>> yes, some of that money is going to be spent on capex. you cannot avoid capex.t or postpone it. companies have done that, that money has got to -- it has got to buy equipment and increased plants. >> what is the pharmaceutical m&a binge of this week signaling? >> the government is a big buyer, sellers need to bind together to get more leverage against the government. >> howard ward with gamco. the president continues his tour of asia. he is in korea and he missed to malaysia and the philippines. this is "bloomberg surveillance." stay with us. ♪ >> good morning, "bloomberg surveillance." a busy morning. with me as scarlet fu and adam johnson. our guest host is howard ward, chief investment officer of growth equities. a busy morning in international politics. adam johnson here with our top headlines. >> rising rates have pushed up 14 year lending to a low. higher rates, lower lending. this is according to the newsletter inside mortgage finance. fell 58%.of loans the average fixed 30 year home loan has risen almost a full percentage point in the last year to 4.5%.

these businesses looking at deciding whether or not to invest in capex or go the m & a route, go for the cheaper, low-cost option in m & a. that's what we're seeing surely. >> it's the lower risk option. it tends to deliver more quickly. it gives you the pr boost. really what we would like to see companies doing with their accumulated cash piles is not necessarily m & a, it's invest into future capacity. that's going to give the economic recovery really the boost we need. let's face it, at the moment it's mostly carried by consumer demand. we need to get more of that industrial demand going as well. while we're encouraged by what the m & a tells us about increasing confidence levels amongst decisionmakers in industry, we would like to see that confidence also translating into capex. >> we talked about last year being the year of the buy backs. if i look at the s&p 500, these companies are still spending about the same amount of money investing in capex that they are in buy backs. it's still the year of the buy backs surely. >> that's why i'm not overly totally bullish on equities as

we think capex will be the next step tore investing.s interesting about this m & a cycle, it's been creative for at choirer. we've seen the acquirer stocks go up. yesterday you have the announcement with pfizer and astrazeneca. you are pfizer stock up. corporate america has learned how to create value by purchasing other companies. i can tell you, becky, i have not seen this in my career before. not at the rate we've been seeing. >> you say flowers to come in may. >> that's correct. >> but there will be growth in the spring? who are you, chauncey gardner? >> you have april showers. >> the roots take hold, growth in the spring. >> yes. i should have brought you flowers, sorry, joe. >> i like to walk. >> things will blossom. we don't think the market has ended. >> all right. >> so you say you haven't seen this in your career. is that in terms of the m & a where the companies have gotten smart about making creative purchases? >> correct. fund managers that invest in m & a, particularly hedge fund land, they own both stocks. i've never seen

our capex was hugely increased from a year ago.ons was up, free cash flow was down because of capex. we are spending for the future. in particular, we're spending against the changed shell gas we have in the united states. these factories are all going down in texas and louisiana. we announced a new r & d center down there as well. when you expand the r & d, that's good for sustained long-term employment. >> i was going to say, that creates jobs, what kind of jobs is that going to create and when can we see those coming online? >> clearly the construction jobs are in the thousand, 3 to 4,000 for that particular type of plan, remember, dallas revenue is roughly $60 become that revenue base proliferates for every job we have, there is five in our supply chains. that's 250,000 around us, the supply in the u.s. gulf coast is seeing skilled shortage and labor shortage and we skilling the work force is the major issue we are dealing with. we need state of the art people that understand auto makes. that's the issue. the u.s. recovery won'

i see the market -- the economy as shifting from fed easing to companies spending money on capex or hiring. i think that could be the next leg of economic growth. that's what we're looking to hear from companies over the next couple of quarters. >> savita, thank you so much. from bank of america, merrill lynch. >>> now to general motors, a federal judge in texas has refrained from issuing an emergency order that would have parked more than 2.5 million g.m. cars that have already been recalled for defective engine switches. according to reuters, the judge needs more time to study the briefs and will make a decision in the coming days. everybody's been waiting for that decision to come out. meantime, so-called high frequency trading is still in the spotlight. the justice department now announcing an investigation into possible have hadd possible insider trading charges. u.s. attorney general eric older says they need to insure the integrity of the financial markets. >> this practice, which consists of financial brokers and trading firms using advanced computer algorithms and ultrahigh-speed

&alittle bit about capex and m i timidly.s it too dangerous to stock pick companies that may be part of m&a activity? >> absolutely not. m&a that, the sort of people used to be wary about will be that driven by financial gearing. we saw a lot of that in the charge of private equity in the lead up to the global financial crisis. all that money needed to be deployed to companies with much more leverage and risk. many of those cases then become unwound. the other issue is whether there are improvements available to companies through operational gearing. really important parts of growing shareholder value. >> thank you for your time and analysis today. on the forces shaping the global economy, i will speak to a former ecb board member. from the shores of lake,. talk to me about the biggest risk that you see the world economy facing. >> well, the economy is recovering. we have many uncertainties. china and asia is one. emerging markets and the european recovery, which is very fragile. main geopolitical , creatinge to europe uncert

th that has been running on where companies spend a percentage of their profits on capex. comes online, that's the piston that will get us to that 3% that's durable at that point. >> that takes ceos and corporations ramping up because of demand from consumers, though. why would that happen? >> it's not only demand from consumers but the capital stock ages, right, when you don't replace it. if you, for example, if you look at trucking in the united states, the rolling stock of trucking in this country is, i think, on average above eight years, you get above eight years, it gets expensive to maintain those rigs. there needs to be capex there. i think that is emblem atic of what we're seeing across the board. the other thing to keep in mind, there's generally an acquisition between employment acquisition and capex. >> the jobs growth has been much slower than a lot of people would have expected after the steepness of the decline we saw. >> indeed. if you look at those two data series, that break is pretty apparent. >> but you think that at this point the market does head up s

if we have a capex store this year across america, guess what? third of it has to come from are energy. these are the arms sellers to the energy companies. with crude and brent over 105 still they will spend money, i think. these are the guys selling them all the stuff. >> ron, what would $90 oil do to that thesis? $80 oil? does oil have to be here for all these things to work or not necessarily? >> i think these companies are much more financially astute than they've ever been in the past. they're going to pull back. they won't spend the money unless we keep crude at these levels. i would back up and say, okay, why is energy still only 10% of the s&p 500? because i think most folks expect $85 crude not $105 crude. that's why we've had this stealth bull market. however, we in aggregate, most people do a great job of cou counting production but don't do a particularly great job of counting where the demand is coming from, ie the emerging world. i don't think there's this missing barrel thing. i think the emerging world is using oil. it's being bur

. >> and the core capex putting the bears on their heels. >> bears and cats are going to tell you they covered -- no, they're disciplined. but they're in a cave -- they're in a den right now, and it's claustrophobic. >> we'll get cramer's mad dash as we count down to the opening bell. futures looking pretty good here. "squawk on the street" is back after a break. at delta we're investing billions of dollars, improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we'll raise it yet again. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. so, what'd you think of the house? did you see the school rating? oh, you're right. hey, babe, i got to go. bye, daddy. have a good day at school, okay? ♪ [ man ] but

we need to see capex and exports being the big drivers of growth, not thinking residential investment thing to bring us back out. that's not going to work. >> it's energy. energy is absolutely holding this economy up. if it weren't for the energy revolution, if it weren't for the fracing revolution we'd be in worst shape. >> easy. >> what did you say? >> energy. fracing. >> okay, fracing. >> if it weren't for the fracing revolution and the horizontal drilling and the harold hamms of the world, this economy would be in substantially worst shape, energy, which no one expected ten years ago has become the linchpin of the american economy. >> excellent. all right. anyone? you guys okay? >> i'm not okay. >> i just want to say i thought austan was talking about the idea that government being out of the way means government is no longer subtracting from job growth. that's a zero. it's not negative at least. is that correct? >> yes, that's what i was saying. that's absolutely right. >> the government has been subtracting, giving rick his wish. >> he did sort of imply the private sector has th

businesses finally ready to spend, which, of course, for all the bulls hoping for an acceleration in capexthat's what you're looking for if, in fact, this is true. i think more than half of businesses see an increase. it's actually the highest number in about four quarters. >> we'd say it's true. we've been looking for this. and we think that some of the words that we've been hearing from a number of activists over the last quarter would point to enough on the financial engineering and enough of the boosting dividends and now time to invest in the business. and we think the market's ready for it and so is the economy. >> what's different about this earnings season, we go into every earnings season with lowered expectations from analysts and then companies sort of not exactly any kind of spectacular growth. but what's different this time around is valuations have gone up. is there a disconnect between what we're seeing in earnings and what we're seeing in valuations? >> i don't think there really is on valuations. valuations are a little bit up. they're a little bit above the long-term aver

ex prices may discourage cap -- capex. >> what about those risks?sks are part of the result of the success of the u.s. oil production. there are many industries in the u.s. that benefit from lower energy costs, and of course there is one big client, the american consumer. on the net, for the economy, lower energy prices in the u.s. -- >> lower gas prices. >> relative to the rest of the world is a huge boon to consumers and to industry. >> in health care, you really like the biotech area. littlehas been looking a closer at biotech possibly being a bubble. >> there has been a lot of talk recently about whether biotech stocks are in a bubble. i will let you judge for yourself. in the white is the run up on the s&p. last year, the biotech index up 74%. you are seeing a correction in the past couple of weeks. they look pretty expensive if you look at the price-to-earnings ratios. is amazon territory. i point this out because this is a hot stock. investors asking not only if the stocks have run up too far, too fast, but if the drugs are too expensive. dru

that's a proxy on capex spending on tech. warren buffett bought that 35% higher. i would look at google. google is trading down. they don't give guidance. they'll do their call today. that's great, 20% top line. that is the type of company i would buy. there's concerns on expensive tech like amazon, like facebook. i mean, facebook fell from where it was -- i pixt o down, it fell back down to $17. it's currently recovered from its ipo price and has fallen again to 20%. certainly if you look at amazon, amazon -- >> i don't know if i want to deal with that volatility. >> that is the volatility. if you think amazon fell to $6 back in 2000, it's now $320. it's basically tresh eurasure a end of the rainbow. the potential long-term opportunity in all these huge growth tech stocks, i think these are early days. you've got to take the volatility. but the rewards at the end, i this i, are great. >> yes. okay. we have to to have a strong stomach for this. >> correct. >> is the point. what is interesting is looking at some of the earnings. we saw this with ibm and diageo and

now would be a good time to do m & a, capex and to expand overseas. it shows confidence coming through. >> you talk about the brutal sector stock, the rotation out there which we'll come to in just a little bit. you're staying with us for the show. >>> ericsson disappoints investors with first quarter numbers, suffering from weak demand in north america and japan. we'll cross over to stockholm to speak to the ceo on a first on cnbc. >>> we'll cross out to japan later on. >>> plus, could the bank of england's policymakers be moving closer to an interest rate hike? we'll have the minutes from their last meeting in around 15 minutes time. >>> and yum brands beats the street thanks to a new add campaign and menu in china. will investors eat up the stock when the investment opens state side? we'll ask a market analyst. ♪ [ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and priori

>> i like the sicyclicals that e geared to the capex spending cycle.next driver will be the acceleration in capital spending. it will be technology, industrials, financials. >> within technology, is that tied more to the old technology, much less to the new technology? >> it really is. it's where we think there's going to be growth, we see enterprise spending, even the hardware side. it's not some of the high flyer names that have come under pressure recently. it's the strong, steady growth names. >> good to talk to you. >> thanks, becky. >>> the fda unleashing new rules for e-cigarettes. it's a delivery stm for niystem nicotine? >> it's better than actual cigarettes. i'd hate to see anybody start smoking these things. i can understand it as a way to get off of real nasty smoke cigarettes. >> who would take up e-cigarettes? i don't know. nbc's tom costello will have a report on that, next. you have to become addicted to nicotine. you don't start that way. why would you even do that? >> we all pick up habits. wine is an acquired taste. beer is an acquir

we thought it was going to grow up, too, the capex number is disappointing. number, we have to wait to watch how first and play out. it's a disappointing number. we don't want to go too far because of the headline print close to zero. >> you think we can make up the ground to get to an average of 3% for 2014? >> we don't think we will be quite there. we look for a number in the 2.6/2.7 range. i don't say, hey, we need to step back and re-assess the views. it's a disappointing numbers. i say in under lying sense it feels a half a percent lower in things not that noisy. we will watch how much gets paid back into lift into the number on friday and beyond. >> let me ask you this, today we are expecting a statement from the fed. will a number like this put the fed on hold in terms of, in terms of another $10 million asset? >> do we go up to 65 or down to 45? >> we go down to 45. >> we are on automatic pilot on tapering. >> we want to do more of this, becky, because it's work sock well for a half a dozen years? >> the fed has been pulling money out on the assumptio

the more turn key our locations become and with the same finite supply of capex dollars you can openr thing is that before the great recession, we weren't as attractive to the best develop and the best centers. now it takes 35 years to reach this point. now we're the first call by the best shopping centers, best developments and that's exciting too. we want more retail real estate development. >> kip, we've got to leave it there. i know you're hoping for the growth and saw that in the call also for the better weather. both of you thank you so much for joining us from dallas, kip and jody of the container store. >> thank you. >> coming up on the program, starbucks ceo howard schultz will be live here at the new york stock exchange. you don't want to miss that interview. we're back after a quick break. . those little things still get you. cialis tadalafil for daily use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines,