Transcripts For CNBC Squawk Box 20140514

Sir whats his name ran it for a while. Didnt seem to really howard stringer. He had to wear something for translation all the time. Yes. So he could understand the employees. Sony was the one thing that you thought even though you saw Everything Else japan was taking over the world 20 years ago. Of course. You really didnt think sonny would ever not be sony. Its really not sony. Its an incredible lesson about how a company that can be so hot right now right. You dont have a birth right to be the best at what you do. You need to innovate every single year. Every single year. You cant innovate 500 different products. What does sony what do you think about when you think about sony . Compact disk players. Betamax. Pfizer ceo ian read being grilled again. The journal has an interesting editorial about protectionism. Uk was the place that started the free flow of capital. London is the capital center. Its interesting at this point theyre making it so tough. Journal is an advocate of free trade. Carl levin is looking at ways, even though hes been one of the primary architects that allow companies to get around paying taxes. This is the no going to pass muster. Rather than getting into the core of the problem. Which well talk about a lot today. We have congressman barney frank on. We have ed luzier on. Ed luzier has interesting ideas about spurring investment by corporations. Anyway, another tough round of questioning were talking about for ian read by the parliamentary signs committee. The u. S. Drugmaker is getting called on to extend commitment to jobs and research in the uk, not just for two or three years but for ten years. Pfizer had given a fiveyear commitment to complete the research for astrazeneca at this new center in cambridge and to complete that center and retain a factor in northwestern england. Well be monitoring the days hearings for any headlines. Pfizer has indicated it could raise 106 billion offer for astrazeneca if they would just enter into some talks with pfizer. Just say what do you want . What can we do . Theyre not even in talks yet. At this point its just an offer and our good friend, roger altman, i dont know if hes in town but when i try to talk to him, its like im in london. Evercorps representing astrazeneca. Hes working on campaigning for their position there. You never know, is the company saying no, no, no or not at this price . You dont really know. Right . Ive generally felt theres always some price. In life for everything. Yes. I didnt say everything but if you want to go there, sure. I just mean in most situations. Most m a deals theres a price. People argue about price. Yes. Its not about whether youre for sale. Which may be a cynical view of things. I guess some things are not. I dont think its a cynical view of things. To say everything is about money and theres a certain amount for people to do anything and definitely go back on principals . I was talking about m a deals. Im talking about everything. Okay. Im with andrew every day. Thats a big joke. When you say marks i think of a different marks. I dont mind those marks, those four guys. Its the fifth brother, carl, that scares me. Another british drugmaker is in the news this morning but for a very different reason. Eunice yoon joins us with glaxo smithklines troubles in china. Eunice . It is troubling. Chinese police are charging gsk executives with bribery. At the end of a tenmonth long investigation, the authorities at the Public Security Ministry Said they found gsk sales staff did indeed bribe hospitals and doctors, helping the company raise hundreds of millions of dollars. Now, the authorities did single out the former china chief, a British National named mark riley. Authorities say that riley ordered staffers to take part in his massive bribery network. All day today weve been watching the chinese staff of gsk in their orange jump suits on state tv. Theres been a parade of them. Theyve been constantly confessing the crimes that they did. Theyve been talking about how they engaged in this bribery and in fact there was one staffer who actually specifically accused riley of ordering hr and finance directors to destroy evidence in a Crisis Management campaign. Now, the company itself has issued a statement about this investigation, saying we take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of gsk. We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of china and its citizens. As you could imagine, there has been a lot of shock about this case and the result of this investigation within the foreign business community. One reason is because this is the first time that a Foreign National has been named in the investigation. And also because a lot people are wondering if this is a oneoff situation or if it could be just a start of a wider crackdown as the government looks to stamp out corrupt practices of all types and also as the government looks to bring down prices within the health care industry. Guys . All right, thank you, eunice. Eunice yoon in china. When you watch from afar, what you dont know is, are they really trying to stamp out corruption or is there a political vendetta against someone in particular . This whole move by china at the moment to stamp out corruption in so many parts of the economy, still, you feel like theres a political agenda eliminating enemies. Yes. You would have to think that over there, one mans corruption is another mans bread and butter the way it is. Exactly. For so long, decades now. I was right about the marks brothers. Zeppo was also known as gummo. Who knew. It was way before my time. I want to make that clear. Chico, harpo, groucho and zeppo. You need an alternate. Like a jury. Is somebody sick . Carl would be the fifth. Karl marx, not karl rove. Theres only three they show. The fourth one wasnt funny looking or anything. The other three were distinctive looking. What do you want . Cant a man have privacy around here. Now you know the joke. Tell me again. The one where hes talking to the woman, you know, would you for a million dollars. What did she say . Lets check on the markets. Looks like flat consolidating, some of the recent gains weve had. Does it feel like a new high in the market . Shhhh. We dont need to publicize it. We dont need to publicize it. Its slowly creeping up. Youd have to say okay, theres energy. Youd have to say benign conditions for the market. We never know what we dont know. And thats whats scary. But at this point theres the future yields. The tenyear, thats so nice, a nice high multiple that allows the fed to exit without worrying about a big spike in yields, europe improving. Ukraine, i dont know. Russia, we almost at this point, we dont know what russia actually is, a postsoviet era russia. We know they werent going to stay where they were. Right. Theres people, there are not just plans in eastern ukraine. There are people that side with russia. For sure. Absolutely. They see it as a stronger economy from their point of view, deeply integrated. Ukraine doesnt offer as much as crimea. Theyre like, please, come in here and help us. They dont have the same natural resources. We know what russiaen watted with crimea. To take in ukraine, its almost like taking over their problems, right . The eastern part of the country is where the industrial brace is, a lot of that part of the country supplies to russia. If russia cut them off, theyd suffer dramatically. Were you in ukraine . Right after sochi. After they started massacring people in the square. You havent gone back . I volcano. It hasnt moved the markets as much as people expected. When were you last gone. Do our viewers know everything about you . Would you rather they didnt know . Would you rather still look like youre available . Because youre not. Congrats. Im not available. Do people know that . I dont think people know that, no. Do you ever scratch your cheek so that thing almost it hit me on the way up. This is a tough story we have coming up here. Right. If people didnt know are you congratulating me . Yes. Thank you very much. A gift thats forthcoming. No gifts. No gifts. You meant it. Yes, second marriage, no gifts. This is number two . Yes, my second marriage. Youre not bearing other no. Jan is like what is happening here . Rescue teams in western turkey are searching for 200 miners trapped in a coal mine. Explosion and fire killed more than 200 in one of the worst mining disasters in turkish histories, one of the worst in history overall. Nearly 800 people were in the mine at the time of the explosion, nearly half were rescued so far. Well bring you more details on the story as it develops. Live cameras there and people are watching this all over the world. Worst mining disaster in the United States left more than 300 dead. The worst mining disaster all time in history was more than 1300 dead at a chinese mine back in the 30s or 40s, i believe. Really . Yes. Flight delays. Its not weather either. More flight delays expected today in chicago after smoke in a radar facility halted all planes coming in and out of ohare and midway on tuesday. Can anything happen in the country without ohare and midway . You should those two down, the ripple effects have to be all over the place. 700 flights were canceled, planes delayed an hour or more. The ground stop was ordered around noon after a faulty ventilation fan sent smoke through the terminal approach radar center which handles all commercial flights, serving those airports. Smoke on the ground, which you prefer to smoke in the air. Smoke on the ground can shut down air travel, 700 flights. Which i about the way, last year was the worst ever. Airlines are much quicker to cancel now. Right. Because they get fined. And because theres been so much restrain in the capacity, it could be days before you take off again. Sears announcing it will explore Strategic Alternatives for its 51 stake in sears canada. Macys is expected to report First Quarter earnings later this morning along with a host of other retailers later this week. Jan niffon joins us. What do you think of the sears news. Not surprised. Closing stores, selling interest, selling stores, this is just one more step in that process. I still see it as basically burning down the house to save the house. Every time they sell some asset or monetize some piece of the business, they basically burn it in the business. It doesnt seem to be getting better. I dont see any real prospects for the the softer side of sears is about to go away. Eddie said the other day he would like to see less apparel sales in sears, shrunk that business down to 10,000 to 15,000 feet per store. That will benefit penneys and kohls. It will be appliances, more tools, things like that. Yes. Does anybody go to sears for fashion . Not recently. No. Its all basics. I dont see how that will work. Ron tried that at penneys. Didnt work so well. When this deal first broke years ago, almost ten years ago now. This is a real estate play, the value of the real estate, the way it was listed under kmart, it was a kmart deal. Theyre going to monetize all that real estate. Instead he tried to operate this thing. Yes, very much so. Then they started monetizing real estate, they sold alamo center in hawaii for 270 million bucks and threw in nine other locations and let people have them, essentially, in my opinion. It never felt like a strategy. Its like well constrain capacity and well be able to operate it better. Its always been committing to operating. I felt like it was two drunks holding each other up, sears and kmart. King of prussia, one of the top ten malls in america, the sears store is being torn apart and a dicks is going in to the top of the store. Theyre doing things like that, none of which is improving their position. The number that came out yesterday was anemic to say the least. The march number was so great. Everybody wondered is that pent up demand because winter was so bad . Well have to see the april number. What does it tell us when it comes to retail sales . Interestingly, it wasnt anemic in apparel. It was anemic overall. So it made us worry more about the consumer and less about the apparel retailers. We were expecting a pickup in apparel in april because february and march have been so bad. Also january, regarding the weather. We got all of that but the overall number didnt do anything. So now were all going, wow, for apparel it was just the weather. Gee, maybe for the consumer it wasnt just the weather. And were not going to find that out until we get further back into the year. Today what we want to hear from these retailers, we dont care what we hear today and tomorrow. We know the First Quarter was tough. We know it was promotional as kind of like the line that joe was looking for in the marks brothers joke, were just negotiating price now. Well, were just negotiating price now in retail because everything is very, very promotional. What we want to hear, though, april was good. The first half of may which were almost through, is solid. So for six weeks weve had decent sales, therefore, the consumer is Strong Enough that well see a good back half. We know the back half has a better calendar. Were waiting for that key word from these retailers. Well hear from abercrombie and fitch, kate spade and macys today. We wont hear from abercrombie. That is on your list. But that will come in a couple weeks. What well hear today, hopefully, kates quarter, january, february, march, that cant be good. Those were horrible months for sales. Despite that, im a big fan of kate spade. Macys will be february, march, april. Theyll be able to tell us april was good. A better story. Theyll be able to tell us the first part of may was good. Kate may talk about april and early may. I hope they do. I dont think they could have a good story on the First Quarter. Thursday, walmart. What do you think we hear from them . I dont have any retailers other than kohls that will be better than the consensus estimate. Walmart wont either. I think it was a tough quarter for all of them. Why . Primarily the weather but the consumer is just starting to come back. The Fourth Quarter was very tough. Walmart talked about a change in food stamps as well hurting them, no . Right. Theyre very concerned about the lowend consumer. I personally think the lowend consumer as well as the consumer is getting better. The amount of disposable income is starting to pick up. Other than the food stamp issue which is more directed to walmart and the Dollar Stores than it is any of the rest of the players, most things are getting better. Even employment is getting better. It may be anemic but its better than last year. I think well have a strong end of the year. Youd buy shares walmart. Yes. Theyre moving into the omni channel retail space, same place that macys is and nordstrom is. They have the Biggest Online business in the country outside of amazon and theyre growing it faster than amazon is growing its online business. Once walmart gets to the point where macys is, they can send it back to the stores, take it out of the stores, distribute to anybody out of their 3,000 locations and have a better online presence, theyll be a fierce threat. You wouldnt buy macys or amazon . It means i wouldnt buy amazon. I clearly would buy macys. Its the best omni channel retailer in the country right now. They own the Department Store space. Thats never happened before in the 150 years of Department Stores. Amazing. Its always been a regional play. I never thought id sit here and say the Department Stores are doing a great job because its been so tough since the Department Stores since the advent of offprice and discount retailing. Macys is doing a job thats never been done before. Does he hire the right people . Who knows what theyre doing there . I didnt meet terry until they were acquiring our company. I was in meetings with him. Terrys this very good looking, you know, you sort of dont take him seriously. One of the most handsome men in the s p 500. Right. Looks like a superhero before he puts on his uniform. I went into the meeting skeptical. I walked out and said, wow, once you walk out of a meeting with terry, you actually think its your idea. Hard to imagine. Thats a gift in retailing. When you have 200,000 people working for you like terry does, if you can get him to go generally the same direction, you win. How do you know youre not saying good things about terry because he bought into your company . I would normally say bad things about him because he bought out my company. Im saying good things about him because i believe them. Good golfer with be too. Which he probably doesnt want people to know. Shareholders should not know. No. They should hear youre a bad golfer. For viewers, i obviously are practicing teleprompter a lot. Do you know any other groucho . No. Im closer to that age than you are. I probably know more than you do. Listen to this one. Terry has a great team, too. Outside of a dog, a book is a mans best friend. No. Its not over yet. Inside of a dog its too dark to read. From the moment i picked up your book until i laid it down, i was convulsed with laughter. And someday i even intend to read it. This is my favorite, it has been where is this . Ive had a perfectly wonderful morning but this wasnt it. Ive had a perfectly wonderful morning but this one right. Jan, thank you. I have some month. I have a perfectly wonderful morning. This is it. Ive used this a million times. I dont want to belong to any club that would have me as a member. That was a grouchoism that was really big. Im feeling bad about being here now. We have no more time. Time flies like an arrow where fruit flies like a banana. Bigtime privacy concerns for google in europe. That story coming up in this mornings executive edge. I saw two periods and nothing really the third period which was all lundqvist. The new york rangers are moving on. They held on to beat the pittsburgh penguins, came back from down 31. They were 019 in doing that. Theyre 120 now. They won in game seven and they had as i said been down 31 and never came back. They once came back to tie but lost game seven. They now will face the winners of the Bruins Canadiens series which makes me nervous. Both of those teams are really good. That series wraps up tonight. We do a lot of this, cnbc and nbc, we took hockey when no one else wanted it. Now its huge. Squawk will return in just a moment. We can launch a feature really quick, and if the feature doesnt work, we havent lost anything, and we can have something up and running in days. And this would not be possible without the cloud. We are now supporting over 25 million users each month. Google can be made to scrub certain personal information. A spanish citizen objected to the fact that a Google Search turned up a 1998 news article that claimed his home had been repossessed. This is almost like a when does bankruptcy stuff get wiped away. Seven years. Everything goes away sooner or later. Felonies never do or misdemeanors. In the United States. What about arrests . Those can be scrubbed from your record. Not convictions. Convictions are tough. Depends on yourage a age and th state, whether its fed, state, local. If youre just arrested and its not true if you have 1,500 bucks to spare, you can now buy google glass. Google which had been limiting sales of this airable Computing Device will sell it to anyone willing to spend the money. Google glass is still in beta, meaning its not the final version expected to go on sale by years end. Its a testing thing. If you want to buy it, youre welcome to try it. Google let the general public buy the device for one day last month but had otherwise limiteded it to a select group of users such as application developers. Its going to sell this version as long as supplies last. I dont want one. I dont know. Ive had one it was here earlier. You can talk to it. It wasnt working that well. It doesnt feel quite as elegant as a Consumer Product would need to be that serves a function and think, wow, this is great. Do you need to search the web at all times . If you can figure out a camera to wear, 007 glasses, there has to be more to it than just taking pictures. I would think. Im not sure awhat that is. Im not sold. It took me forever to get a smartphone. I never bought anything online. Ever . Still. People have done it for me. People have done it for me. Your wife . Yes. I havent done it myself. One of the cnbc first 25 celebrating a milestone birthday today. Facebook chairman and Ceo Mark Zuckerberg is turning 30. I dont know whether he knows now, that young people, you dont trust anyone 30 or over. That used to be the thing. Because theyre old. Right. So im sure there will be many birthday wishes on his wall this morning. In golf you try to shoot your age. In billions he tried to shoot his age. Isnt he worth about 30 billion . Is that what it is. Thats amazing. I dont think anyone has shot their age in billions. Do people get mad when i say i like Jessie Eisenburg better as a Mark Zuckerberg . Why . I like the guy in the movie. I wish he was really Mark Zuckerberg. Its a joke. Did you know what they meant when theyre going to write happy birthday messages on his wall . No. Theres a wall on facebook. Im on twitter. Thats enough. I tweet. Whats your handle again . joesquawk. I think. Ill look it up. Markets in the economy are front and center. And whats up with brazils economy . We take a closer look at the challenges faying the south american powerhouse. As we head to break, a look at winners and losers. Im on top of the world been waiting on this for a while now the Performance Review. That corporate trial by fire when every slacker gets his due. And yet, theres someone around the office who hasnt had a Performance Review in a while. Someone whose poor performance is slowing down the entire organization. Im looking at you phone company dsl. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business built for business. E financial noise financial noise financial noise financial noise you wouldnt have it she any other way. Our toes. But your erectile dysfunction it could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about experiencing cialis for daily use and a free 30tablet trial. Good morning and welcome back to squawk box here on cnbc, im joe kernen along with michelle carusocabrera. Shes not engaged. Shes married, people. Beck qy and andrew are off toda where did that come from. Joe just let it out that youre engaged, that was on twitter. Its done, dude. Its over. Read it and weep all you people out there. A lot of fans. Retailer sears are exploring Strategic Alternatives for its 51 stake in sears canada. Sears is in the process of hiring an investment bank. That move follows last years spinoff of lands end. Sears also said it may sell its auto operation. Were about two hours away from the governments latest read on inflation, economists are looking for an increase of 0. 2 for the april Producer Price index. Both for the headline number and the core rate which excludes food and energy. Flights at chicagos ohare and Midway Airport slowly return to normal this morning. More than 1,100 flights were canceled after an air Traffic Control center was evacuated because an electrical problem allowed the facilities to fill with smoke, the control room. There was, i guess some type of fire. I dont know how serious it was. There was smoke in the control room for the air Traffic Controllers facility. Nothing in any of the planes. Youd never know. Its like when they tell you, it could be anything when youre sitting on a plane. Youre sitting on the tarmac for hours. Could be smoke in chicago. You would be in iowa. With another record close for the books, the dow and s p, theres plenty of data on the docket for investors to digest this week. Lets get more on the markets. With us on set, david joy, chief Market Strategist at aameriprise financial. Which numbers are we even looking at to affect the market in whether it goes up or down. I think it is the economic numbers. I think the thesis is the economy is going to rebound after the First Quarter. That makes it more likely that Earnings Growth is going to be what wall street expects, looking for about 8 this year. So if you look at the data, it does show a rebound. Question is, is it going to be robust enough . I think it gathers and attracts adherence. I think it drives the market higher but i think its limited. Does the stock market need corporate earnings to be strong or gdp to be strong, at 3 or more . I think gdp first. Really . Up until now, the market has doubled. Its been all about corporate earnings. It hasnt been that. The First Quarter well probably get 2 Earnings Growth. Wall streets looking for 8 for the full year. Ultimately its earnings, sure. I think gdp has to drive it. You dont think about the stock market as much, right . Youre more with whether the economy will do it . Whats the gdp number going to be when its said and done for the First Quarter . It will be down. Down what . 0. 5, 0. 6, something of that magnitude. Well get a huge number in the second quarter. Getting one is crazy. Its weather. We used to say that maybe its the that refreshes. There doesnt seem to be anything refreshing about the weakness we saw. There was temporary stuff, whether inventories had a big swing in trade probably due to the early timing of the chinese new year. Five years down the road it may be revised to a positive number. Its probably not that big a deal. Second quarter will be 3 . 3. Sec half . 2. 5 to 3. Thats not 3 . Thats going to be down in the 2s again. Youre not as bullish as other people about the economy. Were 2. 3 for the year. Is that enough for the stock market. It may be. Its not just gdp growth. Its also whats happening to Pricing Power. Inflation has come down over the last couple of years. Its probably going to pick back up in the second half of this year. Not in a big way. Is that good or bad. Its probably good for the market and that thrill will be a little more Pricing Power for firms. If you have no inflation, they worry about deflation. I think thats even more long term. I dont know that the deflation thing is as bad as it can be. We dont want to be like japan. No one get married in japan. They cant afford to get married. If you think its going to be cheaper tomorrow, why would you buy it today . We had inflation ratings down 1 for a few months. Were likely to see inflation come back to 2. One of the things thats significant about that is that this whole argument about the fed can be easier for longer kind of goes away if you have 2 inflati inflation. Now youre right back where you want it to be as opposed to 1. 5. The easy fed is so yesterday. Passe. Dont we need Something Real now . We have ridiculously easy and we have easy, easy. David, things go in and out, dont they . In my list this year in, easy fed out. I think the rate increase will happen in june, july time frame. Guys like paulsen wished they would have raised markets a while ago. I think we end the year flat. The tenyear yield is below 2. 6. What youre talking about brings it there. Its the capitulation, weve been here before. We keep hearing that stronger growth is just around the corner. Where the heck is that corner . Its never shown up. Its this 2 economy for years now. This retail sales number was disappointing. The housing data i think will be critically important. Well find out starts and permits later this week. Next week we sea sales. If they dont pick up, i think 3 is probably more likely. Some are talking about 5 in the second quarter. That will be tough to do without housing. This isnt a bad idea. Weve been talking about affordability goes up a notch, even though rates are still low. And affordability not goes up but it gets more expensive because of Mortgage Rates or whatever. U. S. Finally, maybe we ought to tell people the credit restrain the shouldnt be in there as well. Youre talking about the changes. Yes. It sounds like were going back to the way thats exactly what it is. Exactly. We always overshoot. I know that. I know that. Maybe were not going back to the subfront. We are trying to get in there and manipulate the economy. They are tight right now. Super tight, absolutely. Because of a number of reasons. Housing is how much of gdp . Well, if you add it all in, ive seen numbers as highs a18 . If you look directly, its historically 3. 5 to 5 in terms of residential construction. Then you have a lot of knockon effects. The resale of a house doesnt add that much to gdp but you do have people improving it and updating it. And the new washing machine, that kind of stuff. Home electronics. If you think your house is worth more, you feel better about spending money on other things. Its less today than it normally would have been. Weve overshot to the downside. The tightening of credit is not only for the potential home owners. Its for the builders. Because the builders cant get credit we have a shortage of homes being built. Home prices have shot up. I see that. You have paris, hong kong hotel. What is on there . All kinds of International Travel stamps. Certain travel sites. Ive tried to promote europe. They need a break. They do. Ive often wondered, how many are they pairs of suspenders. Yes. How many do you have . Probably 30 or 40. Wow ive been doing this for 30 years. Is it more shoes than your wife has. Probably not more shoes. My bulls and bears, ive had them since i started back in the 1980s. You dont have a belt on . No, no. You dont do that . No. It defeats the purpose. You have suspenders or sorkin has neither. Really . Yes. I still cant i dont know what that is. Thats just lazy. Hes real thin, too. What i do, when you get older what do you do . Miss a hoop. My wife goes, youre slipping. You missed a hoop. Slipping. See you guys. Thank you. Slipping. You do. Slip a little. Ill watch for that. Coming up, a plan for retirement and maybe plans for the white house. Senator marco rubio will be our special guest coming up in the 8 00 a. M. Hour. Welcome back. U. S. Equity futures at this hour now giving back a little ground. But theres a lot happening between now and 9 30. We closed at new highs yesterday on both the s p and the dow. So not to worry at this point, down seven points. Coming up, is brazil worth a second look for your investment dollars . We check out the economic prospects for south americas largest economy when squawk box returns in just a moment. I have low testosterone. There, i said it. How did i know . Well, i didnt really. See, i figured low testosterone would decrease my sex drive. But when i started losing energy and became moody. Thats when i had an honest conversation with my doctor. We discussed all the symptoms. Then he gave me some blood tests. Showed it was low t. Thats it. It was a number not just me. [ male announcer ] today, men with low t have androgel 1. 62 testosterone gel. The 1 prescribed topical testosterone replacement therapy, increases testosterone when used daily. Women and children should avoid contact with application sites. 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Change your number. Turn it up. Androgel 1. 62 . A big conference of latin american ceos gets under way if fork city. Joining us now this morning from the conference is the chief economist of latin americas largest private banks. He is the sponsor of the conference. Its good to have you here. Good morning. Its great to be here. So brazil has been in the headlines a lot lately. Not for very good reason. All the construction for the world cup seems to be far behind. Threats about the olympics. Blrpt theyre going to be done. We recently had a well phone investor say the situation in brazil is so bad it may actually be good if you are a contaxpayerian investor. How should we see brazil right now in the state of its economy . I think you can see opportunity. I think growth has gone down to an average 2 . Maybe after election, we will get more groove. A lot of the bad fuse of price. Asset will reflect better views than we have now. The world cup and olympics are going to be next month. July. Its going to be entertainment. But then we go back to the basics, the planning. I said things maybe get better after the election. Thats not a ringing endorsement about whether or not the economy will improve. Why do you say maybe . Well, because you are never sure that justice will be made. We need some adjustments. We feed to save more. We feed the country to invest more. The productivity will not resolve in the last ten, 20 years. As you know, there was a boom. Brazil took advantage of that there was production. Wages are high. There is unemployment. Now you need to do the justice to grow. Yeah, i mean, you talk about a lot of the issues. From the outside, when we look at brazils economy, what we see is the government and an overwhelming relief the government should be deeply involved in the company. Tim green with the company is telling ceos what to do, et cetera. Is that ever going to change . Well, the results were not great. But have they figured that out . Has the government figured that out . That was their intervention that led to that result . Yes, when you look for example at the office of the structure, its more market based now. Theyre not completely market base because you do have some failure development. But there is an position, there is competition. You are getting the winners. So i think the government is getting there. Its still slower than i will like. I think we need more competition, less government, more private companies, private involvement. I think we are getting there, but we are not yet there. Do you expect protests as we head into the worlds cup . Well, i think, maybe, maybe, yes, because, you know, its a window, you have millions and millions of people watching and people want to find the message, what is the message . The message is that they want Better Public Services that, for example, they there now have better income, higher income. Theyre employed. But it saves them two hours to get to work. They used to be, the health, the service they get is not gooding when they seek, they have to wait in line. All of there is a part of the what is demand. There is no longer demand for food, but they demand more services. So i think you have some process because the world cup is a window for the rest of the world and they want the magic to be heard. Thank you so much for joining us. Lets see you later today. We will be interviewing a football of brazilian ceos. Tanks for being here. Yes. Thank you, thank you thank you for having me. Next up, coming up, some of the biggest issues facing washington and wall street. Competent taxes, jobs and income equality. A business professor and former chairman of the economic advisers gets ready to sound off on those topics and more next on squawk box. What is this place . Where are we . This is where we bring together reliably fast internet and the best in entertainment. We call it the x1 entertainment operating system. It looks like the future we must have encountered a temporal vortex. Further analytics are necessary. Beam us up. Thats my phone. Hey. [ female announcer ] the x1 entertainment operating system. Only from xfinity. Tv and internet together like never before. Competent tax reform, income inequality, jobs in america. All big topics for our guest host, he will tackle those issues this morning. More records from wall street. Will this bullish trend continue for the summer neighborhood, getting the business off the ground, the keys to building successful restaurants and getting customers to come back for more. Thats the second hour of squawk box begins right now. Good morning, welcome to squawk box. Becky and andrew are off today. For the changes coming michelle caruso, carrera. Its a brand. The lost time you did change it. Didnt we see your name on there . Not going to mention that. Im not sure how to pronounce it. It was so long ago in ohio its pronounced another way. Anyway, we have plenty of company. Ed lezear, senior fellow, Hoover Institution. Professor of stamfords graduate school of business. Chairman of advisers under president bush. Ron cox is reuters breaking views. Lots of big topics to every co. With ed especially, we have congressman frank on a little bit later. We have a chance that here, hes very smart and hes not in office anymore. He, you know, he will tell you whether something makes sense or not. You got some great ideas that i dont understand completely. On Corporate Tax reform . Not Corporate Tax reform, ed says is even better. We talk about. I was doing some research for today and i found out, we have not made any investments in this country and we have been consuming, consuming like crazy, you cannot grow without investment. Absolutely. Thats where we need to talk about this depreciation thing. We will get to it. The government investing. I cant stand when i hear, we will invest. Corporations investing. I will also combine that. You might like it, with bringing back money and doing Public Private stuff. Infrastructure, we can do that, cant we . We can certainly do that. But the problem on the investment side you mentioned right at the beginning is on the private sector investment. We are lagging there. The recovery has been slow. Fortunately, it looks a little better now than it did a few months ago. Particularly in the labor market. We are seeing some light there. But its not enough and we need to think about the long term. Not just the recovery. I think what you really want to think about is what do we do to get back on a path of growth rates . Not the kindofgrowth. All this stuff is much more manageable. The income and equality. The employment picture. You go threeandahalf deficit. 3. 5 , 4, suddenly we think we are america. You are talking about a broad reform. Its an issue. Thats right. Absolutely. That takes years. It takes elections. Its an easy one. The futures are doing nothing. So look at them. Get them out of the way. There they are. Down 5 thank you. Ten year below 2. 6 michelle has more. Two retailers on our watch list. Sears is exploring a 51 stake in sears canada. They have been trimming most recently with the spinout of lands end. Macys is expected to report Quarterly Earnings in just about an hour. You can see how these e those are trading in flee markets. Sony is forecasting its second consecutive annual loss for the year that ends next month. As it continues its efforts to turn around its electronics business, sony said it will accelerate restructureing moves. Pfizer ian read is trying to get more from the lawmakers for the takeover of astrozenica. Read told law makaries takeover wouldnt disrupt drugs currently taking place. Yahoo mobile messaging might be buying blink, it sends messages that self construct and destruct. Terms of the deal were not disclosed. Marissa myers acquired several small startups since she took over the internet giant. We are joined by a dynamic guest host and reporter duo, ed, as you told you, he is a senior fellow at stamfords Hoover Institution and professor. I already said all this, did i not . Yes, you did. Did i not. Im not doing it again. Rob, you are with reuters. I like it. Wasnt that unbelievable . Unbelievable. I got to keep busy. Its like lundqvist against the penguins. When you have a guy like that. Hes the king. He deserves the title. He does. And hes so handsome, too. My wife thinks he looks like bradley cooper. My duties looks at him. I find myself fanning a little bit. Im not kidding. Anyway, thats neither here snapchat was valued at what . 3 billion. This does the same thing. Is it not true, everything sticks around forever anyway . My kids are showing me to actually do a thing where you can hold the picture that they sent you. So you can actually hold onto it. But its, this thing, the reason that its saying we dont know the number. I dont know if it was disclosed its because they dont have hundreds of 348s of people using it yet. The idea, someone has a good application, a good technology, now its up to yahoo. It seems all these things there is no border to entry by info rate issors. Thats the point. Shes not, marissa meyer, yahoo is not shelling out billions of dollars apparently to buy this thing. A couple of folks came up with a competing app, maybe it has bells and whistles different from snapchat. I dont know if it was video pictures. It sounds to me that its text. Text. Its an application they can roll out using this famous attachment theory or create synergys. My favorite few board is this is a prerevenue company. There used to be preprofit. Now theyre being described as prerevenue. Im looking for post ref few. Right, exactly. Everyone is trying to get into some sort of communication space. I mean, whats app went for what 19 billion. All of there in the same space. But the reason you pay up for these things is because they have a user base. At least thats the ration ail. The justification is you are getting hundreds of millions of people. Thats why instagram went for the money it did. This blink maybe blink we wont even know about it. They have nanged things over time. You think back in the old days being first was the big deal. I remember lotus 1, 2, 3, where are they today . Postrevenue. Exactly. You wonder how much do you get in there being first having a good product but not one that lasts. I was moving my commodore computer searching for lotus 1, 2, 3. Okay some my idea if the Interest Rates is low. Im trying to be bipartisan. Why . Im trying to be a little bit. I to the you got the democrats off the shelf. Let me ask you this, i was reading some stuff about going all the way back to the great soviet Foreign Ministry back then, theyre trying to engage, in terms of civil rights unequivocally. It works. You congress let states as far as antidiscriminary napgs. But how would, if its not states, how do you get the private sector to we build all the highways, the airports, the bridges, why would the private sector ever do that . They can do that. Why would that . You have to have a profit mode to do it. There are private roads, those things. There is some mode missing somewhere, because were in decline. There are ways to allocate this. The question is, is it better to have the private sector do it . Will you not have an unregulated private sect ovrmt this will come up later by the way when we touk u talk about freddie orphanny. But the difference between the natural monopoly and the government created one, the failure one only makes sense to have one road. You dont want to have 15 roads parallel to one another. Have you to have one private road or one government road. So what ends up happening is when you have the Profit Sector doing this, you have regulation. The question ten becomes whether the regulation is more pernicous than having the government doing it themselves. Usually the best way to do it is to somehow farm it out, have a contract, have some kind of a deal where the private sector does it. Heres my idea. See, were having money bringing this money back. Theres a lot. Its ridiculous. You mean the repatriatation is exactly. We work with Corporate Taxation and get territorial. The only way maybe we get the left goal or democrats to agree to bring it back is if we tie it to some type of infrastructure buildout. At least we get it back. Cant we agree . Were so we talked about geithners book. I dont know who hates geithner more, the right or the left. In a society. From a politically churned environment like that, where we are so far apart. Is there anything in the middle we can agree on . There is nothing wrong investing in the infrastructure. There are people, even michelle. Wait, wait, wait. I have never said i dont want to invest. I am looking at your body language. Some things i find frustrating is you think if you give the money to xiong for infrastructure, we might get some instra structure out of the process. We wont, thats the problem. You divulge to the States States where local people have to pay a part of the bill. Taken you get real indestruction that matters. Heathrow is a privately run concession. Have you used the hong kong public session. There is concessions you can give out long term. You give certain stability in returns. You can do this. Why cant we take some of these best practices and figure it out . I dont know, ed, you have a view on this, maybe you need government concession, a certain amount of clear regulation. You need to know you will have a longterm 20, 30year return on that investment, on that concession. Its doable. It had a huge stimulus bill. It had a huge component. How many did we get . Nothing. We know the whole shovel Ready Concept was misguided. We are look at the right before we left office, actually. We thought about whether we should initiate a stimulus in december 28. We were already in the recession. We already few the new team was coming in, they were going to initiate a stimulus. We studied this, we said, how effective can we be . Suppose we put money in the department of transportation and them them to go out and build roads, the answer was, if you put in a dollar, you will get 25 cents spent this year, the other will trick him out over the next 11 years. The problem is its very difficult to get money into the economy quickly. Thats not the reason for infrastrir spending. I think the obama team led us astray by letting us think the whole idea behind infrastructure was to stimulate the economy. The reason for in123r5ur at the state level is that the state might do something better. Defense is the obvious case in point. Very few people would aurk it will have private defense. Its better at the federal level, slightly. There are obvious cases where you want that. You might think about airports. I like the idea you put out where you say think about private run organization, you farm it out. Its like a public utility. You got to be careful about the regulation. Have you to be careful about government exappropriatiateing the property. When the government does a good job of building these airports and it becomes profitable. They look at it and say, gee. That should be our money. If they had done it, they would have made that money. You have to be careful about it. As administrations change, they may change their views. We have long Term Contracts rule of law. It seems to me, its 2409 something we couldnt try. We can do it. Im with you on that, i think its a much better solution than the one we have now. You have to be careful. I remember sixes where we had contracts made by the Clinton Administration in the late 90s on oil leases in the gulf. Congress zielded those contracts were too sweet, that we should take them back. It was ironic the Bush Administration said no way. If the Clinton Administration, were sticking with the deal a. Deal the a deal. Were not going to allow that to happen. You have to make sure you honor the contract. Maybe another party. We now talked about the bushclinton years. Those were similar republicans. A probusiness. Now we have seen, i dont use the word exact option. Now we have seen the exact opposite, all tow, option is usually enough. Okay. So we got nowhere there. So well talk about maybe, im just looking for something to do in the next two years. Maybe we get a different senate. Then well eventually get a different president. Up with of these days we got to do corporate reform. I dont know if there is any hope to do it. I will talk to barney hope about it. We will chat about it later. I think there is hope. I will show you a paper that shows Corporate America because of globalization has moved. Its now 26 it would raise so much money here, even if we didnt close loopholes, revenues would go up. Revenues would go up if we build it. We will have much more from ed and rob. Ed and rob, throughout the show. Its like a Comedic Group like jan an dean. Another record setting day for the dow and the s p 500. Brian belski from bemo is headed to the set. Squawk returns if just a moment. In just a in a moment. Both the dow eclipsed 1,900 for the first time ever. Even the march retail sales, april retail sales were glib. The march sales were revised upwards. With us is bryan bellski standing by his 1,900 year target on the s p. That means we are done . You know whats interesting is that were not hearing a lot about. That we have two sets of institution allans around the world. The first set are clients that are bitter because they missed the entire move. So theyre looking for the big correction. They have not hesitated. On the other side of the spectrum is a growing list of clients are becoming complacent in talking about the lack of a big direction in pulling any kind of a pullback, in becoming more and more comfortable, oh the market will pull back 3 to 5 . Theyre embracing the goldilocks scenario, which obviously has come about. What we said for 2014 was this that target, we will have a big rally. The stocks lead earnings, which lead the economy. Stocks have told you what will happen in the economy going forward, when the economy starts to peck up, thats when the market starts to roll over. At the end of the day, we need to see environment apples kick in after that so were not trying to time the mark. We said we are in a 15 to 20 year bull market in equity. We need a bit of a digestion period. We think it means a tremendous amount of complacency surrounding stocks where we feed a digestion period. Thats whats happening. We xeep seeing incremental most. Yet, we are pretty much flat for the year, soar fa. Look at tham. It doesnt look like a rapidly rising market. We are talking portfolio pangers. You see an increasing amount of indexing, right . Its not exactly the point where we are seeing a lot of stocks. For instance coming into the year, energy was one of the best performing sectors, this year, its one of the best performing sectors. We wrote a cautionary tone on energy a week ago saying, hey, this is a momentum move. The quality stocks are not leading. Energy and facebook, momos. This year its about momentum. Moment item and growth straid trades rarely have the type of longevity. The dow price to free cash flow, last year. This year its growth rates. Okay. Especially estimated growth rates. Typically, when you see that, its a shortterrell movement. Thats why we remain exceedingly confident. I usually turn it around. The markets predict gdp. What are you looking at in terms of predicting the market . Well, gdp is not the best predictor earnings. Gdp estimates continue to come down, right . I think the biggest surprise, theres two big surprises, gdp numbers continue to come down the tenyear treasury is below 3 . Nobody accounted for that. We are looking more tepid growth, into the 2s, the 3s, into next year. We embrace problems in china, problems if europe. We need to get back to capacity and come back to america. I think ultimately that will drive the next phase of the bull market. Prior to myself coming out here, we talk about fiscal reform. Okay. You think about water happened in the last 30 years, our bond brothers and sisters got a great run. God bless them. The last organization of an Interest Rate move was orchestrated by mr. Goldberg. This is the next move in Interest Rates orchestrated by ms. Yellin. What do they have yellin done have . Fiscal. We are not seeing any kind of fiscal response. We think going forward, when we get the next great move in the bull market, we need fiscal response as well. What do you make of mergers and acquisitions . Is that a function of the markets or companies coming up to the markets or a leading indicator . Ill caution you on a word giant. Are you seeing that so far this year . But, however. Are you seeing mna activity across every sector number one . Its across the sectors, number one. Telecon. Number two, i go back to prior comments of infrastructure and needs. What the parallel to the mark was in 1950s, we had the strongest Balance Sheets since the 1950s. Where the last big infrastructure spent was made in our country. What is happening with that in terms of activity . American Balance Sheets are the strongest since then. They have the cash. They have to grow out of that. The majority of deals are done with cats. Its the last peaks, which was 2007 and 2000. We are not fear mna peak. Its not widespread across all sectors. Is bmo, montreal. So you watch them . You care about that . Congratulation blackhawks. So you didnt convert to a montreal . Because you beat minnesota. Are you still a minnesota real good . Its been a rough call. You bet it has. So you are not immediately switching allegiance . Im jumping on a plane, tonight will be rocking. Enjoy. Thank you. Thank you for joining us. I think it should be brain. We mess up would you rather . Coming up, we are will fire up the Corporate Tax debate with barn fifrank. Plus the secret ingredient to creating a successful restaurant. Squawk box will return in just a moment. Aflac. Aflac, aflac, aflac [ both sigh ] ugh you told me he was good, dude. Yeah he stinks at golf. But he was great at getting my claim paid fast. How fast . Mine got paid in 4 days. Wow. Thats awesome. Is that legal . Big fat no. [ male announcer ] find out how fast aflac can pay you at aflac. Com. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Next,s t astrazeneca is steppinp questions. Will marco rubio throw it out in the rink for 2016 . We will press him when we come back and much more in the next hour of squawk box. Welcome back to squawk box. In the headlines. After a set period of time. And the change in the executive suite at krispy kreme. The company has named Tony Thompson as the new executive succeeding the executive chairman. He most recently served as president and chief operating officer at Pizza Company papa johns. Rescue teams are searching for 200 miners and an explosion killed more than 200 in one of the worst mining disasters. Nearly 800 people were in the mean. Nearly half were rescued so far. We will bring you as soon as the story develops. Astra seneca has put protectionism, all kind of stuff. Does the u. S. Need tax reform . Joining us now, barney franks, cnbc contributor, former chairman of the House Financial Services committee and ed lezear and rob cox. I will call you mr. Chairman. I dont think congressman does it. Well, neither one is accurate. Im mr. Frank. Really . Im not a great believer in pompocity of carrying times to your grave. If you have one. I cant even do. I have some people who have one for you, joe. You might not want it. Feisty from the start. I was going to mention that michelle needs a ride, ed lezear is here. One person that have broad if you have shoulders. You are. I figure. Joe, i have to say, im a little disappointed. 3to1. Its going to be me. Im with you on a lot of things. I appreciate. I tell you why im excited to be able to talk to you, number one, you are an elder statesman, you represent the thinking on the democratic side. At least you know your facts, you know your numbers in terms of proils policy and in terms of financials. So i think we could get somewhere here in a country that seems to be completely paralyzed. Wen what im talking about is Corporate Tax reform. I dont understand what the issue is here. And its around doing it where revenue will at lowest stay where it is. We need it to be revenue neutral. The case can be made that on a lesser curve that its moved and 26 here would not actually be a huge revenue enhancer if we were to do it. Is that flawed thinking . Well, ill quote Alan Greenspan that was asked at a hard of hearing i was at, isnt it true if we cut taxes in the right way, you can increase revenue . He said, its theoretically possible. But ive never seen it happen in my lifetime. I think once you get into that and its possible to think of a case to make the argument. But i would not. To invitepy former colleagues to the argument, oh, if we cut this, cut that, well do more see one of the things that troubles me, within i hear these debates the concern for the deficit tends to disappear when were talking about spending money, make it easier for low income kids to go to college, aid to cities for law enforcement. We hear about the deficit. So i think we have to keep the deficit in mind in everything. So what i would like to see us do is i agree, obviously, the Corporate Tax should be from the competitive standpoint reduced, offset if my mind by an increase in taxation on wealthy individuals. I think can you do this in a way that further incentivizes business activity. I think there is still room for to us go in raising taxes on individuals with the upper income without interfering with incentives. That was going to be one ofpy questions to you, when we talk about ref few neutral, i didnt foe if they meant in the corporate sector. Thats a good question. My answer would be, dont try to make it. There is no argument with making it ref few neutral. The corporations, i iced to say corporations arent people. But the Supreme Court says they are, not apparently through this, this occurs to me, i think you want to make it not just neutral. You want to make it equality effect neutral. That is, clearly the major beneficiaries in income terms in a reduction in Corporate Tax will be overall effect in the country. I would offset that. I dont want to make the American Economy even more an equal than it now is. Think about it. If you were to do it in a way that corporations did better and competed better, and then even more profits flowed to shareholders, those are the people at that point that you could make up the ref fews that you are losing with the competent. There would be more jobs, more profit. And the corporate executives. The high end people. Absolutely. Because in looking at this, trying to figure out how this works, i look to try to find out the percent annual of gdp, if were really at a loss in this country competitively, how, corporate revenues is a percentage of gdps must be higher. Theyre not. Were below the odc in the country and corporate revenues as a percentage of gdp, yet we have 40 , basically, if you add if taxes which is much higher. It also becomes a great incentive. A part of what you would do here would reduce the loopholes in reductions. Because the 40 rate is not the effective rate that many corporations pay. But at the same time, many just say, that is the one way you achieve not total neutrality, but to offset reducing the rate is to make sure that more people pay the full rate without some of the deductions. I will look at your email. In doing, trying to physical this out. I spoke to some people with the aei. I spoke to arthur brookes. I got this paper written a couple years ago about the las ter curve and what would happen to Economic Activity if we went to 26 . Theyre telling me you you dont have to close loopholes and be revenue future tral. Ill send. Its very empirical the way they do it. And that would be i will give you my email address off air. I dont have to be quite so publicly available. I know. Thats where twitter puts all of us at this point. But i wish, and i mean, we were talking earlier, carson, about becoming territorial and bringing back some of the point thats already over there to do infrastructure. Arent these things the democrats and republicans heres the thing, on the question of the overseas income, i would like us to approach that in an internationally cooperative way. I got into the whole question of International Cooperation in a very big way of necessity when we were doing financials this morning. We tried very hard to coordinate. I think largely successfully with england, with the european union, with canada, with japan and i think there is room for some collaboration there. The concern i have with the money overseas, if people, if we make it easier for people to profit from making money overseas and then that does in one sense give an incentive for people to do more in other countries. So on the question of the territorial taxation of taxation in other countries, i would like us to do that on a multinational basis and, frankly, deal with some of the countries that are encouraging a race to the bottom. I was somewhat troubled during the efforts to bail out some of the European Countries that you had countries that have gotten themselves in terrible trouble. Were getting help from others, we are occurring a low tax rate where they were enticing other countrys businesss to go there. Id like to see that one done multinationally. Ed has a question for you. Mr. Frank, im with you on that. I think the big problem is, its not so much territorial versus world wide, at the point you were thinking about earlier, which is the difference between our tax structure and other tax structures. If we are an attractive place in a tax sense, then its easy for us to come back, to get those monies to come back here. So the issue really comes back to fundamental tax reform him something i want to ask you about, something i have been pushing almost ten years now is not taxing investment. Thinking about this as rather than lowering rates, instead, having deduct ability of investment at the time that its made. Have you thought about that . Did you score that and compare it to lower rates . I havent. Your initial question, who is going to determine what investment is. And i think thats a thats always the case. Thats true in any tax system. There is Nothing Specific to this. You always have the problem of whats income, whats investment. So i think no, but it doesnt always, the difference doesnt always have the consequences of total taxation versus an absence lack of taxation. Sure it does. You deduct it from your physical. Its either deductible from your revenue or its not. All im saying is deduct it up front. The reason for doing this, again, what you do when you do that, you guys usually like this i think the democrats would actually gravitate to this approach. Its like an investment tax credit. Its basically a permanent tax credit that says, look, if you will lower rates on corporations, dont give the breaks to investments made ten years ago. Focus it all on the stuff thats going to be in the future. Its new to me. I got to say, i had not heard it before. If you say it should appeal to democrats, it probably in ten years, none of them have become aware of it. So its a brandnew idea to me. I would be prepared to look at fit you send it to me. Its not the type of thing i have a response off the top of my head. It seems to me, everyone around this table has a good idea. I bet if you sat down with 20 members on either side of the aisle in congress, what is it, why do we keep talking about it . What was it like when tlurp in the house that would give you any encourage that we could implement these ideas . I dont have encouragement. Part of the problem i think is you and i have agreed that you talk about ref few neutrality. What we did outside the corporate rate. There are members of congress, particularly the Republican Party who have said under no circumstances do i ever raise any tax. I think thats an obstacle to the kind of xhiechltz you saw that in the response among republicans that they cant, they had thoughtful ideas. But there was an immediate, you can cut this and you cannery douse that, eliminate this you cant raise anything. I think what we need to do is to get frankly if bob dole was still a republican leader. And that philosophy was there, then i think you would have a chance of that kind of, okay, well cut there, well raise there. But in the current atmosphere where you have essentially dave kevin found out the ruling view and the republicans in the house under the circumstances do you ever raise any rate, that makes this kind of a excise impossible. Mr. Frank, what would you do at this point when you see pfizer attempt an inversion with astra zenica, what should be done in order to change that infrastructure . In the first place, i wouldnt change the structure. The necessary that a corporation berngs all evidence points out from a great deal of person war, very influential with our world wide patent protection or our support to drug prices. For them to decide not to pay a lower rate. But to pay it to england instead of america, still being an American Company and enjoying the benefits. I support some efforts to say, you cannot stipulate by some manipulations decide are you not an American Company, even though you are, in fact, still in america. I think some kind of temporary change on that is a legitimate thing to do. I mean, the percentage of ownership, of Foreign Ownership should have to go up. So my Immediate Response is to not allow that kind of clear cut manipulation so that people enjoy the benefit of being American Companies and pay taxes to some foreign companies, while we reduce our tax structure. I know defense spending. I look at ukraine, russia. I dont know how we do that either. I think we can do. Our military was not relevant to the russian takeover. Its not going to be. And there are other areas. What we have to do is announce today to a european wealthy allie that theyre depending on us that that day is over. You have the average nato countries spevengd less than half of what we spend in the percentage of the gdp. So they depend on our defence. We keep negotiateing. The answer is to say, okay, look to japan, germany, world war ii is over. I forgive what you did then to the extent that you stop using your horrible activities of 70 years ago as an excuse to hide behind the american taxpayer for defense i think. Then there are other things. Its time for to us get out of afghanistan. If we havent been able to do that in 13 years. The president wants to spends another 10 billion in afghanistan. There are plenty of ways we can reduce and send that money home. This is good. We cant stop talking to one another. Thats what theyre doing in congress. We need to set an example. I appreciate that. This has been very successful. Barney frank, we appreciate you being with us today. We are college e colleagues. We are collegial. The tax rent apples. They make it double. Coming up, foodies get ready for a cnbc crime time piece. Restaurant and ceo of b b hospitality is looking to invest his own money in new food concepts. I love food. Hes going to join us next. Later, another day of trading. Another record what happened, we will talk market trend and find out if a summer rally is coming to squawk box. Well be right back. Cars are driven by people. Theyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Cozy or cool . Meow or woof . Exactly the way you want it. Until boom, its bedtime your mattress is a battleground of thwarted desire. Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Hes the softy. His sleep number setting is 35. Youre the rock, at 60. And snoring . Sleep numbers even got an adjustment for that. You can only find sleep number at a sleep number store. and right now all beds are on sale. Yep, all beds, starting at just 649. 99. Know better sleep with sleep number. We stathat the kid onhe thought the back of the bus might have a song that he has in his head but he just cant get out. With the technology of cloud, we change all that. I can sing something into my device. Up to the cloud it goes. Back down it comes sounding better. We break down the walls of creation, and we give music creation for the masses. Coming up, serving up restaurant success. The newest member of our cnbc team joins us after the break. Then in the next hour, senator marco rubio giving us his state on keeping america growing. Squawk box is coming right back. What is this place . Where are we . This is where we bring together reliably fast internet and the best in entertainment. We call it the x1 entertainment operating system. It looks like the future we must have encountered a temporal vortex. Further analytics are necessary. Beam us up. Thats my phone. Hey. [ female announcer ] the x1 entertainment operating system. Only from xfinity. Tv and internet together like never before. Cnbcs newest lineup stars joe bostianich, they invest their own money in food ideas they believe will make them millions. Joining us one of the stars of the show, show bastianich and anyone in new york, the list of restaurants. Its the greatest restaurant city in the world. We are privileged. Its a great place to eats you all know. Its lard to get in there. I get up at 4 30 in the morning. I venture out. I went and its phenom nam. I had spaghetti. Black spaghetti. Its spicy. You know the menu, bobo, loopo, alto, esca, most recently italy. Thats in new york. Its an incredible concept. Its like a mall of italian food. The best of shopping and eating in one place. We signed on to do another in the Freedom Tower downtown. We will be on wall street soon so were excited. Mario is out there. He has been on tv for a long time. Hes good. I have been kind of behind the scenes doing more of the finance part, running the businesses, now we kind of bring that to the screen. We see that makes sense, doing the finance side of things. There is real. People bring you ideas. Are you in competition with this other guy . Welling coined of similar to other shows where we are either together investing together or in competition for an idea. Once we get a pitch and we decide which one we want, we bring them to l. A. For a popup. Watch them operate. See the pitfalls, how good they are and sit down and negotiate a deal or equity. You are like the market of the restaurants. That would be, well. Why do you hesitate . We president more investing in ideas, hes buying physical property, failing businesses. We for the postpart people tell us their ideas, they show us it can work him we give them the capital to become their partners the knowhow and capital to make that a reality. Will you yelp at him like he does . Sometimes a little bit of yelping is necessary in the world of finance as you know. But were more lending our credibility, our money and our expertise to helping them, you know, finding. Its a true search for entrepreneurism for making money. Case in point, one of the tension we know success in restaurants breeds success. So people who are good restaurateurs in the past are pretty good bets in the future. Are you looking for new people . Obviously, its more exciting to look for new people is that really the best Business Strategy . Wing will for all times, redemption, people who failed and want to come back. I think its sniffing out opportunity. For me, restaurants are like dna. I walk into a restaurant. I know if its successful, well returns if the good is good before i walk in the dorm i look at food entrepreneurs in the same way. 50i78 looking to invest money to people who can create great restaurants and food ideas. Taking equity shares, helping them run their business and create a portfolio of s with a return. In this show, we paid good investments. Some in los angeles. Theyre operating right now . The show has been taped. Its going to be on air in early july. Some of these food ideas will be popping up very soon. Where is the you call eight popup. Its out in l. A. Where is it . On Melrose Place in hollywood. Its literally a shell. We bring them in a week. They run it two days with us. We are getting to foe them. This way the negotiation becomes part, tow. Do the xhefrs know theyre guinea picks . Sometimes, yes, people come in, spend their own money, some people are invited. Its a try market test of the viability of a concept. Then more than just the people, you get to see how people operate under pressure, under the pressure of us, under the pleasure of the cameras, what can they do and how good are they . Its the Great American dream, so many people dream of a restaurant or a cafe. Some people say it. Failure is endemic to the Restaurant Industry right . You have done extremely well . As we go ahead if other seasons, with epaid five investments in the first season. I think as in anything else, in a portfolio of investments, if you are good, you will be able have a good rate of return. Will it survive . Im looking for 66 and a 3rd hit ratio. Like italian . Anything from a gourmet burger truck in l. A. To Rock N Rollers in brooklyn who want to fry fish to an alternative pasta company. The ideas are, this is our first seventeen so you imagine when this goes on the air the kind of demand we will get to see products from the whole country. It will be massive. We will have more to choose from. It kind of builds on it. Thank you. Watch the show. Im telling you, you will be back. Thank you, i look forward to it. Keep your alarm clock ready. This is an Early Morning out ride out to north jersey. Right, for now. Cnbcs new restaurant reality series premiers if july. Joe, thanks for joining us today. Man, they put it fall there for me. Try reading that. No, dont do that. Get on up stuff. More on the markets at 8 10 eastern time, for marco rubio talks about a possible president ial run. Check out the uts ahead of aprils ppi data out soon. Squawk box will be right back. Were moving our company to new york state. Re all stations come over to mission a for a final go. This is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. Three, two, one. Standing by for capture. The most Innovative Software on the planet. Dragon is captured. Is connecting todays leading companies to places beyond it. Siemens. Answers. Sell in may . No way. Listen to what i say. How about you go eat some hay. I can make things out of clay and lay by the bay. I just may. What do you say . The dow and s p hitting another record high. A summer ramally on its way. Keeping america growing. Senator marco rubio talks Corporate Taxes the middle class and more. Plus Quarterly Results from retail giant macys find out if Terry Lundgren has hit all stores . Final hour of squawk box begins right now. I. They say Madison Square guard isnt crowd and as good as some other places. When the goal is scored, they play this. Its pretty cool. It is. Now, macys is out. Im done talking about this. Fine. Fine. You want me to read it . I will talk about this and go to macys. Expectations are 59 cents a skair share. 60 cents is what they earned. Same store sales are down, theyre giving giants. You know ma the estimate is . No. 448. Right there in the center there. Gross margin tlapg. 9 . I dont see the revenue numbers at this point. I can tell you. 6. 28 billion. We will put it on the screen. Does it say a little below 6. 46. The stock right now is, you cant tell what it will do. Up 66 cents. I got a 57. 50 bid and a 58. 20 after repurchase opt piezation shares raised and the company is also boosting its dividend by 25 and im not seeing the wrong. It was a 1. 7 yearold. Its going up to a dollar. Bring back the charts so joe can see it. The stocks definitely moved premark. The Dividend Increase is amazing. You dont usually see a 25 inkreechls you won consider 1. 7 a big yield stock. Are you like 2. 123506r78 thats good. We will speak to da fa kelsey. Macys says it sees good signs moveing forward into the second quarter, all tow, Business Trends were soft in january through march improved in april now that 60 number was up 9 over last year. So well talk more about this and find out how the margin number was. The company seized same store sales for the year up 2. 15 to 3 . Thats how much the weather affected the quarter. They are seeing it up for the full year up 2. 5 to 3 its impressive to an industry bucking serious trends. If you think about the longterm trend towards electronic markets and having Companies Like sears and pennies, everybody else struggleing, seeing macys at least hanging in there, its pretty impressive. Its not a zero ends game with the internet. With macys, it kind of hits. Penneys is taking advantage. Sears years ago. Even at other mallbased retailers, macys initially he consolidated them. He had a movie about macys, miracle on 34th street. They had a parade every year. I thought you were taking about tom hanks. When someone switched back to woolworths. Lets change our name to venader. Whoever heard of that . Its a real estate play. That makes sense. Macys, you spend millions and millions on that brand. It shows you the value of making part is moves early. Another exam of this was back in the days that predated the auto crisis, remember ford was struggling. They were in ouble. They were very strong. You are seeing the same thing now. You compare j. Krchl penneys or sears t. Retail experience is completely different. You go to j. C. Pen fis, you feel sad. Macys are still investing on the floor. It does. It will be tough. You consider it was taken for macys. I mean how is that name out there so long available . How cool is macys . The symbol the m. Why . It starts with it. I know how to sell it. For years. The letter . You mean the stock symbol. There was talk they were trying to preserve it. For microsoft. Who never showed up. All right. In other earnings furksz they reported 2. 65 cents per share. Shares of the deer equipment, it was hurt by Equipment Sales in the u. S. And canada. In other headlines, the death toll in a mining disaster if turkey is up to 272. Miners were under ground trapping them in the mine. Nearly 400 miners have been removed from the mine, 80 of whom are injured. That rescue is ongoing. Tliets to midway and ohare slowly returning to normal. 800 flights were cancelled yesterday. They had to be evacuated due to an electrical problem that filled the control room with smoke. The dow and s p continue to march higher. John lynch of wells fargo and guest hosts are here with us. And former chairman of the economic advisers global editor of reuters breaking views. Gentleman, grit to have you here. What do you think, john, why do we keep hitting highs . When we look at the year low chart, it looks kind of flat, like point by point. Daybyday. Is the put good enough here to make this rally go on . The gain is death by a thousand cuts, right . Very gradual increases. What i see in the market, yes, we hit new records, im concerned about the leadership, a flattening yield curve. Performing growth, a small underperforming utilities leading. Thats kind of troubleing. But what i do find encouraging is that the more if you will corporate cyclicals such as dow transports, philadelphia Semi Conductor index, theyre outperforming by wide par gins. I think what the market is trying to do now is, quite frankly, discount future participation from Capital Investment whereas last year, we were discounting participation from the consumer. I think as we transition from consumerled to at least rate of acceleration to business led, i think that will be ultimately a positive. So ultimately what do you do . Do you redeploy your. Differently if different sectors or take a little off the table and have some cash available . I think it can stay cyclical. Thats ba we can do. Certainly at wells fargo, were looking at technology, industrials, im very encouraged. You talk about the chart over the past year. Few look at the chart of industrial sector relative to the s p, were outperforming by about 700 basis points so if you want to maintain sick lickcality, cycleic to the investment cycle. Why do you think yields were below 2. 6 . I thisty mark is buying into what janet yelp isnt saying. I dont think the market is concerned about longterm inflation. We will get a couple numbers today and tomorrow. Maybe. 3 of 1 begin for the consumer level tomorrow. But i think its really important for your listeners and viewers inflation doesnt worry me t. Yearoveryear fairson will be very easy. We could be up to 1. 9 on the consumer level. That may cause consumer flat wages, a cyclic peak. I think businesses can maintain their margins, until credit housing wages fully participate, inflation wont be a sustainable threat. Good to see you. Coming up, senator marco rubio will talk about the middle class and as we head to break, check out the skwaux squawk box market indicator. Squawk. The 2016 president ial election may be a few years away. But our next guest is among the top candidates if early polls. For marco rubio joins us. Once again, its grit to see you. Thank you for joining us this morning. Thank you for having me. You gave a speech. We will talk about a lot of these ideas that make sense. We will totally avoid something that hopped to you a little earlier, where you stepped on the third rail of the progressionive movement in terms of global warming. Hopefully, you learned your lesson now. I am more than happy to talk about that. For the, no, no. You know what happens to dissidents in some foreign countries. If you Say Something is a fact long enough people either you start buying into it or in a religious way you become a heretic. You dont want to go there. I have learned, i believe the climate is changing. Thats all you need to say. Ive actually said that. What i dont believe is these laws will do anything about it to destroy our economy. I saw you backtrack on it. I actually didnt. I said the same thing before. Whether man is responsible for global warming. I think its okay for you to be scentable about that. Most of the time science over the years, are you allowed to express skepticism. Thats ma science is all about. Not anymore. You cant make speeches anymore. Im giving you advice. Take it from me, just say, i believe that the climate changes, leave i want at that. It is not worth it. I do not believe these laws will do anything about it. I will not destroy americans. I will not say anything else, i know theyre watching. There are sorrow funned groups that watch. I watch every word now. They have a neilsen box. Thats all i care about. Anyway, senator, one thing that i think makes a lot of sense is how we get young people for the realize i think it would help if they took it upon themselves to prepare for their own retirement. That way we wont be, for the matter what the government does, maybe well be able avoid becoming an entitlement state full on within 50 years. Part of my point is these programs, for example, Social Security was never designed to be the soul source of the retirement community. Its designed to be a splem. Thats the way it will be for the future for my jen rapgs and younger generations. What were trying to do is how do we get more younger investors put your money in equity, not if a savingsk, where over a period of time that will compound. The products are available. If you happen to work somewhere that doesnt have a Human Resources or offer 401k, woking in places without a preretirement savings plan, they would have an ability to pay into a savings plan members of congress have. Its one of the best performing platforms in america. A day doesnt go by when we see that medicare and medicaid are expanding. Its here to stay, obviously, but it could be certainly run a lot more effectively. You made a point about what they tried to kill, the Medicare Advantage plan, you could learn something there the overall system the way those are run. Absolutely. My mom is a medicare patient. What she has found and i have learned watching it, they mark it heavily. That i do all sorts of things. Up with of the things she trax the plan she is ought right now is it provides, they have quality doctors, they will pick her up. Take her. In fact, they want her to go to the doctor. They have an incentive to keep her healthy. If we can create more options for all seniors on medicare beyond the Medicare Advantage, creating that option for everybody, i think will you see competition and quality increase. Your point about Retirement Security is extremely important. Im glad to see you are on to this. One of the big problems we have right now is with People Living longer, you have people working 40 years to support the remaining 20 years. What that basically means is that you have to have not only hire saving. You want the work life to be longer. I to the ump focusing on two aspects of that. The first was creating incentives. I am one of those people. The second was to get savings up. I wonder if you can talk about each one of those a bit . On the higher rate of return, we wont have Interest Rates any time in the future. You never had them at a pace with equity. People are investing in the marketplace. A lot of people dont have access simply because they dont have the time to go down to a financial situation and open up a pretax account or their employer doesnt offer it. So we want to create that option for people to be able to do that, invest in something other than treasury, where over a period of time, thats compounded. I think as people see that succeed, theyll have more of an incentive to invest in it. I think 340e69 people expect to work beyond 65, not because they have to, theyll want to i think that will be the nature of future commitment you see it now, you dont think people want to work after 65, take a trip to the u. S. Senate. You will see quite a few people past theably of 65 who work very hard because they want to. Thats a good thing for our country. We should not punish it. I think there comes a point you should no longer have as to pay into that system after you have been paying into it 40 years. Is there a danger people look at your plan and see it a as a baby boomer appeasement plan for someone running for higher office. I didnt see a lot about how we get younger people to save more money, younger people to invest money, say, in education and skills which are really going to be quite important to holding up all these folks up there who will be needing health care and worried about their retirement. First i have rolled out an agenda on higher education, which i believe is critically important in the 21st century, all middle income hiroshima jobs of the 21st century, all will require some level of advanced skill acquisition or education. Ive rolled out a whole agenda on that. On the speech, we for the cutsed almost significantly on younger workers, giving them a vehicle to invest their money for retirement, dpichg themming a sets to the exact same 1401ktype system that congress has, if you work without a pretax capably, you will be able to buy into the exact same stham i as a member of congress have access to. Thats in there. The other thing is the longterm viable of medicare and Social Security as it is currently structured, neither one of those programs will exist by the time millennials retire. So weve got to address that. Thats a huge part of addressing the needs of that generation. Thank you, senator. We are talking way too much substance here. Let me get back to politics here. Michelle went to well place. Ly hear about the question. Because hillary went to anyway, as far as Hillary Clintons job as secretary of state, you are not the record, itself, benghazi not withstanding you questioned whether she would get a passing grade . I do. I think the foreign policy, this administration has been premised on a failed notion, that is somehow the u. S. Stepped back from the world that other countries would fill that void in a positive way. Thats not been the rum. What we have learned from this experience, while the rest of the world doesnt like to be told what to do by america, they expect us to load. They want america to lead. They understand we are you gnoccily positioned to create a coalition of free nations who will do things like probability freedom of navigation in the seas or the respective territorial boundaries. In the absence of that, you see the chaos when she was at the state department when all of this was happening. Cannot, for republicans to avoid snatching defeat from the jaws of victory in 2014 in this election coming up, what do you do with these hearings . Go full bore. You frtread lightly . What do you do with lois lerner . I expect it will be run in are a professional way. I think this is a fact finding operation. It shouldnt be theater. These are serious thinkers and workers. These are not necessarily showboats doing it for television exposure. First we know there was a long history of credible reporting, the situation in benghazi was very dangerous. We know the red cross and british and others had left benghazi because they felt they couldnt protect tear personnel. The u. S. Decided to stay. Thats a questionable zichlgs assu adecision. Assuming you say, you have to put in resources to protect your people and extract them. We did neither. Who will be held accountable . So far nobody has been. I think that should be a significant part of this inquiry. The other is, the white house made a decision to go to the American People and them them, in the early stages after this occurred, that this happened because of a video. They didnt want to say it was because of terrorism. Because if you will recall, their narrative was terrorism is on the run. Senator. They also need to be heldkable. Joe brought up the wealthy thichlt im also cuban american. It would be great to see a cubanamerican president. Are you going to run . I dont know if i will run. I will know the end of this year, early next year, my senate term is up as well. I have as to make a decision if i want to stay here in the senate and continue to make a difference or run from another spot. Well see early next year. I like senator rubio is more cuban. Yeah. Senator, thank you. One last thing that you might, you know, if you do weigh in on it again, you might say the modems have correctly predicted wed have more warm, degree, wet, cold, summers an winters and they have, it has been correct, warm, dry, cold. Thank you for your time. Thank you. Just trying to help you here, senator, appreciate it. I understand. All right, coming up, a new top baker at krispy kreme. Squawk box will have the data when we come right back. What does it mean to drive as far as you want. Theres a new baker at krispy kreme. James morgan will remain at the company an serve as executive chairman. Mr. Thompson scombroens papa johns international. He serves as chief operating officer. Coming up next, april ppi numbers are out. Then the spring art auction season is off to a solid start selling 280 million of impressionist and modern art. The best result in a category in four years. Find out pa the market is saying about the state of the overall economy. A the market is saying about the state of the overall economy. Wa the market is saying about the state of the overall economy. Wa the market is saying about the state of the overall economy. Hwa the market saying about the state of the overall economy. Awa the market saying about the state of the overall economy. Twa the market saying about the state of the overall economy. A the market is saying about the state of the overall economy. The market is saying about the state of the overall economy. Welcome back to squawk box. We are second away from the Producer Price index. See i wont say what that says. Ppi. I wont say pp on the air. Rick, what are the numbers . Its easier, too. Hot, hot, hot up. 16 of 1 on ppi. Throw that away. Nobody cares about that type of inflation. We look at the exfood energy stripping off everything i purchased the post. Up. 5. If we look at some of the other internals, the final demand yearoveryear 2. 1. So we go from headlean up 1. 9. These are all hotter than we expected. This is pipeline, what we will Pay Attention to later in the week, we get cpi. What is photoworthy here, that is inflation picks up a bit on the numbers, but we should see some type of appropriate response on the long end of the Treasury Curve but harken to a 257, jumped one basis point from 256. By the way, should we close under 257 will be a low closing yield. Why arent we getting more pop out of the long end . The long end is concerned we are not getting enough pop out of the economy. Back to you. We will check the markets and get to seve leisman. Steve leisman. I read last week that maybe there could be just a very, very prime ordial sign of maybe some stirrings in these things. There is a camp out there of inflationists its soon to be nigh. Food stuff is up 2. 7 month on month. Trade, this new ppi report, they just revamped it. Looking up the chain, less process, intermediate demand goods, processed goods are unchangedlet. So not quite sure we are seeing the pipeline pressure here. There is 2. 17 consumer goods things like profits, depending on how competitive the market is, it depends on how much they pass this along. Ed, tell me the thing that everybody is really watching are wages and a tightening laid the market and the general theory is, which, folks, as you pointed out to me in your emails is not the general practice of how things happen in reality t. Economic theory is you have wage inflation, it leads to people buying more stuff. Loads to inflation prices. Is that the best way to think about the inflation die namic . Its not the way i would think about it. Im not a big believer in cost inflation, which is the story you have. It sounds like you got a changein multiplier in there as well. I would say the way i would think about this is first of all distinguish increases if price, inflation from changes in the relative prices to some of the things you talked a minute ago, if you see food prices going up, gasoline prices, changes in relative prices relative to the prees of labor as well. Thats a big problem. If you are thinking about inflation, are you thinking about the fed. To me the key is paying Interest Rates on reserves. That to me is the key instrument that the fed has right now that theyre using right now to keep inflation in check at least in the short run the question would be how that plays out over the longer term. Because, you foe, a year or two down the road, will you have to ask whether the fed is willing or able even to pa i the kind of higher Interest Rates we see to suck that money out of the economy and back into the feds. You are in the education business among other things, which who are you teaching right now about the inflation doi namic . If you had said five or six years ago, the fed is going to afternoon up the Balance Sheets of 4. 1 trillion. You would have thought, guys, show me the equation. That hasnt happened and given that that hasnt happened, water the dynamic by which we eventually do have inflation . Again, i will go back to what we were saying. Anybody who is looking at increases in the money supply five years ago would have forgotten about the fact this is a new institution. Remember if 2008, that was the first time the fed had the ability to pay interest on reserves. I keep saying that because i think we cant state the overimportance of. So you are saying 25 basis points is keeping, listen, i agree we shouldnt pay it. 25 basis points is keeping these institutions money on the side lines because that makes the difference of whether they can find something cool to invest in. Is it really that bad out there. Theyre sucking that money in. I mean, you look at it. Its 25 basis points. I know that. Agree, they shouldnt pay it. If that is the difference between stockpileing or investing or opening up a plan, were in way worst shape than i to the we were five minutes ago. We know thats the difference. If you look at the market rates on short term is zero. What can tell what the market rates are doing . Seriously. Im basically if your camp, though, on this rick. I worry about inflation in the long term. I think the Balance Sheet we are looking at right now not a stable situation. Even if the fed can maintain this in the short run, you and i might have a slight disagreement on that, i think the more important story is really the longer term him on that, i think were on the same page. Thats really where the danger lies. You also think the labor markets may be what, tighter or stronger . You have been looking at an hours work. I do. I am a big fan at looking at two numbers that dont get an hour of play. One hour is work. That had been declining from february until september. Some might have been weather related. Some of it was a trend. What we saw in the past couple ofs is hours picked up. That pines the Jobs Creation has been double the football of hours gone by double. One hour work is 350,000. Private sector jobs and 400,000 if you include all. Its a big deal. What do you make of the weakness that 800,000 left the work force . The way i like to think about this. Those numbers tend to be volatile t. Way i like the think about this. The key number you soul be looking at is the deployment to population ratio. That tells you how many people are actually working relative to the size of the population that can be working. It cuts through everything. You dont have to worry about whether people are discouraged. Just look at that number. That number has been pretty stable now at about 59. 8, 58. 9, which is better tan its been. So were if pretty good shape there. The problem is, the peak was 62. 5, 63 or a long way from that. So even under the current situation, weve got three to five years before we are back to normal. So people like, im standing in quicksand, my neck is still above it. Thats stability. How do you have the type of genius on set . Dont suck up the hit. Are you kidding me . One of my favorite economies ever. Hes not one of those. Hes one of us. You are just so unfair, joe. Unless there was like i have a question. Im going out to stamford for reeducation camp next in a upcom weeks. All right. Good. Such a genius. Do not be fooled. What growth sectors, where is the market headed . Cnbc roger frank is joining us next to talk about the options. Were having a conversation on the air on the set. Sorry him excuse me, krispy kreme auction, having the best spring auction ever. We had barney frank on there. Two franks. We are very frank in this show. You are supposed to give me a i am working on it. I did get a couple. Ifies. A beautiful little set. I hope you bought them privately not at auction. I am not sure like i say i dont boy anything. So water the price . You know all about rich thats all you do . Its my fulltime job. You are like astock stalker. Im a reporter, similar. This was an amazing amount of money 740 million sold last night. That was the highest single auction in christys history. Heres my top sign of an art bubble. The top seller last night was this piece. We will show it to you Barnett Newmans black fire went for 84. 1 million, including kpix. There it is. Do not adjust your screen, folks. Its a panel of black and white with a line down the middle. Again over 89 million. Andrew, art snobs are going to kill me today. Why is this piece worth 80 million . Its an adventure or two in effect mo. He painted only 117 paintings if his career. A painting this large has been in the same collection. There is sort of like big game hunting. If you are checking, gaeth newman is like the sort of the white whale of big game hunting. There are a few of these zip series, two or three in private hand, still . Most are in institutions. The last one that sold in auction november of last year twice the size, half the price, it sold reportedly for 45 million. I want to get to the other three here, frances bacon, trip tick, remember it went for 142 million. This by comparison went for 80. 8 million. This same piece sold ten years ago for about 8 million some you went from 10 to over 80 in a commission of ten years. It sold if 2001 for 5 million. The current owner who sold it last night bought it around 10. This picture as good as it was did not compare. Same artist. Must be high value. This was a late painting of an incipid subject, his last lover john edwards. It didnt have the power or the signature. It sold for 80 million. Its rare. Its one of 28 pictures. Is this premarket pop . It was purchased by asian collectors. Of the five things that sold for over 20 million last night, five of which went to asia. We used to think it was Hedge Fund Guys buying these contemporary pieces. It shifted because the utility is. The Consumer Confidence of the very wealthy is really indiblgtive of afrt values. Its how the wealthy view themselves. The art market has become globalized and marked in a way where these items, particularly at auction where the value is memorialized enhanced by this public display, it becomes much more of an object of desire. You heard me say this before. One of my favorite songs was from president christies there is no other place you cant blow 100 million. Can you buy a house, a yacht, diamond the volume of dimes for sale at that size, very small. Its only art. Those assets convey the valorization of taste, class, aeridiings that fine art does this is a huge component. Totally faked. The huh pan purngs you have a situation of the abstract. I was going to ask you about the newman, what does the person that appreciates art, other than they might make money on it. What do they feel about that line down the center . Newman wanted to invent a nonobjective abstract language to convey commonality with men and separateness, these are direct quotes from him. So the idea of developing this language, its not this language in the visual. Am i going to get off if i look at it in person . Absolutely. Over time you will. Its an acquired taste. Let me come back to what rob said. Does this tell you about equality among the rich . It used to be the case rich is located in a couple countries, now we are getting a dispersion of rich throughout the world. Are you seeing that . The income inecall between the wealthy and extremely wealthy is enorm ousz. He said money no longer has value in art. He is getting outbid by these wealthy agents, a guy that is worth hundreds of millions of dollars feeling not so wealthy in this mark. He chose to an andy warhol. The race riot. That was the big one, you said that was going to be big, it was 63 million. Marlin piece went for 51. Warhol is king. Warhol is the first artist to have the universality of this globalized buying. You have an paj last night t. Race riot is, its amazing that picture 40 years, 50 years after it was painting has the force that it does now, particularly in this environment with an africanamerican president. This pantying is not. Its really a glorification of the triumph and patriotism of trooi triumph over racism. It reads as a very elegant and passion fat work. I mean, the photograph of which this was derived was taken by Charles Moore in life magazine june of 1963, an 11 pic spread on these images declaring the Birmingham Police to be cruel and inhuman and it was very, very favorable you come like, look at my tie. I think i got this line bordered by that line. Then i got a little line here. If i let you go off on this youd write an esky novel. Wouldnt you . Andy warhol, once remarked on barney newman, oh, barn figoes to more parties than i do, probably because he only has to draw a line on a canvass and has a lot more time. Its a rarity. This guy, we can find these anywhere. Its the rarity value the aura of the artist and the sense of history and that there are so few of these. He is important to the abstract movement in terms of abstract art in america. Coming up, the new york stock exchange, what you need to know ahead of the bell. Reaction to the macys earnings. Squawk box will be right back. All right. Cramer, did you meet Jennifer Anniston yesterday . I didnt have that attractive opportunity. What about lebron . You had good guests yesterday. How about ginni rometty, how did that go . I thought that david, you know, hit her with everything she had and she came out teflon like. She did not get a good hand. I and i think the cloud story is for real. Would you buy ibm . Yes. You would buy it here . Yes. You ended up believing that her strategy, which i think its a daunting future for i wouldnt know how to do it at this point, its been reinvented a couple times already. Yeah. She has to do it or this is one of those things where you dont keep your job forever if you dont do it. Its a real board. I was talking about that with david beforehand. I think cloud is the way they miss cloud. Everyone missed what salesforce. Com did, orca really, hewlett theyre catching up to sales force. Thats the problem with that sector, why the stocks one of the reasons the strox been going down. Ibm has declared war on the sector as has oracle. Do you buy art . No. But i happen to be a huge Barnett Newman fan. I think theyre worth every fan. Come on. Explain the newman line. Did you see my tie . No. These guys chose not to be bound by the four walls of the canvas. I have to tell you, i love this work. How do you feel when you stand in front of one of those large youre supposed to have a meta physical experience . In awe. They were struggling with the notion the canvas was limiting and blew it out. Started with lit ski. Monica . No. Its a guy whos an artist. I dont know. Im sure you like i know she painted back in the news, i didnt read the articles. For a Hedge Fund Guy that knows value of what things are worth, maybes theres something to this. There isnt. The japanese came in 89 90, bought them at 30 million. A dry cleaner bought a marilyn shop, had to dump it 10 million a few years later. They tend to be top tickers. If you ask me whether i like it. Thats different from what i would pay for it. I want us to team. Like this dead chicken carcass. Thats my thing. I saw it over in one of those french museums. Thanks, jim. See you in a couple minutes. Reaction to macys results. [ speaking Foreign Language ] yeah. Yeah, yeah, thats where it was. Cars are driven by people. Theyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. man speaking chinese macys out with earnings first of the big retailers to report. Macys beating estimate business a penny raising its dividend and increasing its share buyback. Samestore sales for the quarter were short of estimates. Joining us to break down the numbers is dana, ceo and chief Research Officer for tellsy advisory group. Good to see you. A lot of good news from macys and then not so good news. Where do you see it . I think overall when you look at the sales, Comp Store Sales were negative, 1. 6 . Mall traffic frankly was a little weaker than what their sales were, so the fact that they were able to deliver that kind of a result, in an environment you didnt have a lot of traffic in the mall they managed through it. They held the comp guidance 2. 5 to 3 . We think as we go through the year were beginning to see a pickup . Sales for all the retailers as the weather has become more seasonal. The commentary from Terry Lundgren sales picked up when the northeast finally got a little warmer. Exactly. When you look at a lot of the nationally based retailers you up to 30 of most National Retailer chains based in the northeast. So as were seeing the icup in the northeast, it should help the overall business. The other takeaway on macys earnings the fact that gross margin came in better than expected. Weve had two quarters where theyve managed the gross margin well which helps when you have a volatile sales environment like q1. Recommending the shares or no . I think if theres any pullback on the stock, you buy the stock. The initiatives they have in place with the differentiated merchandise assortments with the omni channel investments theyre getting, theyre getting share. What about other retailers reporting . Well hear from walmart, for example. What are you watching closely . Whats most important . Im watching everyones sales. Sales is the holy grail. If we can get traffic back as we see some of this improved seasonal weather, i think the sales will help everyone feel better about the state of the consumer. Plus, the other element were watching, you got to watch the inventory levels. We want to make sure everyone is staying pretty clean on inven r inventory so we dont have margin and promotion risk. Were you concerned when you saw the retail sales number that came out yesterday . I mean, that retail sales number wasnt so exciting. Certainly ex the autos, a flat number. March and april combined look at it together and the First Quarter, it made everything, whether you focused on home, whether you focussed on durables thats where the spending was. It wasnt on discretionary. Good to see you. Thank you. We want to thank rob cox and ed lazear for spending the morning with us. Squawk on the street is going to be on in a second. Thank you. Pleasure to be with you. Going back to stanford. Just going across the bridge. It will take me a few hours. It will. He may get home before you. Probably afternoon. And youre not on the Admissions Committee currently at stanford . But you know people. Yeah. Well i know people but im not sure a letter from me is hurt not help. Thanks. Squawk on the street coming up right now. Good wednesday morning. Welcome to squawk on the street. Im carl quintanilla, jim cramer, david faber at the stock exchange. We begin with the s p and dow, futures a bit lower amid reports the ecb is planning more stimulus in the weak macro environment. Tenyear yield dipped to 2. 57 this morning, Producer Prices did run a little hot. Europe is down slightly this morning as well. Our road map begins with macys, sales fall, the stock up, though. Investors shrugging off the cool spring as