructure that the united states -- >> they'd liar successful people >> let's clarify you say a flat tax is higher -- >> i'd pay more if it was simpler! that's what i'm saying i'm so -- i probably have 20 people -- >> do you pay more what's your effective tax rate when you say 33%, is your effective tax rate higher or lower? if it's lower, god bless you for taking on 33% -- >> i don't even know anymore >> most of your taxes come from investments. so you're taxed the a capital gains rate not at at ordinary -- >> i have capital gains. i have current income squr. >> so your tax rate is more in the 20s. >> not a chance in hell. it's way more than that. i just know it is -- >> on a federal level.

>> i understand this federal level -- >> imagine returning that to the economy -- >> that go to states, that go to federal, municipalities. it's all taxed and i would ask you guys one question, just on behalf of everybody that's an investor and wants to be one or an entrepreneur -- do you believe -- andrew, this is for you, too -- is it better for me to give a money to the government and put it through the meat grinder of government hell than investing in a company? what would you rather me -- >> we're not talking about rates. we're talking about just collecting what the government is owed. rates is a whole separate discussion rates, we can talk about that forever. what we're talking about today is -- >> one of the reasons you should care about rates is that i argue that one-third of every dollar given to any government is wasted that's my whole point! >> and that's an important argument what we're talking about today is should the irs have more resources to collect what the government is khallegally owed that's a simple question and there is no answer because right now congress is fighting over this issue. >> make it simpler, as you said earlier, and then everybody will pay their taxes because 99% of people don't want to cheat

i don't want to cheat on my taxes. i don't need that headache i want to be free to go make more money that's what i want to do i don't want lawyers chasing me. >> and that benefits all of society. when we're creating wealth in a society, everyone is benefiting. and if we could make it simpler for corporations and individuals, money that's spent on compliance would go to the productive side of the economy. >> adam, as we've been saying here, we can have that debate, but i think this is a different conversation here. adam, i have heard you talk about what you call the rule of law. >> right. >> you talk about the rule of law. there is a law in this country which says you have to pay your taxes. the idea that you don't want police on the street to actually verify that people are paying the taxes doesn't make sense to me >> look, the irs exists -- i talk to many people who pay a lot of taxes i think someone just said a little while ago they don't even know what their effective rates are. there's a lot of people who have no idea how much they're paying in taxes because they have an army of lawyers and accountants that are doing their best to figure out, and their job is to figure out how to lower their rates as much as possible.

>> that's me i don't know i don't know my effective rate -- >> and as long as we have a diseffective system, this is going to continue. >> humphreys county, tennessee, or alabama >> mississippi >> good to know. >> all right. >> get that right. >> thank you guys for the debate robert, thank you. >> thank you, guys. >> it's a longer run we'll do it again. when we return, fiat chrysler teaming up with renault to potentially become the world's third largest carmaker that story and much more when "squawk box" comes right back. my experience with usaa has been excellent. they really appreciate the military family and it really shows. with all that usaa offers why go with anybody else? we know their rates are good, we know that they're always going to take care of us. it was an instant savings and i should have changed a long time ago. it was funny because when we would call another insurance company, hey would say "oh we can't beat usaa" we're the webber family. we're the tenney's we're the hayles, and we're usaa members for life. ♪ get your usaa auto insurance quote today.

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a major shift in the auto industry fiat chrysler is proposing a merger with french carmaker renault that would create the third largest automaker in the world. salt in the wound. the fight to preserve state and local tax deductions that were decimated by president trump's tax law. and squawkers and talkers. new data on how much time we're spending on facebook, along with disney's magical box office weekend, and an nba ratings snafu. the final hour of "squawk box" begins right now ♪ it's my life, it's now or never ♪

>> 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 kernen along with becky quick and andrew ross sorkin this is, like, he's yelling from over in new jersey, i think, this guy, isn't he even though we're showing times square our guest host today, "shark tank's" kevin o'leary. futures indicated slightly higher, up 61 points this morning. that's not sharply, but better than we've seen all session. it was actually up three or four, five the other averages were actually down earlier, but now we've got the s&p indicated up five and the nasdaq up 16 1/2 maybe it's because people realize, wow, i can borrow money really cheaply the ten-year, 2.29%. >> wow. >> it was 2.28% earlier. pretty interesting. plenty to get to on the

potential full merger of fiat chrysler and renault in just a moment, but first, let's get you caught up on other stories that investors will be talking about today. alibaba is reportedly debating whether to offer new public shares through a second listing, this time in hong kong. according to reuters, the company could reportedly raise up to $20 billion. alibaba is currently working with financial advisers to offer the listing as early as this year. memorial day is over and the summer driving season is officially under way americans are finding a little relief as gas prices have eased following their biggest seasonal spike in eight years aaa says that the average price of regular unleaded is now $2.82 a gallon that's down 2 cents from last week and 14 cents from a year ago. a and a high-profile trial begins in oklahoma today the state says that johnson & johnson's marketing practices are responsible for widespread opioid addiction this is the first of 2,000 lawsuits brought against drug companies over opioids over the weekend, teva

pharmaceuticals said that it had agreed to an $85 million settlement with oklahoma over opioid-related allegations now to the big story of the morning, the possible merger of fiat chrysler and renault. phil lebeau joins us this morning with the details phil >> reporter: andrew, this story is developing quickly and the negotiations developed very quickly over the last weeks, including over the weekend so, here's the proposed deal from fiat chrysler this would be a 50/50 merger, equal partners, at least on paper, between fiat chrysler and renault. annual sales, if they come together, would be 8.7 million vehicles they would be number three in the world in terms of global sales. $8.9 billion net profit in 2018. yesterday the ceo of fiat chrysler, mike manley, sent out an employee email regarding this proposed merger. in that email, he said, "in group renault, we found a like-minded partner who sees the future as we do. we've worked well to get this far and this would truly be a

merger of like-minded businesses on an equal footing to create a world-leading company. all right, so, there's going to be hurdles, as always whenever you have a merger of this size, a potential merger of this size. so, some of the biggest hurdles that are out there -- let's start, first off, you've got france and italy government approvals, especially with france it is a large stakeholder within renau renault. in addition, you've got the labor unions, especially the european labor unions. they're saying in this deal there are going to be no jobs that are lost. that's a key agreement that has to go out there in order for the late european unions to buy into this deal. and then ultimately, what happens with nissan/renault and that alliance? by the way, as you look at shares of nissan, remember that its stake in renault, which is currently 15%, it would be cut all the way down to 7.5% basically, everybody who's a current shareholder in renault, their stake gets cut in half when you look at renault, the board has already reviewed the proposed merger.

i think we're probably going to hear something from this board relatively quickly there's no time frame out there. nobody has said, look, we're going to vote by the end of the week but you can bet the way this deal has been coming together, it is likely that we will see some kind of a vote from the board relatively quickly and then finally, fiat chrysler as you take a look at those shares -- remember, in order to make this deal, the valuations become equal there's going to be a special dividend, $2.88 billion dividend that would be shared by the stakeholders if the deal goes through. so, the real wild card is what happens with the nissan/renault/mitsubishi alliance. >> all right that's something interesting development over the weekend kevin o'leary thinks it's awful, phil i'm sure you've heard his comments. >> i did hear what he had to say. >> not awful, but is it two drowning people holding onto

each other is that basically what the analogy, kevin >> it's a team of the misery because these are middle-market companies that are all going to over time have their margins crushed as this becomes a commodity, a box with four wheels it's a miserable space i don't predict investors will make any money on this deal. and guaranteeing a government you're not going to fire people when the whole deal is cost-cutting of course they're lying to them. they'll be whacking french employees the minute they put this thing together. you know that's going to happen. then they'll get litigated it's a's miserable, horrible sector let's tell the truth about it. >> for more, paul ingrassia is editor at the institute for automotive research and cnbc's mike santoli, who -- do you have a renault? >> i do not. >> have you ridden in a renault? >> yeah. >> have you seen them? how was it >> it's going back 25 years. >> i had one in high school. it dlacollapsed all the time. >> you had the convertible, right? >> no, it was a little white box

and that thing caused me more heartache and headache trying to get around i learned how to, like, fix my car a million different ways because it broke down so often. >> o'leary coined the term poop box. was it a poop box? >> i think he said a poop show. >> but you can interchange it anywhere with the other word, right? >> that company will be a poop show for five years as they try to struggle -- >> i didn't realize they had to get all of the government approvals. >> it is a nightmare from hell if you wanted to dream up a place to go if you've been bad on earth, it would be to work at this company. >> paul, how many renaults have you got and how many are in the shop >> you know, i don't have any, but i do remember back in the 1980s when, you know, when they were in america through its ownership of american motors, they made the renault alliance -- >> that's what i had >> which was nicknamed in detroit, the renault appliance, by the way. >> that's what i had it was a white one, looked like a white box. >> yeah, it was. >> american motors and renault, that partnership made in heaven,

or hell, or something. maybe you could put it one of those pacers or a gremlin. oh, my god i'm dating myself. what do you think, though, overall? is this good for the world if these two companies sort of, i guess, are going to be able to rationalize operations or something, right >> well, to a certain extent obviously, the issues that kevin raised with the unions and with the governments are going to be there, but there are other things they can start with, like purchasing and that sort of thing. i think, actually, one big, important point here -- this is a real coup for john elcan, who is the heir to the yelli fortune who controls one of the world's great fortunes john took over custodianship of the family fortune in his 20s. he's still now only in his 40s he's a thoughtful guy, and i think he's looking out and saying, gee, you know, there's te technologic challenges, there's

trade challenges to being in the car business and ultimately, this probably sets the stage for the anyelli to reduce or even end their involvement over time in the automobile business. if you're going to own 15% of a multinational company, that's much easier to exit or wind down your position than if you're the major shareholder of fiat, an italian industrial icon. i think john elkann has proved himself to be an indebt custodian of the anyelli fortune and this is another important move for him in managing that fortune. >> that's a good point. >> right. >> hey, paul, what are the chances that you think this transaction ultimately gets approved >> oh, i think all the signals are pretty high that it is approved i mean, when the renault m management says we'll think about this, quote, friendly offer, and they call it a

friendly offer -- and also, don't forget, renault is feeling a little jilted by nissan right now. so you know, it's a little bit of revenge, if you will, on nissan well, you don't like us, we've got another girlfriend over here. >> speak to that alliance, or what's now a complicated alliance, clearly, and how you think nissan is going to ultimately react to all of this. to some degree, we were talking earlier, it dilutes down the french government, which was always a big issue for nissan, but at the same time, it's going to dilute down nissan's overall influence in the larger alliance >> yeah, i think, you know, this could go a lot of different ways, to be honest with you. i don't think nissan really minds being diluted in its ownership and involvement with renault, frankly it's not really a good situation right now. this alliance did, you know, produce real benefits over time, but feelings aren't good on either side right now. so i think that, you know, to the extent that this gives nissan a way to sort of wind down or reduce the alliance,

maybe to focus it more on just a few cost-saving issues -- nissan might actually sort of welcome that. >> mike? >> it's the kind of deal where everything kevin says is the reason you would never start a car company today and you would never actually put fresh capital into it. but if you're in it and you have huge scale, even greater scale matters, the way that the global auto stocks are valued right now, it's not just like, hey, we may be past peak cycle it may be the last cycle of the sort we knew before. >> michael, how do you get around the problem they're making a utility. >> yes. >> a box with four wheels -- >> scale is the way you try to do it. and look, it's funny, though, because we do have these residual kind of opinions and biases about the brands and about the quality. cars might be the product we use every day that have gotten better more than any other in the last 30 years, in terms of reliability, in terms -- so, the platforms work, and if you just can bolt more volume onto them, they probably could be okay for a while, but are they going to be true to their word and not cut capacity because the world wants less

auto capacity. >> well, that's true to governments, too. >> you're takinging about fix it again, tony? is that -- >> all of that found on the road dead, if you want to go back -- >> i know. i didn't want to say -- you know, i'm not saying anything. i loveitaly. >> i got it. >> hey, paul, you know, salvini, speaking of italy, there may not be -- all of these cross-border deals -- what if all the borders come back? >> well, you know, one of the things that's really interesting is that in europe, politics and business seem to be going in different directions. >> right that's what i mean, yeah. >> on the political front, you know, there seems to be a feeling abroad there for less, quote, europe united, countries more wanting to go their own way with nationalist movements, that sort of thing. the messages out of the european parliament election were mixed, but that's certainly one strong thread meanwhile, you have puget acquiring opal and boxall from general motors and now you have this cross-merger deal so as usual, europe is kind of a

confusing and baffling and going in several directions at once, but it does seem to be the politicians and the businesspeople are taking opposite tacks right now. >> phil, you had some comments >> i think one thing people have to keep in mind is, while i understand what kevin o'leary is saying in terms of if you're an investor, do you really think you're going to see these investments grow say over the next five years as much as other areas where you could put your money? what you need to keep in mind from the perspective of the automakers -- they need to do these types of mergers and get bigger in order to grow their war chest, because they're going to have to make massive investments in autonomous vehicles over the next five to ten years. and who knows how that's going to pay off, whether it will pay off, but you'd rather be in a position of strength in terms of size and volume of sales in order to feed into that investment than you would want to be where they are currently, which is big but not big enough.

>> all right, phil and paul ingrassia, thank you you, mike santoli, you go with the found on the road dead there was a fixer -- >> correct as the son of somebody who used to be a ford mechanic at a dealer, i've heard them all. >> my dad really did come home with the gremlin. >> what it says is don't invest in the equity because it's going to be a place where money goes to die if they put out a bond esche, a five-year piece of paper with a security on assets, i'd invest at 9%. >> 9%? >> at least. >> auto companies have plenty of debt outstanding you don't have to issue a new one. i think you can find one -- >> french government not a chance in hell. >> you think you're warren buffett? >> no, i'm just an investor looking to scratch out a living. >> 9%? you'll get nothing and like it. >> yield bonds around 9% -- >> there you have it i rest my case. >> yeah, buy those. all right, when with

committcome back, a clear look at the negative effects of president trump's signature tax law. we're talking about the states that are realizing they got the short end of the stick and the taxpayers in those states that are angry. is there anything that can be done, or are these states stuck with a permanent tax hike? we'll be joined by representative josh gottheimer stay tunedo quk x"n bc t"sawbo o hey! i'm bill slowsky jr.,

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it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. ♪ wake me up before you go-go, don't leave me hanging on like a yo-yo ♪ president trump concluding an official visit to japan but making some news on china and the trade war with that country. eamon javers joins us this morning from washington. >> reporter: good morning, andrew the president is in the air on his way back home to washington, d.c., after spending memorial day weekend in japan was memorial a ceremonial and relationship-building exercise in japan over the weekend, as you see the president and shinzo abe, the japanese leader, hitting the links for a little bit of golf, building that

relationship between the two men. and there, the president presenting the new presidents cup trophy for sumo wrestling, the president taking in some of that before meeting with the emperor of japan, the newly enthroned emperor of japan then also, along with shinzo abe, meeting with some of the families of those who had been abducted by north korea. so, a dramatic moment there during the course of the weekend. the president also, as you say, laying out some of his thoughts on where things stand in the relationship with china on trade. here's what he said. >> i believe that we will have a very good deal with china sometime into the future, because i don't believe china can continue to pay these, really hundreds of billions of dollars in tariffs i don't believe they could do that you know, businesses are leaving china by the hundreds, by the thousands, going into areas that are nontariff, including the united states, by the way. >> so, the president there continuing to suggest that the

chinese are paying the tariffs and in fact, actually, who pays the tariffs are importers in the united states. nonetheless, the president suggesting that that's causing business pressure on china and that companies are going to leave china to other areas of the world, and that will make them, ultimately, agree to a deal but not really putting any specific time frame on when he thinks he can get to a trade deal with china, simply suggesting there could be a deal at some point into the future, guys so, not a lot of specifics here over the weekend. >> eamon, thank you very much. >> you bet. >> eamon javers. all right, let's turn stateside to economic issues that are facing those specific states we're talking especially the negative fallout from president trump's signature tax law on some states. some in congress say that their constituents are being hurt by caps on state and local tax deductio deductions joining us now is congressman josh gottheimer from new jersey. good to see you this morning. >> how are you >> good. we've spent a lot of time talking about the unintended

consequences of the new tax law, things like the gold star families that ended up paying more on taxes. i don't think this was unintentional. i think this was very intentional to try to punish some of the states where you did see blue states and where you saw high taxes coming in what do you think? >> 100%. in fact, i have colleagues who actually admitted to me they were trying to stick it to a few of the states, including mine in jersey and secretary mnuchin was before the financial services committee last week and i asked him what's the impact of s.a.l.t. been, and he said they're seeing it having an impact on several states and they're monitoring it closely. they admitted what we already know, that it's hitting some states hard and the accountant association in new jersey put out a survey in the last couple weeks since tax day saying that 60% of accountants are actually recommending to their clients that they consider leaving new jersey >> wow. >> because of the s.a.l.t. tax so, we've got to actually -- we need to really, really not let them gut it and put basically a double taxation on us, which had a huge impact on my district.

>> i feel your pain. you are my congressman i live in your district. >> i know. and i want you to stay. >> but i will tell you, i understand the arguments from the other side saying, why should state and local areas be able to raise taxes so much and then get a rebate from the federal government what's the response? >> historically it's double taxation you can't tax people twice on the same income, which i agree with and remember that our state, new jersey, like others, greatly supports these other states. i affectionately call the other states moocher states. in our district, we've gotten back historically 33 cents from every dollar that goes to the government mississippi gets $4 back for every dollar we're talking about stopping double taxation, making sure we're able to actually deduct it and we're a more expensive part of the country it's more expensive to operate here there's no reason you penalize new jersey for that. it's time we actually get real tax relief, instead of continuing to get handouts in these other states at the cost of some, like new jersey and new

york, connecticut. it's really absurd we have a $100 million-a-day economy here, right? a $100 million-a-day regional economy. to keep taking shots at it and try to undermine our national security here is outrageous. >> i know you're chair of a bipartisan caucus and i'm guessing you have bipartisan support for this, but i'm also get guessing you only get that from five states -- california, illinois, new jersey, new york and connecticut, correct >> california, maryland, illinois -- >> maryland. >> all of the states you mentioned. it's actually broader than you think because there's a principle against double taxation, which is what we're facing here. i think everyone wants tax relief they know we've gotten stuck it hurts the national economy when this part of the country is ailing and we were -- new jersey was the number one out-migration state in the country last year, and why? because of the tax hike, because of s.a.l.t we need to actually reinstate s.a.l.t. fully, get those taxes down, and you know, that's a big, big priority for me

>> so, do you have support in congress, enough to actually do that >> i think we've got big support in the house the senate is more challenging but you know, interestingly, something else i talked to secretary mnuchin about last week and we've talked about this before -- the charitable tax deduction, which is something that 33 states have been utilizing to help give tax relief for decades now, like alabama and mississippi. and the irs has put this on hold new jersey passed a law last year to allow us, our states, if you can give money to your town, to actually get charitable tax deductions for things like law enforcement and education, like other states have been doing and i asked the secretary about it last week, and he admitted that these other states have been taking it and they're trying to figure out a way to preserve it, but he tended to imply that he was going to try to protect it for the other states that have been using it for years. >> yeah, treasury's already put out -- >> provisional guidelines on that. >> -- provisional guide lines saying forget about it they look at it as a tax dodge, if you're going to give money to your local jurisdiction under the guise of charitable foundation and then -- of

charity -- and then be able to write it off they say that's not the case. >> here is on the problem they ran into -- 33 states have been using it for decades, and now those states, like alabama, mississippi and others, georgia -- >> red states. >> right, red states are saying, whoa, wait a second, you can stick it to them, the blue states that we've stuck it to already on s.a.l.t., but you can't touch our deductions, right? so now suddenly it's gotten more complicated for the treasury department and for the irs and so, and secretary mnuchin admitted that last week to me that this is very complicated. so, i think that's an area to fight. we've just got to keep looking for ways to fight back to actually cut taxes for us. and you know, later today i'm actually going with some members of the chamber of commerce and labor to talk about infrastructure and getting more reasons to get that going because that's another great bipartisan area where we've got to get things going because that's a big economic factor on our region as you know, because you drive here and you know what it's like. we've got to figure out ways to get our -- we've got to get our infrastructure fixed, get our tarens down, basic things to keep the economy humming.

>> josh, who's your dream ticket are you a man without a country? i mean, you on a trump re-election bid or -- >> because i work with both sides to get things done that's okay now. >> give me one give me your top three -- >> i've got a home-state guy who's doing really well, cory booker, and we're all behind him here. >> to get the presidential nomination >> yeah. he's running for president. >> oh, i know. i mean, i know i saw that yeah so are 21 other people i think he's like -- >> it's a crowded field, but i'll tell you what i'm focused on -- let's get our taxes down, let's fix our roads and bridges, look at making health care more affordable there are things we need to get done here and that's what i'm focused on. >> congressman gottheimer, great to see you. >> infrastructure, all these investigations, josh you're not getting it. i'll say it again, you'll get nothing and like it. thank you. coming up, a big weekend for the box office and another hit for a studio that's already seen more than its fair share this year i guess talking about disney they didn't -- "dream book"

wasn't disney. i know that. we'll tell you which philly had moviegoers buzzing and how much time are we spending on facebook new data this morning doesn't ande well for the social media git. stay tuned you're watching "squawk box" on cnbc i consulted with your grandmother's doctor.

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♪ welcome back to "squawk box," everybody. this is cnbc, and we are live from the nasdaq market site in times square here are the stories that investors are going to be talking about today. nasdaq has dropped out of the bidding for the oslo stock exchange they had been competing with euronext for control the move comes after regulators rejected nasdaq's argument that a bidder should buy at least two-thirds of the exchange euronext's business is for a little over half shares of activision blizzard are rising in premarket trading. goldman sachs upgraded the stock to buy and added it to its conviction buy list. goldman is optimistic about the video gamemaker's new and

upcoming games that stock is up by about 4% and we'll be getting an updated snapshot on the housing market in 30 minutes. the march case-shiller index on home prices is expected to show a 2.5% year over year increase home prices had been up 3% in february from a year earlier. time for "squawkers and talkers. news out this morning, research firm e-marketer reducing its estimate for the amount of time that americans spend on facebook and snapchat joining us now to talk about it is ed lee, "the new york times" reporter and cnbc contributor, and our own julia boorstin, who is with us on the west coast good morning to both of you. down three minutes that's the number, guys, right engagement -- >> fewer facebook time. >> but i didn't know people were spending 40 minutes a day, apparently, at least on facebook -- >> aren't you on 40 minutes? >> not 40 minutes. how significant is this really >> i think -- >> well -- >> go ahead, julia julia first. she got up early for this. >> i think what's interesting is that e-marketer is lowering its

forecast for facebook over the next couple years, also saying that snap engagement is going to be flat but saying that instagram engagement is going to continue to grow by about a minute every single year it's also worth noting that this is for adults 18 and over, so it does not include some of the younger people who might be using snap but what i think is really interesting and valuable is they say the declining engagement on facebook is directly seems to be a result of facebook pulling back the amount of viral videos that are included in the news feed facebook has talked about trying to make time spent more valuable, not as much time spent wasted on silly videos that aren't valuable or about your friends sharing content, and it seems like these changes to improve the quality of time spent on the platform are definitely reducing the quantity of time spent. >> i think it -- i mean, i agree with everything julia said i think the other aspect to be aware of, the context, is zuckerberg is trying to switch the platform from being sort of a news fed generating thing to

interacting with friends and family, direct messages, group chats, that sort of thing. so, presumably, if you're spending less time looking at these types of videos, maybe you're spending a little bit more time talking to friends and family directly. how you monetize that will be the hard part. >> how much do you think that the fake videos -- for example, the debate that took place on friday around this fake video on nancy pelosi -- >> that's right, they took it down. >> -- factors into the decision-making about users about being engaged on the platform do you think people look at that and say, i don't want to do this, or do you think they say i don't understand this debate and i don't really care and i'm just going to use facebook anyway julia? >> unfortunately, i don't think the debate about whether or not this video is real is necessarily impacting the decision of whether or not to share it seems like one of those things where facebook acknowledges this doctored video of nancy pelosi was fake and their solution would be to downrank it, to make it not appear as frequently in its news feeds,whereas youtube pulled it down or has been trying to. so, this is controversial.

i don't think the average person is really engaged in this debate, and i think if there is a salacious video, people are more likely to watch it and click and share on it, and i think that says something more about the sort of addictive nature and the sort of compelling nature of the more salacious content than it does about people really being dialed into what the controversy is >> by the way, i thought this was an easy win for them to just have taken it down and i understand that rationally, right, the rational actor inside facebook is saying, if we take it down, it doesn't matter, it's going to go here and there and all of this, but -- >> it's also, there is philosophically for them, they see it as crossing a line. you've sort of censored something. so, the downranking is sort of an easy way out. it's also what they've been doing, so consistent to their measures in the past i think if they don't figure this out going forward, it will continue to hurt them because they don't seem to have a consistent sort of reliable measure for when things go up, when things go down, when things get downranked, and it's a hard thing to figure out. they have to figure it out. >> for all of this noise and all of the focus for the last six months on facebook, i still own

this stock as i did six months ago for one reason -- i look at the spin that my company's put into this platform each month, each quarter, for the back end of this year we're up 14% we don't stop -- >> on facebook or instagram? >> facebook. >> facebook. >> we want to do more on instagram. they're changing the algorithms all the time we want them to be able to put a link directly into the copy there because we want to advertise on it. but facebook, show me where else you go for geolocked advertising with price differentiation >> facebook really, really owns that that is right. >> do you think everybody that you're getting is a real person on facebook? because i've seen some complaints just in the last two weeks about how companies think that these are fake accounts, that they're being charged for >> becky, i don't care i get revenue. i don't care >> you get sales you get returns off -- >> that's all i care about it. >> -- off the investment is your point. if you're buying into facebook shares right now specifically, i think you're really buying into

instagram. that's where future via l you is coming from. now to another topic, disney's magic at the box office "alladin" expected to top $100 million over the long weekend when final totals coming in, leaving disney with four of the top eight domestic grosses of the year that's according to box office mojo we want to talk more about disney's dominance and also there were a number of articles written over the weekend, julia, and i'd love your opinion on this, given that you're out in hollywood, about films like "book smart," which got lots of rave reviews, but under $10 million at the box office. nobody's going to it. >> well, here's the thing, "alladin," a huge success, $113 million over the four-day weekend at the box office. this is key for disney because it shows their strategy of adapting animated movies into live action movies is working. "dumbo" did not do so great and there were questions about what "dumbo's" more disappointing performance would mean for "alladin," and then "lion king," coming out later this summer i think the thing about "book

smart" is these are smaller movies that don't have a big opening, but if they have good reviews, they can continue to hold on for many weeks over the course of the summer but ultimately, andrew, what we're seeing here with these small companies is that people go to theaters because they want that big, expensive experience and when you have a movie like "book smart," many people may say i may wait to watch that at home. >> do you think it becomes a bifurcated market, that there will be eventually the netflix, hulu, amazon market for even what might be described as adult films, but not in that respect, and then there are these big-brand films that you go to the movies for >> i think julia's right, you want the spectacle in the theater, which lends to "alladin," but "book smart" becomes a streamer it's good to have it in theaters to market it, but it might have a bigger, better life in streaming and that's ultimately -- >> if it first came out on netflix, we might have all been talking about it, though that's what's interesting. >> well, the question is -- >> yep, go ahead.

>> the thing is, if you release a movie on netflix, you may be less likely to talk about it because there's so much content on netflix. >> that's true, too. >> hard to stand out. >> then it's harder to stand out. releasing it in theaters, you get it to qualify for awards and then also, there is this demand for, maybe not everyone's going to see -- maybe if there is counterprogramming, you will get some piece of the market that still wants to go to the movies. final topic, thursday is the start of the nba finals between the golden state warriors and the toronto raptors. mr. wonderful's very happy about all this, but tv viewers in toronto don't count towards u.s. television ratings, and this could have a big impact, i would think, on all of the sort of constituent shareholders that are around the nba and sponsors and advertisers. is this not a problem, ed? >> it doesn't mean people aren't watching it. people in canada are watching these things your brand message ultimately gets across, and we've seen this

in the past. there's nothing new around that. at the same time, within sports media, i think the future for a lot of both leagues and for networks and for all kinds of plays is going to be in-game betting, betting of some sort is going to drive so much more activity -- >> sure, but either smaller markets or markets like this that aren't captured become a problem -- >> but you can capture it in other ways -- >> toronto's the fourth largest market in north america. it's a huge city. >> massive. >> now if you're advertising in the u.s., you get a free feed in there. that will be fixed with the nafta agreement. it happens during the super bowl, too. it's a big beef with the canadian network. >> okay. jul julia, who are you rooting for >> it's interesting because adam silver, the nba commissioner, was talking about the fact that nba ratings are down in part because of the west coast games being so late and they'll look into possibly making some of the west coast games earlier so they can get more people on the east coast to watch so, i think there are a lot of things at play. >> there you go. >> anyone but golden state. >> julia boorstin out in california, waking up early for us

thank you, julia thank you. >> i'm with you on that, ed. just too much for one team >> dominance is not good >> i'm loving this >> kawhi is, watching that guy -- >> he's magic. >> he's got a vertical jump. >> let's bring on the next team. you don't even have to mention -- >> how does he stay up that's what i don't understand he's there for a while it's weird might be the shoes. coming up, when will the markets see its next big pop despite ending last week on an up note, the dow is down for five straight sessions, its longest losing streak in eight years. what signals should you be waiting for to know that the markets e imfoa venearpre r mo o way or the other way or the other a bigger move. you definitely want to take advantage of all the benefits you can get. 2/3 of employees said that the workplace is an important source we'll discus

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welcome back to "squawk box. under an hour to the opening bell on wall street. dom chu is looking at the biggest movers in the stock market before the opening bell dom? >> all right, good morning, andrew let's start with shares of beyond meat, up about a percent or so on 75,000 shares premarket volume the recently ipo'd maker of plant-based meat alternatives getting started with analyst coverage all over wall street. jpmorgan calling it overweight rating with a $97 price target, saying the growth opportunity is extraordinary and they predict that at least one large fast-food service chain will be a customer by the end of the year analyst teams like goldman,

credit suisse have more conservative and neutral ratings. shares of apple, though, are kind of moving slightly positive around 115,000 shares per premarket. analysts at citi have cut their price target to $205 from $220 and kept their buy rating, citing among other things an anticipated slowdown in demand for iphones in china, given those confirmed u.s./china trade tensions but overall, they remain bullish on the growing services business at apple and then there are shares of southwest airlines, which are down fractionally on very thin premarket trading volume analysts at ener core on friday downgraded shares to in line from outperform while maintaining their $60 price target, citing its greater relative reliance on the currently grounded boeing 737 max jet. and we'll end with a quick check of what's happening with drug stocks johnson & johnson, pfizer, eli lilly among those stocks started with coverage by goldman sachs with buy ratings they say that while volatility

from pricing and drug policy headlines ahead of next year's elections could be near-term issues, they do remain fundamentally positive on the overall outlook for biopharma, so those shares, you can see there over the course of the past year moving pretty steadily to the up side joe, back to you. >> dom, thanks. let's get now to what dom talks about individual stocks. let's talk about the overall market we have katie stockton what the technical signals are telling us we had a so far successful test in the s&p of the initial support at 2,800 but katie, your short-term indicators remain supportive of the pullback, which means not supportive of the market, but you think it's got further to go, maybe, and we get through 2,800 and the next level been 27, 22 >> that's another important level for the s&p 500. the pullback, it's not accidental that it started right around resistance at that september 2018 high, in my

opinion. that's very natural to see some kind of pullback at resistance so i do view it as constructive, however, not really over from a short-term perspective when you look at the momentum of the market, it is weak still, of course short term, but immediate-term, it hasn't really been affected yet. >> and you still continue to view it as a counter trend, so that means we're in a bullish overall -- >> right intermediate term trend, it's still very much intact the pullback is really a retracement for the major indices. even sectors that have lagged, like semiconductors, not a lot of breakdowns there. that would be when a stock takes out a support level. we're still only seeing breakdowns among the laggards, looking at mattel or gap stores. those are the stocks that are breaking down, and that to me is not an issue for the broader market >> 2.18% is the next support for

the ten-year note. >> right. >> can you tell me fundamentally what's happening i know you can't, never mind. >> i wish i could. >> you don't see that and say this is crazy, given where the gdp seems to be, or maybe it's not or every friday, first friday of every month we see some pretty good jobs numbers? it's weird to be at month and e number is weird to be 218? >> purely a technical view it is amazing ten-year treasury yield really mind these levels i think that's what we have as a gauge of the next level. >> 218, 229, a month or two it was 229. >> sounds crazy then too, right? >> nothing is surprising all right, you agree that we have more work to do and the sentiment indicator, i heard they gotten pretty negative. >> right

>> not negative enough to keep us above 2800. >> in april we had an extreme bullish reading. we are not yet over that extreme, that's what we'll be looking for. sentiment to get a little more washed out and momentum for the daily indicators that we track or flip positive again that'll give us confidence in adding exposure. that could occur in 2800 or 27 or 22. it is less important, you have to see that set up though. there is similarity between the current environment and for the mid 2016 if you remember the market were pretty terrible, too. there is an indicator, i do think eventually new highs are in store for the s&p 500 it will keep that bullish. >> do you add "shark tank"

participants over there? do you have anyone coming in talking about what's really happening instead of all the hot air? >> over 35 companies -- >> no technical knowledge whatsoever would you like to know something you think of investing in and everybody thought about it >> i will tell you what i look at >> cash flow of american companies held by men and women in every state this economy is on fire. i said it multiple times and i give it out to the deregulation. >> wait a minute. >> i do cup cakes to greeting cards and high-tech industry, i do it all.

renaissance. >> you canadian,are canadian, ia you can use french words >> are you available to go with cuban and o'leary and stuff? >> i love it >> i think you would get eaten alive on "shark tank." >> i hope not. >> it would be tough >> wow >> i think that's a challenge. >> we would love to have you there. you got to take off the gloves and ready to stracratch it out. >> you need an investment? >> oh gosh, i may need an investment >> here we go. >> we are going to make some deals here >> okay, katie, thank you. >> meantime, i want to bring you a scoop from our cnbc colleague. citigroup ended up pulling out

the bank made the decision mid doubts that it can earn a significant profit on the partnership. this happens before the announcement that tim cook unveiled new credit card deal with goldman sachs apparently a number of banks jp morgan and chase looked at bidding on this contract with apple. citigroup in particular, they decided to walk away from it and worried because of some of the consumer friendly component of what they're trying to build and no fee and tech and keeping you from paying all sorts of fees that's difficult to make money >> goldman sachs is looking at this to get in front seat of the demographic. >> for goldman -- >> building a franchise and

getting a consumer franchise >> it fits with their market strategy >> right, their big goal is to build that up. >> respective of how profitable it is. >> i tried to send some real cash in there, no deal >> i thought you needless than $10,000. >> for those of you who are dumb like me on their iphone trying to see if you can seen up on the card on apple. even though it is announced but it is not on their phone yet it will roll out this summer >> exactly >> all right, let's get over to jim cramer to the new york stock exchange jim, you are back. >> i got back late last night. >> a beautiful day here yesterday. i don't know about today what's up and you know it is already tuesday i have been told

which is good. >> well, look, i thought that goldman discussion was very interesting. the build out of the credit card was incredibly typical citigroup has a fantastic business goldman needs to spend more money. apple will be overwhelmed with orders if you are overwhelmed with orders and you get problems with regulators, i am not saying goldman is bitting more than it can chew it is harder running a credit card operation than anybody realizes >> what else, jim? we are down five straight week, it is all about china again? this is not going to be probably not knowing until the end of next month at least if we are lucky. >> yeah, i think that's true we are all kind of hostage, people are looking for a lot of

companies nothing to do with china. but i urge people not to give up but not get too excited of this market things will get tough. >> jim, we'll be watching, we'll see you in a couple of minutes don't miss two big interviews don't miss two big interviews tonight with what do advisors look for in an etf? don't miss two big interviews tonight with i tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research.? my reputation depends on it. flexshares etfs are designed and managed around investor objectives.

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welcome back everybody, let's get a quick check on the markets. the nasdaq is up by 14 kevin o'leary is our guest, it is great to see you. >> thank you >> thank you for being here. >> i am going to get this watch off. >> it is such a good watch >> we are out of here, "squawk on the street" is next ♪ >> good tuesday morning, hope you had a good memorial weekend. i am carl quintanilla with david faber and jim cramer at the new york stock exchange. futures coming down at five weekly losses.