Transcripts For CNBC Squawk Alley 20160422

Will have the ceo on later on. And at post nine, kayla and joining us is kara, and a lot to talk about this morning. Microsoft after missing the earnings, we heard about the pc we weakness and the Cloud Business and shares on for the worst day now since january of 2015, and even though kara, the pc business and everything that pcs have been through not terrible, would you agree . Well, it is not terrible, but one of the things is that the ceo has been enjoying a honeymoon period with the investors, because he is turning it around. There is tax implications, and it is a kind of the messy quarter essentially with a lot of numbers that are confusing wall street. He has been turning in great improvements around cloud which is a important focus of microsoft. There is great signs of the subscri subscriber signup on the various offerings, and things like that, but people are still focused on the pc issues and also the miss itself and the tax problems that they had there. Jon . Yes, and as kara referred to, the numbers were not that bad as you look at azures growth rate, and office 365 on the corporate side, and how that is growing and added more than 1. 5 million on the subscribers of office 365 consumer as well, so a number of the metrics there looking positive. Windows did not look as bad because of the sales in the premium tree, and we heard from the president of intel earlier in the year Brian Krzanich and im not sure if you are concerned about the numbers with the cloud landscape, and as much as you are about the enterprise as ibm was talking about it, and intel talking about it of how much it will change the overall feeling and environment of how much we expect the enterprises to spend on technology. Kara, your thoughts of that since we are hearing from microsoft that cloud is at a 10 billion run revenue annually . Well, it is obviously the future, and the question is that there is a big transition going on in the Enterprise Spending and where it is going, and obviously, microsoft is a big player here, and they have made the ag grgressive and important moves into the cloud. But that run rate was fantastic and impressive, but it is a harder go, and lot more players, and as jon said, you saw the questions from intel and other companies in the space, ibm, and a lot of the companies are sort of reevaluating how they move, you know, in the spending going in the enterprise space, but microsoft is making the moves a waway from the pcs to the enterprise and cloud. And so i think that it is a surprise, especially given all of the previous earnings that have come out that have been a little problematic for wall street. Yes. Speaking of which, shares of google, the parent alphabet also slipping today after they report ed today, misses of 797 and then a revenue miss, and kara, all of this in the operating expenses and head count that is way up, and did that raise any red flags with you . Well, it is a lot of people, and 2300 people, when Silicon Valley is cutting, and you are seeing more stories of the cutting than anything else. They are e betting into the new markets, and that is going to be costing money, and that is the situation, it is spending high, but it cost ss a lot of money t make money, and the other category of nest and fiber and other things which is going to lose more money than ever essentially, and the revenue doubled, but it is a small number and losing more. People are wondering beyond search which is strong by the way, and search is as usual a super strong area for google, and people are wondering where the next business is, and good thing to think about. But there is some cost cuts. And do you see anything big, kara, in the other alphabet portfolio, because when defending it, they said that youtube a decade ago would have seemed like a moon shot. Yes, you have to spend money to move into the new markets. Google never cared. They have misses of 12 of to last whatever quarters, and they dont seem to dance to wall streets tune. If they feel like these are good investments, and youtube is an excellent investment, and they went for it, and the fact is that they have tons of moonshots there at google, cars, balloons, fiber, home automation, and the question is which one of them is the next biz big with business and googlele is putting the bets in a lot of places, and they are expensive and they feel it is important moving forward another question is how disciplined does google get alphabet, however you want to put it on the cost side, and ruth porin signaled when there are a couple of teams overlapping, and working hard to rationalize that, and see what they did with the robotics business and looking to spin that out, and more cultural skrut fi as we have talked about internally on the nest, and how it treats people, and especially given the fact that it is not growing at the rate that some people hoped. So i think that this question of the cost cuts in this environment, echoing a little bit of what we will see ibm doing outside of the u. S. , and intel doing across the board, and my question is for these Companies Like the googles, how much belt tightening and how much does the feeling ripple throughout Silicon Valley since vibewise, hey, lets build and go after the growth mentality. Yeah, they also had the issues around europe. That is probably spooking a lot of people earlier this week with europe going after the android business, and that is probably a w worry, because it is sort of instead of search, it is at the heart of the growth. And one thing is mobile growth, and surpassed desk top, and so it is the area of growth, and so that is spooked people ahead of the earnings, because there is some action, and google obviously disagrees with these statements from europe, but still, it is probably something that investors are thinking about. And kara, we mentioned microsoft, and mentioned google, and jon has been working the secureworks ipo all morning, and can you draw a narrative through all of these things related to tech or unrelated . Well, it is kind of like a lot of things these days, a little messy. Like it is not clear whether we are in the downturn and not clear, bill gurley writing a essay about funny financing so it is not clear where we are going, and the froth is gone, but at the same time there is Significant Growth in a lot of interesting companies, and so it is a period of nervousness around which way to go. And a company like google is going to want to double down and grow, because they have all of the money from search. So it is a little bit of a touchy time i would say here. Yes. And finally today the entire world mourning the music legend of prince at age 57, but if you want to listen to music, you have to subscribe to title, because his music is not available on any other streaming services, and kara, you have written and talked about the past the way that prince busted the model for artists and the ownership of the content . Well, he did bust it. He did not like the internet, and he did not like algorithm, and so he gave several interviews, and he and other artists like taylor swift, they were against it. The one he liked title is because he got more money, and better quality pew sick, and he got to present it in the way he wanted to e present it. It is hard to find the songs of his today online, because he didnt believe in it, or he was particularly controlling and it, as many of the artists are who want to figure out how to move forward. That thes sad for mourners of him who want to listen to music online, because it is much ha harder, but that is the way he wanted it. Obviously, an iconic person, and he wanted to do it his way, and that is what he did. Yes, he was paranoid about even having his speaking voice recorded by journalists in interviews or even notetaking which is amazing to be able to set those ground rules. Kara, the very public spat that he had with Warner Brothers years and years ago, do you believe that empowered the artists to either start their own labels or say that i dont have to stick with the system here . Well, again, the Music Industry has changed so dr drastically, and it is very few artists like prince who can sort of call his own shot, and most artists are not in the same position that he is in like taylor swift and others, but certainly a lot of of the the artists, adele, and taylor swift and others are wanting to know how they want to be presented, but it is a small group of people who do that and the Music Industry has changed no matter what any of these people do, and how people get music has changed and the question is wo has the power here, and obviously, the consumers do in the end, but he definitely was inspiring to people. And you know, he was not enamored with tech unlike a lot of people. He did not have a iphone, and he made fun of them. So he was not someone who is going to bow to the internets barreling through the Music Industry. For many me, as a kid growing up in new york in the 80s or the early 80s, prince was so much a part of the sound track of that, and what is interesting to me about how prince looks now at this particular moment, a few year ago people said that he is a luddite, and people are not going to know who he is because he is not embracing the internet, and it seems that there is a dichotomy of the artists and the celebrities and the overexposed like the kardashians trying to get out there as much as possible, and then on the other end, prince, huge iconic talents who operate in scarcity. He created the content, but he released it shreelectively and did not want it all over the place, and wanted control, and that is smarter and smarter as we see some of the top producing artists in terms of the sales and mentioning taylor swift and adele trying to control the amount of distribution, and it could be that the princelike model wins out in the end. We will have to see. I dont know about that, because i do believe that you have to be on the end, and very few artists can do that and im very, very old and i have the cds, because i bought them at the time, and that is what he wants to do, and he lived the life that he wanted to live, and that iss a great legacy for himself. Yes. And you were not the only one digging out the cds yesterday, kara, because he is going to be missed. I got them. And kara, good to see you, and have a good weekend. Kara swisher joining us out west. And the dow is lower this hour, and much of the drop, 30 points from microsoft, and 20 points from visa on the back of both of the companys earnings, and s p 500 is negative wh nasdaq faring the worst because of the news of the nasdaq which was down. 5 , and something that we have been saying a lot this week, energy, the best performing sector so far today, and starbucks is falling after the revenue missed analyst revenues, and higher domestic demand, and Stores Opening up in china, and stocks down and with facebook, it is falling with other tech laggards like microsoft and googlele, and it is down 3. 35 and it had been up 4 on news. And also, maybe just a natural pullback there on no news. And also on the piece of vanity fair how Silicon Valley kr created donald trump. Nick, the author, is going to join us next. And also, the spinoff of the securityworks into the nasdaq, and we will talk to the ceo of that company. And we will talk about news of president obama and David Cameron as the president is in london urging britain to stay in the eu. We will go there next live. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Youto get the help yourefar looking for. Thats why at xfinity were opening up more stores closer to you. Where you can use all of our latest products and technology. And find out how to get the most out of your service. So when you get home, all you have to do is enjoy it. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Getting the breaking news on gm and mary barrios compensation, and phil lebeau in chicago. Well, it is that time of the year when we get the reports of the compensation for the ceos and for General Motors for mara bar ra, her compensation was 28 million which is a considerable rise from where it was in 2014 when it was 16. 1 million tlrz and ke and keep in mind that while much of it was in stock grants and awards and those grants and awards have not vested in the future, and some of them will vest depending on the price of the gm shares, et cetera, but right now, we can tell you that the General Motors ceo mara barras compensation last year was 28 million. Back to you. Thank you, phil lebeau on the gm update. And nick felton is kicking it off at the post with aer kl how Silicon Valley created donald trump in vanity fair and now in the first interview as editor of vanity fair, nick felton. Thanks for having me back. And you have said that Silicon Valley and social media helped donald trump, and what is different in the way he use it in the past . Well, if you look back as i have said in the column, that it is not the first time that trump has thought about president and it goes back to 1998 when he ran under the reform party, and won a few delegate, and looking back, he has been always saying out landish and misogynistic things all of the way back to the 1980s, and he has learned more than anybody in the media that the more he says them, the more attention he gets. And if you look at the way he uses the social media, he is going to tweet something outlandish early in the morning because it will capture the media for the day, and if you look at the things that are different and isis and sure problem s wi problems with the republican party, but other than that the thing that is truly different from the few times he has tried to run before is social media. It is standing out to the me as one of the things that has helped to propel him to where he is. And you are saying that he is being strategic about the things that he is tweeting and posting more so than the Obama Campaign was doing with facebook back in 2008 . Well, i think that what the Obama Campaign doing with facebook back in 2008, people misunderstood it, because think were using it to get people out, and saying, lets go canvas, and go doortodoor and this or that, and that is the main core of what obama figured out how the go back to the rallies and he said, go out there and tell your friends on social media to go out to knock on doors and do all of these things, but what trump is doing is that he is tweeting the most outlandish and often Disgusting Things that he can to get more attention, and it has worked every single time, a ped what is amazing is that if you look at the world in which we live in to tai with twitter mobs and everything has to be so pc and correct, and if you say one thing wrong, a mob will come after you, and most people find it terrifying and they are so careful for what they say, and trump says, i am trump and hear me roar and bring it. It is evident that he loves it. And you know, it is Kim Kardashian loves it and kayne loves it, and trump loves i. Nick, sometimes the tweets are arguably fairly or not invite ridicule, the misspellings and the grammar and is that intentional . I think so. I actually do think so. And look, this is not from my reporting, but from my thesis on the matter, but it is to show that it is donald doing it, and i know that there are certain ti times that his press secretary, sorry, his press woman, and i forget her name now, but when she is doing it, but it is donald dictating and part of the typo thing is that this is donald on the blackberry typing away with the little fingers, and that is the whole point of it, right . To let us know that we know that he is the one that is saying these things, and not someone else. Nick, i dont e know. I might argue that social media created barack obama more than donald trump. I mean, that everybody knew who donald trump was already, and maybe we didnt know he was f g going to be tweeting that or that he would put that out on, you know, the other thing out on the Different Social Media channel, but barack obama took advantage of the social media in a way that was not done before, and surprising and isnt donald trump an already celebrity billionaire taking advantage of the attention and not just on the social media, but also on the mass media and frankly any medium he can find . Well, that is a great point, but lets put it this way, okay, if you open up twitter right now or if i opened it up any day over to the last year since donald started to run, majority is trump and it is not Hillary Clinton unless it is an email scandal, and so there are moments when it is hillary and ted cruz and things like that, but it is often when it is a scandal, but it is always trump, constantly, constantly trump. And these people using the social media, and they are using it, so wa is different about him is the fact that he is saying them, and he knows that going back to look at the outlandish thing th things that he has said on twitter and not on television, and they always occur, mostly in the morning, and he understands if i do this, it is coming out for the rest of the day, and im just going to be talking about it, and free publicity over and over. We dont have time to go through all of the tweets, nick. I dont believe that we could on television. And you say that the main political belief in Silicon Valley is money, and you quote a San Francisco blogger on, that and how does that change the way that the valley is looking at the election . Well, worried more so than they have under any previous election of what i am at least aware of. And trump has gone after the valley, and maybe because he wants the attention or maybe because he has truly beliefs about the system out there, and you know, he said that if he becomes president , he is going to be changing the h 1 b 1 visa rule to affect google and so they could not recruit people from overseas which is an important thing for them, and especially mark zuckerberg. He threatened apple saying that he would make them make their iphones back in the United States if he were president , which is a little ludicrous, because it would happen with robots and not people, and so he could not bring the jobs back, and he had a funny tweet to r l really propel that further when he said that he would stop using his iphone and use a samsung instead, and so that is a fearful threat by donald. Well, a lightning rod of the article, and nick, you have always been special to squawk alley and now a special correspondent to vanity fair thank you. Thank you. And now, spinoffs are now open for trading after briefly trading down and the stock is now up 2. 5 , and the ceo is going to join us live on the other side of this break. What i do metaphorically is look into my closet and say what is not here . And so you look at what is mising if your life and fill that void. I have found a void for the Business Plan and my goal is to help everybody find theirs, and i would challenge everybody to put yourself in other peoples proverbial shoes and hope that they would want to put themselves in yours. Welcome back, and it is the first ipo tech spin ah of the year. After going public here on the nasdaq, mike cote is going to the join us now from securityworks. You are in an interesting position given about the market, it is the hard to be the first one out, and the first one out in the earnings season given that Enterprise Spending reports have been choppy on it. How do you think that affects the way that investors are looking at the prospects of a company like secureworks . Well, we started the process two years ago. Michael dell and i met and we had a conversation about where the market was going and how big the Internet Security market is and the adjustment from that perspective, and invested in the business, and we were ready to take the Company Public at this point in time, and we are estatic about the day here at nasd nasdaq, because it is spectacular. And tell me about the Growth Prospects and the model. It seems that your head count as grown nearly double over the past year, and the topline has not grown as fast, and i know that you are investing in the sales force and costing money and people to do the ipo and how is that going to trend over the next few years as investors want to see the profits. Yes, the investments were not unusual from the sales perspective, and the infrastructure from the global perspective, and as michael and i had the conversation, and they said, lets build out over the world, and so is we built out in japan and australia, and singapore and increased the presence in france and germany, and the markets where dell had big markets and big Internet Security markets, and so as the market has moved towards us u we made the investment ins the infrastructure and added some g a costs to go public, but it is going to scale over time. And financial ser i haves is a big part of the customer base, and bank of america is your largest customer, and overall 38 of revenue for sales, and how do you expect that to trend over the next couple offf years . Are you trying the build that base as a percentage of the revenue overall or specific industries to target to diversify outside of Financial Services . Well, that is a great question. We started with Financial Services vertical when i joined 14 years ago and it was Financial Services up to six or seven years ago was about 95 of the revenue, and we made a conscious effort to move across verticals and client sizes to do 36 of the fortune 500, and all of the way to small and mediumsized businesses in all geographies, and we will make a continued push because the more vertical verticals the more client sizes we see and the more data, the better we can do our job. And i should correct that the Financial Services vertical is about 32 , it is 37 including the Insurance Company, and the b bank of america which is a client of ours since 2002 and expanding over time is now 7 to 9 of rev few. As we move into the cloud era, what is the pitch to the customers who say, i have some stuff up there in the cloud, and microsoft wants to handle some security, and why should i go all over the place, and stick with securityworks which is in the business for a long time rather than the newfangled companies claiming they were born in the cloud . Well, the fact that you are in the cloud is no different than having the things on prim, and devices on prim, and we will take the feeds from all of the devices in a vendor diagnostic way, and working across the security universe and look at the logs whether they are coming off of the cloud or off of the prim devices and try to using the counter threat platform, and the intellectual property and 14 years of historical attack data to find the bad guys doing on your network and look to discover them and take the appropriate actions across those vender diagnostic attack, and predict where the attackers are going to go next, and repair those that are current. And so, the stock is up and mike cote is join g ing us, the ceo, and now, 98 of the voting power of the company, but an important day and first tech ipo of the year. Thank you, and back to you, carl. Simon, what is the session . Well, the equities are closed the day after the ecb and a lot of big banks are working through the Technical Details that we got last night on the corporate buying from the qe from the ecb and deutsche says if you are looking at the parameters, it is bigger than they were expecting and it is a bigger part of the 80 billion euros of the qe moving forward to 5 billion and to move potentially those asset classes. And particularly interesting the au automotives, because daimler is one of the major losers, and parts because of the disap po t disappointment of the rollout of the eclass upgrade and also, it is the doj forcing it effectively into the emissions which have brought the stock down. Volkswagen off of the lows, but a new figure, 17 billion euros off of the emissions, and volvo is up almost 5 , and the truck maker under the mack brand in this country is cutting back production because of to falling demand. And another is guccis Parent Company which is in negative territory there down 5 , and gu cli is not growing as fast as people thought, and 3. 1 on the sales and partly because of china and depressed tour iism t hong kong and macau where they make a lot of the production. And also, where the bank ministers are looking to do a deal with greece, they are not going to be doing a deal, but it is athens availability to get more on the bailout, and they have to hit a prime resurplus of 3. 5 in 2018 and beyond and the german s a germans are saying, look, if we dont hit these figures we want to see a new set of austerity to kick in at 3. 5 of the budget surplus. So a lot of the argument nas we have before are not over in fwrees, and will britain withdrawing from the eurozone bring more problems . Those are not going away, simon. Thank you. Two big techs struggling, microsoft and alphabet two of the worst losing 2 billion in market cap. And now, we will go the press conference with president obama and David Cameron in london. We will go there live when he begins speak iing. Live in a moment. Good morning, everyone. Im sue her rera, and here is t cnbc news update at this hour. President Obama Meeting Prime Minister cameron at 10 downing street earlier today. The two leaders are discussinging the campaign against isis and russia and the ukraine. And also on the agenda the withdrawal of britain from the eu, and the president is encouraging them to stay in the bloc. There have been a dozen fatalities in ohio where criminal investigators have been sent to pike county, but no word on the number of fatalities or if anybody is in custody. Uber has agreed to pay 9 million to settle cases in california and massachusetts and it is revol fg around whether uber drivers were contractors or drivers with benefits. In the settlement they will be classified cop tractors. And more trending on the death of pop star prince as an autopsy will be performed today. Now we go back to you, carl. Okay. Now over to seema mody. The nasdaq is down tracking for the worst day since february and turning negative yeartodate and that is impacting the nasdaq with 1,100 which is now on the ce of the worst day since february as large cap earnings disappoint, and the pie kro soft earnings are on pace for the worst day since january of 2015, and al a alphabet is down since trading on the low, and microsoft and alphabet have lost more than 30 billion in market cap just in the days trade. And facebook is under pressure ahead of the earnings report, and kayla, earlier in the week, we were talking about the market hitting new highs, but it is going to be difficult to reach if tech the largest sector of the s p 500 is going to continue to underperform. If this is a temporary setback or as you just said, seema. And now, we will see what is driving alphabet as well as the selfdriving cars and fiber for youtube red, but is the advertising business the best business Going Forward . Victor anthony is an analyst with axiom, and it is interesting to see the drop for a company today that did not budge at all when the eu unveil ed antitrust charges, and is earnings and sales growth what the investors are caring about . Well, the eu allegations are more a long term risk for google, but what is happening today is lofty expectations heading into the print, and other brokers were calling for accelerating the growth, and whereas much of the work that we did throughout the quarter, the channel checks pointed to decelebrating growth for alphabet this the quarter, but still solid growth, and there are revenues for the core group that came in, and margin estimates coming in, and estimates better, and the eps miss was due to hard to predict events in the quarter, and if you back it out and normalize for it the apple phone consensus, and so the expectations got ahead of themselves. And the company said that the primary driver for the quarter is mobile. And we foe that mobile clicks earned less than desktop clicks, and they are moving in that direction for some time, and should we have not expected that decline . Well, no. I think that mobile, and they call it the mobile and the youtube as well as being the key trooifrs and desktop and i have not heard that one in some time, and some strength on the desktop due to changes that they made to the righthand rail throughout the third quarter. But when you are conducting the checks throughout the quarter, some of them, the Search Engine marketers were talking to the decelerating growth, and when you put them together and look at the mobile shift, the results that came out the night is really what i was looking for, and so like i said, a solid top line number out of google. All right. Victor, do you know anybody who has covered the company long enough remembers when there were real concerns about sg a and spending and still a little bit of the hypersensitive toy the online spending, so where is the line of the discipline versus success . Yeah, and that is a good question. On the call last night, they reiterated that there it is a managing of the expenses within their control, and soy expect the margins to increase at a more measurable pace because of the commitment to the shareholders to manage those expense, but it is a hypergrowth industry, and search, video, mobile, and so many different secular tailwinds that they are benefiting from, so you have to inv invest in the core business to stay ahead of the growth curve. So i expect them to increase marginally over time, and invest heavily in the core business to continue to grow that business over time. As well as the other bets as well. And if you look at the charts, victor, for alphabet and microsoft today, and oh my goodness, hold your stomach, but over a year, not so big of a el deal. But is this a linkedin moment for the stocks where people are resetting the way they think about them, because of something that we heard on the calls or more of just a little bit of the volatility and maybe we saw at a facebook earlier on in the year where it went down a bit, and then recover and it did not fundamentally change the way that people thought about the stock . Well, it is a good question as well, but i think it is the latter, because not much has changed fundamentally, and i thought that we were tracking in the right direction. Nothing caused me much concern coming out of the print. So it is a temporary breather, and the stock had a nice decent run into the print, but with that said, i do believe there is some volatility over the stock market over the next several weeks so i expect the stock to trade sideways, but beyond that this is a stock that you want the own. And yeah, 34 increase in the value over the last 12 months, and that is a decent print, but we will see how they fare after this quarter. Victor, thanks. Thank you. And awaiting a press conference with president obama and Prime Minister David Cameron and you are looking at 10 downing street where they have finished the meeting. We will take that lye when they start speaking. Squawk alley back in a moment. No. Its all about understanding patterns. Like the mail guy at 3 12pm every day or jerry getting dumped every third tuesday. Jerry every third tuesday. We have Pattern Recognition Technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. Td ameritrade. Approaching medicare eligibility . You may think you can put off checking out your Medicare Options until youre sixtyfive, but now is a good time to get the ball rolling. Keep in mind, medicare only covers about eighty percent of part b medical costs. 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Welcome back to squawk alley im Rick Santelli and of course the president and Prime Minister cameron is going to be speaking very quickly, but speaking of the brexit, and the soverei sovereigns and looking at the 10year we have a Double Bottom and i have been watching the charts for a long time on the fixed income, and these are compelling with many of the reversals throughout the last 20 years are formed from the double tops and Double Bottoms and i cant continue to stress that we will test 190, but if we are above the last tie on the closing basis, you want to be prepared an it is not just the longs exiting the markets and if it is, it will run the course. And now, when it comes to the brexit, it is a tough one. Imagine if the United States had any type of similar situation, and first of all, how would we feel about anybody from other countries whether it is a leader or somebody from business communities coming in and discussing it, and they have a right, but i dont nt know, as american, if there were issues similar to that, it would be a hard sell. The real issue with brexit in my opinion is not necessarily the short term, but the long term, and what do i mean by that . In the near term there could be a lot the lose for the u can k with regard to business and how they fit into the international business, and throughout asia and europe and how the time zones that the Financial Services that they offer are a big part of the financial economy, and that could be in jeopardy, but that is not what it is about entirely. It is about trying to integrate the cultures. Put it another way. We see the issues at the European Union itself that the members on the mainland are deal dealing with, and at time of terrorism, and isis, and the legal issues with the migration and the courts, and these are tough policies, how they travel in europe, and to think about that per pecktive from the uk side is very complicated and in the long term, take a leap of faith and say it does not work out on the mainland and the euro experiment has bigger hiccups down the road, and this would obviously, if we knew that today, it would make a big difference in the uk vote, but in the here and now, it is about more money in the Financial Services, and that is a compelling argument at a time when the economies are on the weak side, and the Central Banks are powerful, and on the central bank inside, that is a big deal as well. Trying to meld all of the different cultures, and the financial cultures, and the National Cultures into one is not an easy experiment, but when others tell us how to vote, and this is one tof the blogs that was reading in the uk, it seems as though the president and cameron are definitely close together on this, but that is not the issue, but it is the people. My own opinion, there is no way it is going to be passing, and will it go away . No. In the final analysis is that the right move . Only time will tell. Carl, back to you. We will keep that prediction in the pocket. Meanwhi meanwhile, thank you, and live shot at 10 downing and as soon as cameron and obama start to speak, we will go there live. And quickly here, comerica share s are up given that the company has put everything on the table, and activists and shareholders are urging their company to sell as that dispute has gone public. And meantime, we have put a story on the brexit with a big con troe v controversy in the uk, and the president there to talk about that and to wish a queen the happy 90th birthday as we are awaiting words from cameron and obama, and we go to e chief economy at qe 2, and commentator larry kudlow, and a lot of people, larry, say it is not the president s place to tell them how to vote in the uk. They are right. They are absolutely right. I was reading president s remarks as julian gave me a copy of the oped piece of the ft, and he started out exactly right how the british and the United States had a special relationship down through the many, many years, and including of course, world war ii, and yes, britishspeaking countries have a lot in common. Begin with the magna carta and that is my favorite steppingstone, but on the other hand, the European Union is cut from the different cloth, and it is not a capitalist operation, and not the same private property rules of law, and i hate to see this, but i am not happy to see it, but right now, europe is coming apart at the seams whether it is immigration or the economy or the internal debates or what, and i dont like to site, but it is my take. England on the other hand, and i hope that simon is agreeing, that they are doing much better and the economy is doing great, and they want to be tougher on immigration, and i dont know how it is going to be turning out, and dead even in the polls, but right now, i find myself, yes, simon, with Boris Johnson and the mayor of london and simon and and i have had great talks about this, because i would vote for the brexit, but i dont vote so it is easy. From the british electorate the special relationship with america is very, very important, and people say, we dont need europe because we have america, and what he is saying is a little bit like the older parent to the older child, okay, i love you very much, but you have your own fam i l and go now. And he is saying that your power and your influence and your sovereignty and the power and the influence is magnified through the European Union whether it is iran or the Climate Change or the trade deals we are trying to the do, and britains, you are more powerful if you stay within the eu, and that is important. Many think that you should not be there and often times you dont get the foreign leader visiting in a campaign, and so that is offensive. On that point, i am personally glad to see the president in london, because he has not treated britain with his presidency with the respect and affection that past american president s have, and while we are on brexit notwithstanding, i am glad to see a cordial visit on the queens 90th birthday. And the argument from the conservatives is that the reason he is doing this is because he would rather deal with the European Union rather than britain on its own. And that may be. But from the economic standpoint, it is remaining to be seen what the fallout of the markets are going to be either way on the vote. And the Uk Cabinet Office said that the uncertainty could last a decade. Do you share that view . There is a lot of uncertainty especially over the next couple of years if the vote were to pass, and britain is a major financial scenter, and a good part of it comes from axis to the European Union, and the fact that britain would lose that access through the brexit vote, and highlight the trade between britain and the European Union as an important factor, so i cant see it as a nearterm positive in any sense for the bbry tisch economy if it were to pass. And i dont think, dean, and look, im no expert, believe me on this, and there is a twoyear window, and trade and finance continues, and then after that, they have renegotiations, and britain is so powerful, and the Britain Financial window is so important, and more than we are. That is not true, larry. And the event, larry, it does not operate in a vacuum, and then scotland perhaps, and you start to talk about the bigger rollover effects that have deeper history, and you donting gree . No, i agree, but i dont i think that it is a separate, and it is kind of like the biblical phrase unequally yoked with unchained systems and unbelievers. And i would say this, i dont see the eu as a capitalist e n economy anymore. I dont. And i do worry about the tax harm niization, and britain has very low tax rates, and that is a good thing, and the Britain Economy has outperformed the american economy, and that is a good thing, so i could live with it. The Crucial Point here of the campaign is that if we leave, we can do the trade deals that we have at the moment, and nothing would change, but what you have to understand is that the European Union is terrified that other core members like france and germany are in the poll rating suggesting that they would like a vote like britain, and pick and choose what the European Union is, and therefore the reaction of the European Union from the uk doing this is to really play hardball and say, no you dont get the trade deals, and you are outside of the bloc for the fear that others will follow them, larry. I dont disagree with the logic, but what i am saying is that at the moment, i dont believe that trade or banking which is the big issue, and the big issue is isis and immigration and free boarders, and that free borders, and now, britain has been tightening up, and suffered enormous ly frm the terrorist bombings, and they are tightening up, and that is a good thing. And europe is saying they will tighten up, but i dont believe they have done the job, and some fences are going up, and i am not sure that the fences are going up, but this is really about isis and immigration as well selfautonomy. Now, that is the best i can do. And now, the island, larry. It is an island, larry, and it does not have contiguous borders with the mainland and not as transparent as the rules would apply to greece or belgium or germany. Well, good. And the people outside of the city center still believe that there is not enough water between the uk and europe. Look,b britain, and simon, yu know much better than i, but britain has been ravaged by the terrorist bombings, and now more recently so has europe, and the whole thing is a tragedy, and by the way, the answer is to destroy isis in syria and iraq, and that is my answer, take it to them, but having said that immigration in this country, and it is a big issue in the election, and in england and in the yunited kingdom, and dean, m i rong wrong on this . Well, larry, i hear they are coming into the room, but your comments bring into mind the Central Command tweeted, now we are seeing thins like isil abandoning the field headquarters in order to avoid air strikes. And, and a big newspaper a article about isis with a new strategy to come through our southern border. Our southern border. And the point to the president making in the oped, you win by cooperating and working together. You dont win floating yourself off into the middle of the atlantic that you believe that you are so important that you will be treated like a major pow power. This is small island. And think wont separate themselves from europe. It is a political decision. But they may not have a choice if they choose to leave, larry. That is the point. And the gdp if this passes . Have you worked it through your models this is. No, there is no way to quantify it in the model, but it is a negative for britain and the eu for a couple of reasons. One is that i do think that the uncertainty itself even if it does ultimately work out in the long run would weigh on things like business investment, and hiring and i would highlight that the immigration flows if they were to slow significantly, immigration and population growth is one of the main drivers of economic growth. So it would also be a negative to the extent that it were to be ratcheted down. I would agree 100 with dean on that last point. Were it not for isis and the war, we are in a war. So you are talking to the guy who is a free trader and talking to the guy who is an immigration reformer, and i have been my whole professional life, but right now, we rein a war and we have to take warlike measures to stop them. And to discuss whether the uk future is relative to the europe because of terrorism is odd to me. Surely it is about much more than that, and culture and geography, and you are not suggesting that the uk should force itself out of the European Union in some bizarre reaction to terrorism, because this is about the longterm future and who you belong to, and it is like australia for many years would not accept that it is part of asia, but it is, and uk is part of europe, and that is where the future lies, larry, and that is what is at stake. Simon, if we had more time i would give you a good argument, because i dont believe that a lot of brits believe wa you said, and there is a Political Movement in britain that does not want to be tied culturally to the European Union, and they are independent. Who are they tied to or floating off on their own . The other model is the model of the englishspeaking people, and it is a cultural and economic free market model, and i have been a supporter of that model. They live next to europe and i get that and they generally fight with europe and i get that, but i dont know, simon, i believe that you have a cultural issue here, and a very powerful one that is showing up in the revolt. Yes, and a lot of work is being dope on the defwree to which the country pmen identify with the nationality and lux m luxembourg is a extreme example. Yes, and im struck by the political nuance and i defer to simon all matters british and uk, but if you look at the president s embrace of David Cameron a conservative leader there in england and the labor party, there is an article in the daily mail about whether obama is going to e meet with Jeremy Corbin who is the labor leader who has made controversial remarks about osama bin laden, and then embrace the person who is more on his side of the argument with the eu issue, and a flipping of democrats and labor when you are look at the transatlantic relationship. Yes, i want to point out to people who know the uk and europe well know that the left and the right is not as align aed as they would be. The United States is much more to the right than is europe, and therefore they are actually probably match. Right. Except for feeling the bern. I dont know how bernie plays in london. Dean, to what defwree is cameron weakened going into this based on what is happening in the last couple of weeks relative to the Panama Papers . Well, that is not really my field of the expertise. I think that, you know, certainly globally those papers have had a big effect, but i would not want to comment re