Transcripts For CNBC Squawk Box 20140602

Ground in massachusetts. Andrew, over to you. Thank you, beck. Its a horrible story. Earlier he spent 88 million buying out the other half of the philadelphia inquirer. His son will now join the board, but other Corporate News this morning. Apple kicking off the Worldwide Developers conference happening today in San Francisco. Ceo tim cook promised the company will enter new product categories this year. Thats what hes been telling everybody. Among the announcements expected from apple are this. Details on the new operating systems because theres ios for the iphone and ipads along with the mac and what that is going to look like. We will also hear applications with a lot of news reports that the applications may let the iphone or ipad control parts of your house like thermostats, appliances and security systems. So well see what happens. A lot of people are looking forward to that. And General Motors could have a recall issued this week after details are released gm will disclose new steps designed to make sure future safety issues are brought more quickly to the attention of top management. Finally, google reportedly plans to spend more than a billion dollars on a fleet of satellites to extend Internet Access to unwired parts of the world coming from the wall street journal this morning. It says the project will start with 180 small highcapacity satellites orbiting the earth at lower altitudes than traditional satellites. Joe . But not drones. But not drops. Because drones fly 40,000 feet or whatever. Does the apple thermostat, can you control your beats remotely . Did you get over that yet . Im not over that yet. You read all the conjecture about it and didnt pay that much for the stream but they paid more than it was worth, like five times what it could be valued at for spotify. But its all about those two guys making it cool. Thats what it is about, right . Thats supposedly what it is about. Call me in a year. Im sure. They are going to have the beat streaming and the itunes separately. Are we sure we should do this, tim . 3 billion is such a small percent with the market is over 500 million. Well see. 500 billion. How can it be a mistake . Just in the margins they make on the beats, the overpriced beats. They may make the money back on the beats, but they have to believe the beats will be fashionable for the next five, ten, 15 years. They make a billion a year. In profit . Maybe thats revenue. But thats 60 markup. Well check on the markets continuing to confound people. The more i read about it the more i get nervous about, you know, all this money, all this fed money, the market is up, the bonds are up, the volatility is down. People arent able to trade. Its just i dont know what is going on behind the scenes. We are up another 22 points at 45 million a month. Thats still real money. Still qe. Basically buying everything out there. We think they are tapering but in fact they are still hugely in it. Lets look at whats happening in oil. You would expect at some point oil to move, but that hasnt the up nati inflationary problems, that would be the low. 2. 48 now. Longterm it goes back down below 2. 40. Well take a quick look at the dollar. Which 1. 36 on the euro is what im interested in. I dont know about the trip abroad. We got tariffs coming here, we dont need to go to paris. A meeting at 8 00 a. M. This morning with thomas pickety. One of the first things im going to ask, have you been to new jersey before . He was at m. I. T. Before. I dont know if hes been to new jersey. You know the expression, its hard to go back to paris if youve been to new jersey. Its very difficult to go back. Its hard to keep them down in paris. You want to stop by princeton during his time. He may have stopped by princeton. Youre right. On his way to teterboro. Youre im not happy about the comments of new jersey and driving along the new jersey turnpike. Terrible. You have a lot of nerve. Have you noticed the new look this weekend . Check this out. Take a shot of joe and show them. It is only on our screen. Whoa, thin man. You need weight. You dont need to be any thinger. Thanks. It is only on the little screams. On the big screens we are stretched out still. We are still fat . Okay. Did we look at gold . No, lets take a look at gold. I feel bad for gold. 1245. Dont you feel bad . For the gold bugs, you mean . It is losing its luster a little. It shot up very high, very quickly. Well get to if theres any type of untoured activity. This is an important story that caught all of our attention over the weekend. You just assume the worst in everyone. Everyone is guilty until proven innocent for you. What do championship golf, an activist investor and a las vegas gambler have in common . Apparently a federal trading inquiry. Phil mickelson confirming over the weekend hes been answering questions from the fbi about stocks and options trading he made with Billy Walters. At least one involving an investment by carl icahn, but the investigation may have hit a snag. Our Senior Correspondent scott co cohn is here with the latest. He may have hit a snug and this is all for nothing. The snag is that the word is out, potential snag, and that complicates any undercover work in if the feds can get past that. And it would bring together two areas where pete barrara and his company have done a lot of work. 26 people pleading guilty in a single case last year. All indications are that this case is in the factfinding stage. An attorney for mickelson says the golfer is not a target but mickelson acknowledged this weekend hes answering questions. I have done absolutely nothing wrong. And thats why ive been fully cooperating with the fbi agents. And im happy to do so in the future, too. Until this gets resolved. But for right now, and hopefully it will be soon, but for right now i really cant talk much about it. Mickelsons trading partner Billy Walters has declined comment. Heres where carl icahn comes in. Take a look at a chart for clorox 2011. They launch a bid at 7. 50 a share. But did somebody like Billy Walters and fbi mickelson know icahns bid was coming and did they learn it from icahn himself . Even if they did, its not clear its illegal. And Billy Walters says he has not heard from the fbi. One criminal defense attorney told me over the weekend it would be difficult to prove anything without a recorded conversation, a wiretap. And if that was part of the governments plan, and the wall street journal says it was, it would be hard to pull it off now that we know about it. The idea that icahn hasnt been contacted yet, does that suggest they were going after him or collecting information to go after a higher target . That doesnt necessarily suggest anything, but if hes the target they may not come to him until late after having all their ducks in a row, but thats conjecture at this point. The investigation has been going on for three years and still they hadnt done what they needed to do yet . Three years to is that when the clorox deal was . The trades were three years ago. They are always looking at up usual trading patterns ahead of a big announcement like that. We dont know when they figured it out or decided there was something to look into. They are looking at him in realtime. They saw the activity three years ago. That must have looked really weird. Then they put it together to figure out who is who. Do you think they get all excited when they see its Phil Mickelson . I think they get excited to see Phil Mickelson, carl icahn, the gambler. Wouldnt you in that situation . If they are looking for headlines thats their business. One of the richest athletes in the country. Yeah, but like Martha Stewart, the idea of getting her was so attractive at that point, i think. And then a noname the Martha Stewart thing took on a life of its own when she lied to the investigators. But they probably did because it was an obstruction case at that point. Plus mickelson made the comment about taxes being too high. Right, throw him in jail. Lets go after this guy. I would worry myself. Scott, stay with us. Well get more on the Ongoing Investigation with berto with us onset. And harvey pitts is onset, former chairman of the securities and exchange commission. And i guess harvey, ill start with you because we were talking beforehand about what really constitutes whether this would be Insider Trading or not. If youre a third or fourth person in line of where the up f info says and clorox is doing some, and you say lets buy some based on that, is that Insider Information . It can be depending on what you know and the source of your information. If you can tell the person who is passing on the information had access to confidential information, it doesnt matter if youre third, fourth or 16th. But what happens if you dont know . Meaning, i mean, this is complete conjecture, walters goes to you, youre hanging out and he says, by the way, i think something is happening with clorox. Im friends with icahn, he may have been in it before, i dont know, but it is all like that. What is that to you . It depends. These cases are hard to put together. There will be a fair amount of difficulty in trying to show that he knew, but the government, at least the sec part of the government, can do this by circumstantial evidence. If they show telephone calls immediately before meetings or then trading took place. But they didnt have that. But this happened in steve cohens case. In steve cohens case they had emails and other things to make it quite clear. What if they wanted to put more wiretaps in now and they werent able to, so what did they want to hear . New stocks that he might be in . Or what if they said, geez, i am really worried, is that what they are looking for . Roberto, would that cause them saying, wow, we better cover our tracks, they just talked to me today. What should i do or say . They may do it, too, huh . Thats exactly what they are looking for. And just to go back to the cohen case, what the government also had was cooperating witnesses. And clearly the government would have been looking for that in this case with mr. Mickelson and icahn and Billy Walters. And theres no suggestion that there are any cooperating witnesses in this case so far. Can i just ask, even if icahn did tell them what he was doing, i know that thats all supposition at this point. But if he did, how is that different than what bill ackman is doing with valiant . It isnt. The question is whether this information was stolen. And whether the people that were involved knew that it was stolen, whether walters and mickelson knew it was stolen. Thats really the crux of it. And icahn just saying im going to make a trade is not necessarily stolen information, except maybe from icahns investors. Icahn had a deal. They were in business together. Its a different kind of violation. When someone is accumulating a position, if i tell my friends and they buy stock, then my position looks smaller. And that would be a violation of the securities laws. It wouldnt be Insider Trading. He had a publicly traded fund at the time. Icahn, does he still have that publicly traded vehicle . So he would potentially be defrauding the investors in that fund . If this involved stock he was buying with that vehicle. And we know some of the stock he accumulated was with the publicly traded vehicle. Roberto, when they went rushing to columbus, thats a great tournament, too, the jacks tournament and fbi agents are swarming the fairway. When they went rushing to see mickelson on thursday because they knew it was coming out, what did they expect to get from him there . What was the point of that . You know, i dont like that. And 15 years ago when i was in the justice department, i would tell you that type of fbi work is routine. But youre telling me they couldnt wait until monday . What was the urgency . Especially since there are reports that mickelson was already aware of the investigation. So youre not exactly going to the memorial tournament to surprise him as he comes off the 18th green. So i really think that the government is doing this in a way to bring publicity to this, trying to embarrass mickelson, rattle him, force him to talk when really he shouldnt be saying anything. There was a i dont think it was on the 18th green, i think it was during a round. And its like, theres a joke about that. Well, something horrible happened to phil over the weekend. What . He went doubledoubletriple on the last three. I think he did. I think he was like 6under or something. That will throw you for that might hurt your short game. That might get a little yippee on a couple shots, wouldnt you, scott . Well, yeah. He made the cut, though. He did make the cut. He was only 2under, but that just shows you how great he is. And he can call up can i go back to one Insider Information issue that im still unclear about, though . If youre a company, and an insider does something, i get that. That makes sense to me. But if youre an investor, and carl icahn has no inside information about what hes about to do except that hes about to do it, but thats not like hes got Something Else going on. And you say to your friend, hey, im thinking of investing in this company. Is that considered Insider Trading . No. Unless you have some other duty of confidentiality you breach, it wouldnt be. The government will have to prove that icahn got some benefit for sharing that information. No one is talking about that aspect of it. What benefit would icahn have received for sharing this alleged inside information. Could walters or mickelson get in trouble without icahn in trouble . Absolutely. Theres no question that even if icahn did not violate the law but his information was used by others to trade in the market, thats a clear Insider Trading violation. What is that, that they stole the information from him . They misappropriated it for their own personal use. Whatever icahns rights are, he cant transfer those to other people who get wind of his ideas and then trade on the basis of it. Thats Market Information as opposed to corporate information, but its also subject to Insider Trading laws. Does it benefit, the benefit has to have been received by both sides. So mickelson, im sorry, so walters would have had to get a benefit from mickelson for giving information, is that right . Well, right. You have to show that the personal who originally had the duty of confidentiality which would be icahn received some benefit as well. It wouldnt just be walters. So its a little more complicated. Im saying, im saying icahn says it by accident at dipper, walters now has it and misappropriates it and mentioned it to mickelson. Show me the benefit piece. Reputational friendship. Information about how mickelsons feeling in future Golf Tournaments. And that would open able his bets. There are all sorts of ways in which you can come up with benefits. Isnt the benefit issue a little bit of a gray area right now with the cohen cases, the michael stineberg case, thats the subject of the appeal, how much benefit does he have to get from it . Its whether the tip has mom of the benefit. You still have to show there was some benefit, but whether the tippee has knowledge of the benefit they received. Thats up in the air right now. A fascinating case study, talking about phil, if you know how he plays, he has never not gambled with any shot. He gambles on every shot. Over the years, theres been stories swirling about huge bets he makes. Or that people make with him. So here he is making 60 million a year. 60 million a year and is buying dean food options and clorox options. And he knows this guy in vegas. Hes like good friends with this guy who is a professional gambler. Its all like gambling. You have seen it with Michael Jordan and others. Right. Thats why the ten years at 240. We dont understand that because we dont have 60 million. Thats why we dont understand that. Speak for yourself speak for yourself. Speak for yourself. I dont have 60 million. Thats because you have been here 25 years. And where is my 60 million . Thats true. Maybe thats why he has 60 million. Thank you for bringing up this case. I can tell he likes this case. What i dont like about this case, which roberto eluded to earlier, is why is this public . Why do we know about this . This is not the way government investigations are supposed to be conducted. That is very, very troublesome. When you read the wall street journal piece, there was a New York Times piece, but where do you think the leaks come from . I thought they were really two potential sources. The one thing you can pretty much say is it wouldnt be icahn, walters or mickelson because it is not in their interest to be tarred with an investigation. So its either the government or somebody who was approached for information by a subpoena or otherwise. I figured it was someone at the golf course. Because of the timing, they get approached at the golf course. Carl icahn, i have never given outside information. What about the inside information . I have never given outside information. I deal with the inside information. Never ive never given outside. Only inside. Harvey, thank you. Roberto, thank you. Scott, well talk to you later this morning. When we come back, well look at the group that runs commodity trading. And the Los Angeles Kings were able to close out the chicago blackhawks. Game seven of the western conference finals. They will now be facing the new york rangers in the stanley cup finals. Game one is wednesday. Squawk box is back in just a moment. Peace of mind is important when youre running a business. Century link provides reliable it Services Like multilayered Security Solution to keep your Information Safe secure. Century link. Your link with whats next. Welcome back. Its time for the executive edge. And today a peek inside commodity traders. The secret club that runs the world. Good title. I cant take total credit for it, but it is eye catching. Its a global, powerful but surprisingly low profile world i discovered dominated by people i have never heard of in addition to hedge funders that trade oil, natural gas and commodities, some we have heard of. The business has shifted in recent years to lightly regulated overseas company. Take in part glencore estrada. And a swiss firm that just bought jpmorgans assets is a game player. The cofounder was recently sanctioned by the u. S. Government. These guys are snapping up mining, drilling and transport assets. And more interestingly, trading bucket loads of futures, options and swaps as part of the multitrillion commodity contract market im writing about. The u. S. Regulations have a lot to do with the movement offshore. Earlier this year the fed raised concerns that assets like a Deepwater Oil rig or Nuclear Power facility could create systemic risks if they were to malfunction badly as they have in other situations in recent years. And that perhaps they shouldnt be owned by u. S. Banks. That was only the latest glitch for banks at a time when Capital Requirements are higher and trading is a backbone of trading and outlawed under dodd frank. For more than 12 billion it has plummeted from five years ago to a third of that now. In fact, heres an interesting fact. The amount that ten banks made for all of last year in commodities is just a hair more than gold man saks and Morgan Stanley made each in commodities during the peak year of 2008. So does this lead us to a concerning potential conclusion that if the banks are getting rid of the Smaller Companies we dont know are buying up the assets, is this much a less regulated market than it would have been when the banks owned the assets . This is the irony. Absolutely. In the last five years, the cftc has ramped up commodities. That was the legacy of gary ginsler, probably the toughest regulator to come out of the post financial crisis era. Every day in his position, his map date diminished more with budget dollars and resource dollars. Just as he was bringing greater oversight to the system, it was moving offshore because of bank holding companies. It was like a black market. Things that are much less regul regulated than in the banks were still owning it. I think the swaps market has a lot more accountability, a little more oversight. And this is a 600 trillion market as you know, andrew, home to cds and other important products. But at the same time agreed a lot of the business is moving offshore where the u. S. Cannot see whats going on. I wonder what that means for u. S. Corporations that we talk about every day who want to hedge, but they are not necessarily great at it, but they need to wait to hedge their exposure to volatile prices. But you would definitely, you prefer it inside the banks . If you had a choice . I think thats a tough call. When i first saw the feds concept, it was called a proposed notice of future rule making in january talking about the deepwater horizon fire, all these horrendous natural disasters and manmade disasters that have been spurred by the transport of raw commodities or drilling of them, i thought this is a bit much. I dont see this happening. On the other hand, if you put a few minutes of thought into it, this is the risk associated with drilling and mining and all the other activities do. We need that in our already precarious Financial System . In my book i talk about how he was asked to stay by a number of people. He was, okay. Theres a perception that he was no, i can read from it. Theres a perception he was pushed out. Tim geithner and others invited him to say, but he said five years is enough, et cetera. If i had to pause it, and he wouldnt admit this to me, but if i had to pause it, he got frustrated by the lack of resources. Theres still a fraction of the size of the fcc in many ways, but in recent years they have been aggressive on the enforcement side and the oversight side. There are so many folks overseas and so much is deregulated. Is there a way to get it back if they wanted to . Thats a good question. I think theres a lot of innovation happening with commodities. We have the Energy Dependence theme with opportunity in natural gas. Look at Aubrey Mcclendon who started this incredible start up in new shale assets. Theres plenty of opportunity and the contract markets will always be there. But we will be rebuilding to some extent this apparatus that used to exist within the banks. It is all being sold for parts right now, including the Russian Oil Company whose ceo has been sanctioned. So its an awkward time in geo politics and Raw Materials. Kate, thank you very much. We appreciate it. Pick up a copy of the secret club that runs the world thats on sale today. Coming up, a huge week for Economic Data all leading up to jobs friday. Well get that on friday. A preview of those big expectations for the month of june. Then later in the hour, Roche Pharmaceuticals in its part in the war on cancer, including new data on more than two dozen medicines. Squawk box returns in a moment. If i told you that a free tensecond test could mean less waiting for things like security backups and file downloads youd take that test, right . Well, what are you waiting for . You could literally be done with the test by now. Now you could have done it twice. This is awkward. 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. You want a loan to build you cant do that. Ica . Nobody builds factories in the us anymore. You cant do that. Using american Raw Materials makes no sense. You cant do that. You want to hire workers here in the states . Theyre too expensive, you cant do that. Fortunately we didnt listen to the experts. At weathertech we built american factories, we use american Raw Materials and we hire american workers. Weathertech. Com, proudly made in america. Quality like this. You cant do that. man speaking chinese [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. Good morning. And welcome back to squawk box here on cnbc. Im joe kernan along with becky quick and andrew ross sorkin. Authorities are looking into whether Phil Mickelson and Billy Walters may have traded illegally with carl icahn. They are focusing on trades in clorox. In fact, i dont think icahn had anything to do with dean foods. And i dont know what happened there, but mickelson owned it off and on and something happened with dean foods. I dont think he was involved in dean foods part of it, but mickelson and walters were involved in dean foods. I think maybe Billy Walters may have been involved in some other. Is there indication that walters was getting Something Back from phil in terms of gambling stuff, sports gambling stuff . I have a view on this, which is that the implication could be that walters is a guy in vegas, he likes being friends with mickelson, theres a i believe the government could make the argument that simply being friends with mickelson is a value to a person like walters, to be able to bring mickelson to like a dinner with whatever, it becomes a business thing and then you are going to say who you can be friends with and who you cant in the industry . Maybe thats why, when harvey was out here and thought one of two places could have leaked it, one being the government. Maybe that would be the governments reasons for doing that to try to embarrass them to make people jump to the conclusion. It certainly could be like, if people are thinking its like, if you knew floyd or a boxer and could talk him into taking a dime, put a bunch of money on it, you cant i dont think with with golf it is different. You couldnt have phil deliberately play crappy. Unless you are talking about tiger. If i could get mickelson if i ran a business and had a client to bring along to get mickelson to come to play with me, even though hes my friend. You could make the argument, you give him tips, he comes to play golf with you. Thats a really im just saying thats the case i would make. If i had to make it. That would be a really difficult case to prove. And then into the idea of saying you cant be friends with these people in Different Industries otherwise well talk more about this this morning. Isnt this you . I dont really care whether it is me or not. Its just reading. Go. Read. People would rather look at you, probably. Thats new, isnt it . It is new, thank you. You noticed. You guys both noticed this morning. Im impressed. Thank you. Chinese manufacturing growing for the third consecutive month in may. I envision you in white. This is a powder blue. It is a blue stripe. Powder blue. The data could suggest that its the weird monitor. The data could suggest a slowdown in the worlds second largest economy. And its stabilizing. You see i wore an heirmet. And disney maleficent wins the Weekend Box Office starring angelina jolie. This movie cost 300 million and they have to make close to 600 million at the box office to pay it back, given all the commissions on ticket sales. Its a darker twist on sleeping beauty, which was pretty dark to start with. My kids were very afraid of the end where they were spinning and they get pricked on the its scarier at the end. Remember . I do. And the dragon in maleficent. Handsome prince, i thought. Do you remember him . I dont remember him. Its funny that i do, isnt it . It is. Markets closing out the month of may with another s p 500 record. Well take a look at the trading week ahead. Joining is paul shatz, president of heritage capital. And Michelle Meyer onset, senior u. S. Economist at bank of america, merrill lynch. Paul, well talk about the markets, what is going on with the stork markets . What is happening at this point, they seem to be almost unstoppable . This is coming off a real typical digestion year. Its been pretty quiet, only up a couple percent. To me it feels a lot worse. The news hasnt been so good, yet stocks have been fairly strong. Dow, s p, the nasdaq are close to their highs. The midcaps in russell are trailing, but the russell kicked into gear last week. I think overall things are fine. I dont think were close to a doubledigit correction. And i dont think were close to blasting off either. I think we are just trudging along our merry way. It will get kind of slow and boring. But things are fine for the markets. I guess ive been surprised because the news has been bad. If you actually got some good news, then what happens to the market . Well, the news hasnt been its not awful but it certainly isnt good. Thats why you are seeing the tenyear bullish on bonds since the end of last year. Everyone has been scratching their head. The news is not great. You saw the gdp print. If the gdp print was really that bad, if that was what people perceived to be our economy, stocks would have fallen out of bed for days and days and weeks and weeks. Whats going on in the tenyear is whats going on in europe, that is you have this inflation to deal with and it probably will over time, but it wont be fixed any time soon. People like to see stocks climb the wall of worry, although when close to alltime highs, you need people to be more excited about stocks to push it higher. I dont think we are there yet. We are in this kind of broad trading range. Maybe 17,000, 17,500 on the upside. And maybe towards the upper 15s on the downside. But things are fine. We are at the last stage of the bull market, which should last well into 15. People are looking for a reason to hate this market since it began in 09. We are at alltime highs and Everyone Wants to hate it. Michelle, last week we had lousy quarter gdp numbers, but this week we have the friday jobs report. I think it will be more positive than the qe gdp report, but showing a modest healing in the labor market. Not really the rapid acceleration we were all hoping for and perhaps thats what is being felt in the rate market. The economy wasnt really contracting in the quarter. We know there were a lot of special factors, whether the inventory correction will play out in a stronger q2 number, but the concern is if you average over the past four quarters, you are talking about a low 2 for the economy. We are not seeing anything that different in the jobs numbers either. You are seeing this modest improvement looking for 225 on friday better than where we had been trending but you are not seeing this takeoff in the economy. What do you expect the gdp for the full year to be . Below 2. 5 . You are starting off q1 so weak if you get the big bounceback into the remaining three quarters of the year, its the averages. You are trying to bring up a caverage from your freshman year. Exactly. We have some still expecting 3 . Some who are looking for even stronger. What do they see that you dont . We are actually in that 3 camp in terms of the last three quarters of the year. So to get to 3 on average, you would have to see above 4 . You have to see 4. 5 and that seems completely up reasonable in our opinion given where we are right now. If you are looking at 3 for the rest of the year, thats relative to what we have seen. Part of it is bouncing back. Into the second half of the year, fundamental improvement in the economy. We will see improvement in Consumer Spending and cran x. So momentum builds, but you are still churning out growth and not seeing the positive feedback in the market. Paul, if you think this is the last leg of a bull market, would you still be telling people to invest new money in the stock market or would you tell them to hold off . Well, so absolutely. I would buy into any and all weakness. Any kind of 4 to 8 pullback you go and keep throwing money in. 4 below, you would tell people to buy . 4 to 8 below here i would buy because i think you have only a few pieces in place that are there when a bull market ends. It takes many more pieces. We have only see a couple. It is all that is wrinkly in the tangible economy. It never gets back to trend growth. Thats where people get it wrong, but when you have a financial crisis which we havent seen around the world all that often, this is a typical recovery. You have to get through one more recession before you get back a trend in growth. I argue thats not for several years down the road. Old and wrinkly. I dont know why i heard that, too. Old and wrinkly yet still healthy. It got me thinking about botox. I was thinking bill ackman on my mind with the valiant thing. He uses latisse. He is trying to buy allergen that owns botox. Good to clarify that. No worries. Sooner or later it happens to everyone. So just you think you will live forever, i know you think that at this point, 37 years old. But the end is near. Paul, michelle, thank you very much. Thank you for coming in. Old and wrinkly, coming up. Dr. Love is going to join us next hour. Hes armed with his favorite stocks and will be right here on squaux box. E financial noise financial noise financial noise financial noise theres tworked hard. N sydney. Raised two kids. Theyve never been to moscow. But they sent money there. Rented an apartment. All because, they have this 19yearold daughter who loves to dance. In over 700 cities worldwide, products and services that make a citi client anywhere a citi client everywhere. Show em the curve. Its beautiful. Its more than that. Its perfect. Introducing curved Ultra High Definition Television from samsung. Welcome back to squawk box. Well look at u. S. Futures to see how they are setting up for the week. The dow is opening up 22 points. The s p is up higher over a little over a point. And the nasdaq is a little over two points higher. Well see how things play starting at 9 30 a. M. This morning. Coming up, how roche plays into the war on cancer. And later on squawk, french economist Thomas Piketty fanning the flames on inequality in the 21st century. He joins us in the 8 00 a. M. Eastern hour. Squawk box returns in a moment. Passion. Became your business. At t can help simplify how you manage it. So you can focus on what you love most. When everyone and everything works together, business just sings. I always wanted to design a bike that honored those who serve our country. And geico gave me that opportunity. Now naturally, we wanted it to be powerful, innovative and we built this bike as a tribute to those who are serving, those who have served and their families. And i think we nailed it. Geico. Proudly serving the military for over 75 years. Worldwide among the 32,000 strong gathered in chicago this week for the American Society of clinical oncology annual conference. And biotech and phrma reporter me go here. Good morning, meg. Good morning. Im here with laroche, the leading maker of cancer drugs. Mr. Dan oday, thank you so much for joining us. Thank you for having us. Its a foundational year they are celebrating 50 years. We have been actually intro the deducing medicines for cancer. Our first chemotherapy was 1962. This year the main theme is immunotherapy. You presented one of yours. Tell us about the landscape for immuno therapy and how it can change going forward. Youre right. It is important to put them in perspective. Here at this conference, we will present the results of 350 studies of more than 200 medicines. One the is immunotherapy. Last year we saw with this new way of approaching cancer, we really used the bodys own immune system to attack cancer cells. We saw results last year in cancers from lung, melanoma to kidney. We see a new cancer this year that has responded to our immune know therapy drug for Bladder Cancer. What we saw in our study, half the patients responded to this therapy. Some had a Long Duration of response. That results in breakthrough therapy by the fda which means we can now work with the fda to confirm these results in additional trials. Hopefully if they are confirmed bring it to patients with Bladder Cancer. I want to ask you about that. You have gotten it for this drug for Bladder Cancer and drugs too. What has been your experience . That is a relatively new thing how eupl euit impacts. It is beginning to make a big impact. As you said, we were the First Company to launch a product with break through therapy medicine sib. It made a big difference in the standard of care. What we are seeing in working with the regulatory authorities, we can work more quickly. We can share ideas on how Late Stage Development trials. And we are seeing these medicines are getting to patients sooner. In a crowded field like immunotherapy, astrazeneca, merck, everybody wants to be in this spate. How do you compete . Is it getting to market fastest . Youre finding marksers for patients on whom the drugs will work best . First of all, i think its great news for patients how many medicines are being developed the for people afflicted with cancer. What we see is we follow the science. With our immunotherapy program, one of the things we see that is intriguing is there are certain biomarkers. We are seeing that there is a particular biomarker that may help us determine which patients are more likely to respond and have a longer duration response. Thats part of our strategy also. Looking forward to seeing a lot more data on that. Thank you so much for joining us. Back to you guys. Thanks, meg. And daniel oday. Meg will be back with another special guest from that conference in the next hour. Alice died. Who . Brady bunch. Alice from the brady bunch died . How old . 88. She was great. Didnt see that yet . I missed that. Its the post. It was a shocker for you. I see it. I watched it live and reruns every day. Still. When we come back, the investor, golf pro and gambler. The case and what carl icahn is saying up next on squawk. Tdd 18003452550 there are Trading Opportunities tdd 18003452550 just waiting to be found. Tdd 18003452550 at schwab, were here to help tdd 18003452550 bring what inspires you tdd 18003452550 out there. In here. 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We constantly evolve to meet your needs every day of the week. The billionaire investor, the golf pro and the gambler. Possible insider trader. The war on cancer. The annual meeting of the American Society of clinical oncology is in full swing. Well hear about astrazenecas pipeline. And mario will join us and see if he sees any more love connections. The second hour of squawk box begins right now. They call me dr. Love good morning, everybody welcome back to squawk box here on cnbc. Again, the the futures this morning looked like they would be indicating a higher open at this point. Dow futures up 19 points above fair value. S p up over a point, as are the nasdaq futures. Were watching the 10year note which continues to yield below 2. 5 . 2. 493 . The kwaoeld is where it had been last week. In our headlines this morning, apples annual Worldwide Developers conference is set to get under way today. Some of the announce thes they are expecting, software that will operate the home. And g. M. Meets for the ignition switch call. That meeting comes ahead of the release on the recall. It is expected to come sometime this week. One stock well be watching today life insurerive life. In talks to be bought by japans daichi. Philadelphia inquirer coowner lewis watz dies in a plane crash. He was headed for atlantic ji, new jersey for a not for profit educational thing they were going to. It veered off the runway. Hit an antenna, fence, crashed into a gully. He just spent 88 million earlier the week prior buying out the other half of the inquirer. His son will join the board of that company. Questions this morning about inside trader inquiry involving Phil Mickelson. High rolling las vegas gambler williams and carl icahn and scott wapman joins us. Joe, thank you very much. He denied any wrongdoing. He said he hasnt received a subpoena. Never gave inside information to anyone. He would while he has heard of Phil Mickelson, the two have not met or spoken. He said he is proud of his 50year career and unblemished record. People have criticized his style over the years but he never had a dust up with federal authorities. Blockbuster creditor sued him four years ago claiming he did use inside trading but it was later dismissed. Mickelson has been mum on the subject. He released a statement from the memory more jol Golf Tournament saying, i have done absolutely nothing wrong. I have cooperated with the government in this investigation and will continue to do so. I wish i could fully discuss this matter. Under the circumstances, its just not possible. As for his sponsors which including barclays, exxon, most arent commenting. But calloway says they are standing by their man. The reported investigation does not involve callaway. We have had a longstanding relationship and partnership with phil and value our relationship with him. He always acted with the utmost professionism and integrity. The investigation has apparently hit a snag due to its going public. Important to once again note neither are accused of any wrongdoing at all. Should have never said that about those taxes. He was asking for it. One question for you. When you spoke to carl, its almost irrelevant whether he knows mickelson. What did he say about his relationship with walt senators. Not much other than acknowledging he knows him. Carl used to on the stratosphere. Did he get into any of this like you . No. Did you push it with him . What do you like an amateur . Im just making sure. Former sec enforcement attorney and federal frprosecutor. He does not look like an amateur i want to figure out where all this stands. I want to start with you. Does it matter whether mickelson knows icahn . Its a function of the chain. If we look at the misappropriation. Theres two theory. Theres classic theory and misappropriation. Misappropriation comes from 1997. It is designed to protect outsiders with Insider Information. So in this case if icahn owes a duty to his source of the information and were to share it under the misappropriation theory and he shared it with somebody who there was an agreement of confidentiality. Can the agreement happen over dinner . If im carl and i have dinner with walter and he says what do you like these days on the market. And he says im looking at clorox. We have routinely exchanged information and you have reason to believe i expect you to keep it confidential or should know, thats enforceable. Thats a big stretch. If somebody says it casually, then no. I gather youre furious about this particular case. Whats your problem with it . Ron analyzed the law correctly. To me it was totally unprofessional here is the fbi going to the memorial and talking to phil mcel there. If he talked to him beforehand its as if theyre desperate and this is a way to bring an investigation public that really should be in the nonpublic domain. If the government is able to develop evidence, and it knows how to do so, it can do so in a confidential manner so it doesnt bring carl icahn, mr. Walters or mr. Mickelson into public view. It seems as if there is nothing this was almost a desperate way to see if it could stir something up. Joe, is there any chance im going to give you a Conspiracy Theory i thought this morning. When i read the papers saying this is a snag, that the entire goal of this getting public was to taperecord everybody talking about it the next days. Crazy idea . Not crazy. Not totally out of line. But realistically, i dont think thats what they were trying to do. Did you see a comment in the journal saying one of the biggest problems with taperecording these guys, he owns a stake in the taperecording it is fbi playbook to come and go to the a prospective person. Theyre not coming and scheduling an important so you can be prepared. Anything to be said about the fact that this has gone on three years . Does it mean anything . Absolutely. To rons point, if Phil Mickelson has been cooperating and hs a lawyer, the agents realistically knew that. What troubles me is the impropriety the way this has come about at this juncture. Thats whatstroublesome. There was a case the sec lost last week. That matter went on 10 years. What happened is they bought some options, right . Right. And walters and mickelson bought options on clorox. And carl later makes his play for clorox. It is so obvious there it is. Now they have to put together something that connects the dots. And icahn new walters. When can we find out how many options it was . When do we get the actual details of the original smoking gun that caused them to see this . If i may, thats actually the issue. That is if you look at the timeline, he starts buying in december of 2010. In february, he files his first 13d, first statement of beneficial ownership. He makes the tender in july. There are 10 filings with sec about what they are planning to do. You hit the issue on the head. We dont know anything about where in the timeline these transactions are taking place. So its almost like the search for the missing airline. Were being asked to guess one other thing to keep in mind. When i was at the sec, you never go start at the top. You gather information and then go to everybody at the lower levels. Im certain thats whats gone on. They had already spoken. If they had something, you probably would know by now. If i may, interestingly, to your point, youre right they go up the line. The fact that carl icahn is even danning knowledge is somewhat strike. Because at least youre going to have some level of sec or fbi inquiry to someone like carl icahn asking him three years into an investigation about what communications have you had with these other people . Theres something that doesnt add up here which brings it back to the professional impish. Everybody here in the last hour went crazy on me. Theres always an issue about whether a benefit is given from one side to the other. If walters gives something to mickelson, tells him, hey, this is an idea, does the the benefit have to come back to walters . Ask could simply mickelson playing golf with him and his buddies be construed at touch . If you look at litigation, the benefit is almost found. It could be reputational, personal. In that case, i dont think thats going to be the hurdle here. Its a whole host of other information. It is what duty was owed and the chain of communication. Do you think it wasnt if it was just joe schmo and Phil Mickelson . Theres a target on everybodys back who has some sense of popularity or pop culture relationship. It hurts them. Deterrence issue. The reason why this is leaked out to some extent is the the deterrent. Going after the big fish is the deterrence factor. There is a deterrence factor. The sec has had two losses with cuban and know advice. Thank you for waking up early. Appreciate it coming up next, i turned around. I saw him. He tells us what he is seeing, where we are seeing some love connection. Thats the way of talking about companies merging but we take it to the least level we can. Show em the curve. Its beautiful. Its more than that. Its perfect. Introducing curved Ultra High Definition Television from samsung. Welcome back. Futures indicated a little bit higher. Dow 18 points above fair value. S p indicated slightly higher. Well keep an eye on shares of arc health care today. It is being acquired by ventas for 2. 5 billion in stock. They specialize in medical Office Buildings and senior housing. Mario gabelli. Mario, we dont want to go tops down. We want to go bottoms up with you. Is that okay . Are you comfortable with that . Anything you want to talk about. Basically we gather the data and project it by going one company at a time in industries we have compound knowledge over a long period of time. So youre right. In the late 90s, it was probably a good idea just not to do anything. Even the nifty 50 were totally overvalued. So was the internet and Everything Else. At this point do you the at least notice that the market overall isnt necessarily trading at a wide wild valuation and that makes you safe to look for what youre looking for . Looking at multiple earnings, psychology, cash flows into the market, it doesnt look overvalued. Theres no margin of safety. We have some dynamic. Youre going to have a 10 correct. Is any of it sort of up on because of the fed. It is afemoral and not real . Evaluations arent that high. But it does seem there are external forces, not fundamentals holding it up. But you go back three or four years ago, the fed under bernanke had a man date, to retphraeut housing. And lower the dollar to help exports. And its worked. And its worked. Now the question is when they taking the sugar out on the u. S. Economy, global economy, delevered in europe. Is modi in india doing the same thing . Will he be able to do the same things. Is china having opportunities exxon. Whatever it is. And you go basically to the notion of stimulating the consumer. Will they be able to go to a consumer economic recover. Has it spread and sort of seeped into the underlying economy . To the degree there had been economics theories. That said, there there is a certain amount of wealth spent. You can see it in certain categories. Whole food shopper has done better than the walmart shopper. Thank in fed to the part too. And part to the fed. The economy, led by jobs, and improved consumer psychology, showed some signs of improvement. What did you bring us today . I didnt bring you love without coming on merger monday. You talked about one day. Go the distance with me. Joe, for a lot of reasons. Protective life. You own it . No. Its not an area in which we have a competency. In that framework what we are looking at is there are companies that you step pack and say, okay, advertising. I was at a road show in the 60s. We had been following ad agencies. What happens had they cant get together . Will maurice come in and say, look, i have to do a deal. The Obvious Company is interpublic. Michael roth, getting out of the legacy issues of practices, accounting and so on. And bright fundamentals. If you have good fundamentals but the possibility of a merger. So you like that one . I think the public has 420 million shares of stocks. They close friday. Yeah. I think its okay. Who has the deal . I cant answer that. Its like hillshire. You own hillshire, right . I did something even better than that. We had sarah lee. It split into three parts. Barnes split the company. We made money with one that was taken over. Hillshire was one for five. So theres 120 million shares of hillshire. Conley, ceo, has done a pretty good job of growing the dynamics. Within that framework, the fund mentals were good. He announces a deal with a company, pf. You know, you wonder why. It was kind of a deal that didnt make economic sense. Pinnacle. Pf, pinnacle foods. And now you get a share of the company for pinnacle. Thats 43. 14 times ebitda. It doesnt make sense. So you track these companies on a spinoff. James beam. Wait a second. You liked hillshire when it was spun off. It could become tyson or pilgrims pride. Feed prices are going down. Chicken is becoming a protein source. You have a very positive cycle. How smart are the guys at pilgrims pride or tyson or somebody else that might bid on it. You think originally if it was a stock deal you would stay in the stocks . We would examine carefully given what we would do. It depends on the structure of the deal. The chicken cycle allowed their valuations to become higher. Or smart math wants them diversified. And it shifts . It always shifts. Micro economics 101 or whatever. Why is the stock valued where it is . You think people would discount for the cycle. Look at sony. Look at nokia, walkman all those cycles of blackberry. We keep going back and forth about whether its the beginning of something good in terms of animal spirits or whether they try to rationalize demand wise. Is it good or bad . The most important question, is every cycle the first 50s came along. 80s were leveraged buyouts with milk. That ended in bust. 06, 07, ale 08, club deals, private equity. That ended in a bust. This cycle has room to the grow. Its global. And the driver, joe, is growth. How as a company ceo, how do i grow, take the advantage of low interest rates, high currency and do a deal . So you see it in a variety of industries. Is it growth because we are in i new normal. You hit it before. The ceo is getting more comfortable. The ceo stock has gone down. You are talking a defensive mode. Highway, were going to do this deal. Were going to leverage. Get some stock. Well, whats going to happen to your stock . Hey, with get synergies and the value goes up, then you have the green light to do more. Just because he told us about hillshire six months ago doesnt mean we knew anybody at tyson. So that wouldnt be Insider Trading. You would have gotten a nervous wreck if he had not done it on tv. He told us privately he would have been breaching his fiduciary duty with shareholders. We publish reports. We file 13ds. Hold that thought. Much more from mario throughout the hour. Andrew needs to read this tease. Coming up later on squawk box, Thomas Piketty. Thats at 8 00 a. M. Eastern time. Squawk box returns in just a moment. Financial noise financial noise financial noise [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Still to come this morning, another checkup from the conference. Who is Billy Walters . We have video of him from 60 minutes from a few years ago. He is the gambler. Youre right. I didnt recognize him. The gambler is in the middle of a possible Insider Trading case. Im trying to sell it. His story coming up on squawk box. Welcome back to squawk box on this monday morning. Making headlines. Broadcom is exploring Strategic Alternatives for its cellular bay span business. Shares rising on that news. You can see it up 10 in the premarket. Marathon oil is selling its north sea oil business in norway to a norwegian business for 2. 1 billion in cash. Google reportedly plans to spend a billion dollars on a fleet of satellite toss extend Internet Access to unmonitored parts of the world. The project will start with 180 small capacity satellites that would orbit the earth. American society of clinical oncology is in full swing. Hello again, meg. Hello, again. Were joined by astrazeneca, which is reporting data in lung and ovarian cancer. Chief medical officer dr. Morrison. Thank you for joining us. My pleasure. You have to talk about pfizer. You just turned down a nearly 120 billion bid from pfizer. You are feeling a lot of pressure here. I think we have told people with what our longrange plans are. Oncology is part of that. Were excited for people to see our data on your molecules. They can judge for themselves whether they are good molecules or not. In reporting some positive both in lung and ovarian, one of the biggest upside surprises. Are you feeling like people are happy with what you are present something. People are very happy about the data both in lung cancer with our egfr inhibitor and our trial that the nci did. Were feeling good about the data we presented and hopeful they will become important treatments for patients. Some folks have said youre number 4 in the race to market. How do you compete . You got a very robust. When patients come to the doctor with cancer, they come at different stages of disease. So some of our competitors are studying patients where the cancer has already spread beyond their lungs. There we may be behind our competitors. We are studying patients where the cancer is cop fined just to their lungs. It is possible we will be the first, perhaps the only company to be able to have a medicine for those types of patients. So you have to think about what types of patients are people studying and what kind of indication would they get. We are in good position for those indications. You say it could be a 6. 5 billion drug peak sales. How big could the immo oncology drug be . A number of analysts looked at this. They are talking overall in the 30 billion to 35 billion range. These because these therapies could be used for multiple different types of cancer and in multiple presentations of cancer. So thats about the size. Its a portion of the market, not the whole market. You are presenting data here. Theres competing data from clovis oncology. This is a tough to treat cancer, the biggest killer of cancer throughout the world. There are certain types of patients with lung cancer. 25 have a specific abnormality in their cancer that there are medicines for today. They become resistant. Once they become resistant, then there arent any other medicines for them. This has efficacy and seems to be well tolerated. Patients who have advanced cancer, theres a potential they will have a good benefit without a lot of side effects. Thank you so much for joining us. My pleasure. Andrew, back to you guys. Coming up, stocks to watch when the opening bell rings on wall street. Income in equality and the book that has everybody buzzing. Thomas piketty author of capital in the 21st century. Before we go, dow the opening up close to 12 points higher. Shes still the one for you. And cialis for daily use helps you be Ready Anytime the moment is right. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, 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 long term 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 cialis for daily use and a free 30tablet trial. 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. Pcentury link provides reliable yit Services Like multilayered Security Solution to keep your Information Safe secure. Century link. Your link with whats next. Lets take a look at stocks to watch this morning. Meadwestvaco. It did the called deeply under valued. Mylan in Patent Litigation with pfizer and celebrex capsules. And protective life in talk to be bought by daichi life for 5 billion. When we return, stock ideas from mario gabeli. His thoughts on the big merger news. And then income in equality and the book that has everybody buzzing. Thomas piketty, author of capital in the 21st century. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening, they dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Lets get back to our guest host of the hour. Mario gabelli. We talked about m a a little bit earlier. I want to talk about some of the other stocks you like. One you have liked for a long time, Madison Square garden. You say they are much more valuable because of Steve Ballmer buying the clippers. It was spun off from cablevision. Financial engineering. Theres a reason they did that. Then they spun off amc. It is a keeper for jimmy dolan. So you look at the assets. The assets consist of cash, couple hundred Million Dollars. Then you look at the msg network. Theyve got about 8 million subscribers. They pay 5 plus a month. That business is worth the entire Market Capital of the country. You get knicks and the rangers for free. They put the knicks at 850 million. Thats 1. 3 billion. So when you buy msg at 54. 75 a share, you get those for free. Then you get the rockettes and all these other venues. But im ballmer, im going im not going to do his tax return, but hes going to take deductions for the athletes. Figure out what happens with regards to the content and distribution part of that when he can create his own network. Theres a lot that goes into it. Much like the l. A. Dodgers. You saw the piece. Msg is worth 90. He is crazy like a fox for 2 billion. Guggenheim paid 850. You hated that deal. I absolutely hated that deal. Theyre going to make a lot of money. I hope they do. They went back and loot at what steinbrenner paid. And given whats happening with dvrless sports. And i think hockey do you know what last night must have been. I was riveted. Chicago l. A. This series coming up, new york l. A. Think about the ratings. What it will do is support the buyin on the cable network, which is the real economic value. Hockey is suddenly im telling you. Its almost like maybe its getting as popular as squawk box. Are you going to watch . In the past i have been really into hockey season playoffs. It is selling at a big discount. How do they allocate cash . Todd smith is the new ceo of that entity. Well see. You said amc, which is the other spinoff. It is now an independent operation. Do you think they have been taking over . They have been on a couple different lists as takeover targets. Is love in the air . They have done a fabulous job of coming up with content but hes not inherently content research. Discovery, as you know, has content. Viacom has content. If i look at companies with great fundamentals, why didnt discovery announce a 21 split. They are preparing for the next dynamic. The next dynamic is a deal . Yeah. They will do something whether its Scripps Network or somebody with content and distribution. In the United States you have a reasonably mature market with regards to distribution. The question i thought you would ask if i didnt interrupt you was the notion of all the mergers of the Distribution Companies is that good for the content . I was going there next. And whats the answer . I was like gretzky. I was anticipating where you were going. In that regard, i think that over the top, hulu type, netflix, google is coming in, they will be bidding on content. And you have secrete buyers. So i still believe content is still king, particularly if you can make it here and go gobel. Would you let the deal happen, Time Warner Cable, at t . If you were the regulator. The free market do you know who is a free marketer . Youre like the only person who is not a free marketer thats around this table. Let the markets work. It would always fight for manufacturing. It will put people out of work. The world entered its best period in the history of 4,000 or whatever. Within that framework, its eup 6th tabl that the structure will take place. And if you dont do it, Something Else will happen. I think you think because you work for the times you always give the benefit of the doubt they wouldnt write an editorial thats not true. How about that editorial. Do they not look at the environment they find themselves in . I dont write the editorials. Do you see them Walking Around the halls when youre there . Do you ever look and say what is your story . Look, as you know, i think theres two sides to the story. The customer in new york, i would love this transaction to go through. I think Time Warner Cable is awful. But call me 10 years from now, to believe its a good deal you have to believe technology will evolve to the point where there will be broadband wireless. I would be so frustrated Walking Around the halls. Then you have a problem. Hold on a second, guys. I would say something. Day after day. Within that framework, theres a Company Called shinavick. Wireless telephones in latin america. They own other assets that are very attractive relative to the value. They own the equivalent of zappos or ecommerce. They are a grower of assets of going public. Going public where . In the uk. Tell us the stock again. Kinnevek. It is a very Interesting Company to own if you want to get into social media, ecommerce and any part of the world other than the United States and china where they have a footprint. It is a fabulous story. They had a row show in berlin a couple of weeks ago. We like that. Were buying it today. It opened about three hours ago. In addition to that other companies that we like that are really teed up, when obama says carbonless, gas more. You have to have a fuel. Nukes are aging. So we go back to knacking and nat gas. Its a game changeer in the United States for employment. We have an acid rich company with a lot of acreage in marcellis called natural fuel and gas. We like that one as well. The stock is around 73, 4. You have 100 in three or four years. What happens if Natural Gas Prices declean. Markettomarket will be a slight plus. Shortterm its likely to happen. That gets prices fluctuating. At the same time there are other dynamics that could unfold in the company. So we have a list of Companies Like this that teed up to allow them to do financial engineering, split off companies and look at the pieces. Once they are spun off, what are they worth . A private equity bye as well. And can they grow it . And so we have turnarounds. Weatherford is selling at 21. This is an internalled turnaround. They have all the equipment people need in the fracking process. Its located in houston. We have a late stage turnaround where new management came in three years ago and took it out of bankruptcy selling off assets to a private equity firm. We think the stock is 24 chmt is the symbol. We think that, you know, its probably got 10 down side, maybe 15 . 75 million shares. When the dust settle, they can sell 35 to 45. Even if the market is flat, we think that kind of internal dynamic. You were telling me you were going to give me a stock that you liked that i would find in my kitchen. Elaborate. Well, we are working on that. Work in progress. You go back and you open your door. Given the different tastes and different foods that people are experiencing with and growing accustomed to the notion of having spice kitchen, a cabin, a drawer or a rack leads us to want to go to baltimore to visit with mccormick. We own a tiny bit. It is high on our radar. We have been following the companies. The other is located here in manhattan. You want to get sugar out because of the health issues. Iff has been working International Foods and fragrances. Right here in manhattan. I have driven by one of their factories in new jersey. A stock close to 100 a share, 5 in earnings. It will grow 7 , 8 , 9 . The ceo is retiring, which is a little earlier than i thought. They made the first acquisition in five years. Great balance sheet, great cash flow. The whole merger and acquisitions boom, i know we talked about this a little bit earlier, you think things are teed up, ready to go on just about every front. Theres a lot of dynamics occurring. You have the activist acting as new catalysts. They have Strategic Companies that want to buy businesses to grow. They do crossborder deals. The japanese are getting more aggressive in terms of capital deployment. The europeans are getting aggressive. The americans are getting aggressive. They are trying to make love together. It is an yon going dynamic. The bell has sounded. Other episodes in history like this. The end of the conglomerate era, bunching up deals. It did not turn out as positive when you did lots of covenant light deals the five years ago, seven years ago now. But its early. Its early. Thats the next phase of our tv shows in five years. All right. Mario, we want to thank you very much for joining us today. Its been a pleasure having you as our guest host. Always a pleasure to be with you, becky. Thank you, mario. And the briefcase. He still brings it in everyday. Its like vinyl. He wants clients to think he is cheap. Its practical. It is frugal. Thats not the individual thats coming auto next. I dont know if hes frugal. Walter isaacson came on friday. He said he didnt want the deal to go through either. Stop the presses. Just stop the press. No, no, no. Isaac on beats and apple . No. Oh, comcast. The sound of music is really dolby. It is intriguing. Thomas dolby. Thank you, super mario. Thank you very much. Thank you, super andrew. Tell but some Corporate News this morning. I will tell you it to you in my socialist voice. Apple kicking off its worldwide conference in San Francisco today. You painted me into a corner thats not fair. Tim Cooks Company will enter a new product category this year. Were looking for them among the announcements later in the week. Ipads, ipods and computers as well. And applications that will allow it to control parts of your homes such as thermostats, systems. And details are released. G. M. Expected to release new steps to make sure safety issues are brought more quickly to top management. And google reportedly will spend a Million Dollars extend Internet Access. The project will start with 180 small highcapacity satellites that would orbit at lower altitudes. You have all three out of the way on friday. Which ones . All three of them. I wasnt here. Andy surer. Brusco. Next time youre out well have steve forbes, arthur brooks. We will get them out of the way for you. Go for it. I did miss my friend ken mangone on thursday. He said your entire uny piece was fantasy. I have heard, but i havent seen. You didnt watch . I didnt watch. Federal regulators looking whether to golf and phil mix ellison may have traded illegally information. Was there really any wrongdoing here . We will discuss that next. And then the man of the hour. Economist and author of capital in the 21st century. Hes here to defend his theory. Squawk box coming up after this. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. My mom works at ge. Time to take care of business with century links Global Broadband network and Cloud Infrastructure. We constantly evolve to meet your needs every day of the week. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome to squawk box, in this hour, a first cnbc interview with Thomas Piketty. His hotlycontested book capital in the 21st century. It leads to the concentration of wealth in the hands of those who are already rich. The debate over income in equality, and hes here to defend his data and his conclusion as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen along with becky quick and andrew ross sorkin. The futures, with Everything Else going on, i didnt pay that much attention. 14 points or so. S p, 19. 23. A pretty nice start at this point finally. I think its a peak. Well, well see. The end of the year. I mean, the end of the first half of the year at june. Well see where we stand. Well take a step back from 1850 basically. So what is that . 73 points on 18. 50. Is that like 3 or 4 at this point . Which is pretty good. Good for the first half of the year if we can do that in the second half or maintain the part from last year and 4 or 5 from last year. The big story about Insider Trading with carl eye kahn, walters and Phil Mickelson. The timing of the rise in rates will depend largely on the outlook for inflation. Central bank dove says the key measure remained below target. And that means any hike may not come until next year or the year after. Also in europe, a new Business Survey showing manufacturing growth slowed more than initially thought. Last month the data adds to expectations that the ecb could ease policy later this week. And billionaire lewis katz died in a plane crash. He made his fortune in the parking lot business. He went to to buy the New Jersey Nets and the new jersey devils. A gulfstream 4 jet crashed, went into flames. That plane never got off the ground. Ed rendell was supposed to be on that plane but for his sake was not. Back to our top story this morning. Carl icahn, Phil Mickelson and Billy Walters all in the middle of an sec probe. Partner at white collar defense. And also laura unger, private consultant. Good morning to you both. Good morning. Do you believe there is a real case here . Im going to start with you since youre at the table. Thats a great question. The Supreme Court is clearly held in order for there to be an Insider Trading violation there has to be breach of duty. And its difficult here to see what duty could have been breached if carl icahn said anything about his upcoming moves. Right. He wasnt an insider. He wasnt on the board. Without a duty, prosecutors are going to be grasping at straws here. Lets say youre right. That makes icahn less of a target. Im going to go to laura on this. Is it possible, laura, that icahn somehow tells walters in confidence or not, mentioned something over dinner. And then he tells mickelson. And that they can become the target then . So thats possible. But i actually disagree with brad on the insider. Yes, there needs to be a breach of duty. Thats what makes it inside information. But carl icahn had a 10. 91 stake approximately around the time that he made the tender. And so it takes 10 to be a temporary insider. When you couple that with his knowledge, his status of being an activist investor and his knowledge about his impending intent to make a tender for the company, that maybe that does elevate his status a little bit. Say he doesnt tell walters about the the tender. But he says he likes the stock. Is that enough . No. And its possible he said nothing. Maybe he talked about the company generally and walters deduced what he was doing. In the 13 interests d that showed the 9. 91 stake that icahn had. I think it was pretty public at that point. Mickelson seems almost two people removed. Right. He claims he doesnt know icahn. Icahn claims he doesnt know him. Walters says to him, hey, i have a great idea. We should buy options in clorox. I hear something good is going to happen. If thats all mickelson heard, thats not enough for Insider Trading. He would have to know that information came from someone in breach of duty. Without that critical linchpin theres not a case for mickel n mickelson. So it comes back to duty. Thats misappropriation for for the classical Insider Trading theory. What about the issue of personal benefit. Mickelson has to give a benefit back to walters. Can that be simply in the could they simply go play golf together with a client of walters . Is that enough . Apparently playing golf with mickelson is a big deal. So maybe thats the benefit. And walt withers, you know, it depends. I think friendship is sufficient for benefit. There are a lot of different theories as to what constitutes a benefit. Again, it goes to breach of duty. What is the duty under these circumstances and what is the argument to be made . Do you want to bring this case . Do you like it on the facts that you have . You dont need to get nasty. Just asking. Washington lawyers, no less. Id like to defend this case. I think that prosecutors are going to be grasping at straws here. To your point about personal benefit, its not hard for prosecutors to prove a personal benefit. The Supreme Court has said it could be a gift to a trade friend. So thats not the real linchpin there in the prosecutors case. But the duty point is going to be a difficult problem for prosecutors, i think. We have to leave the conversation there. Thank you for coming in. Thanks for joining us today. Coming up, the author and economist Thomas Piketty. Did you say piketty . Piketty. Come with me, his wife said. Big job, big city, big new country. How can i move to a city, he said. Im a country boy. Let me see what i can do, she said. So she opened a bank account, sent money, rented an apartment. And found him a little bit of country. In over 700 cities worldwide, products and services that make a citi client anywhere a citi client everywhere. Welcome backing everybody. Capital in the 21st century. That is the title of Thomas Pikettys bestselling book. It promsed scathing analysis from the Financial Times and others about his method. French economist Thomas Piketty joins us on a first on cnbc interview. Thomas, thank you for being here. Did you have any idea when you wrote 700page book about economics that you would spark such a debate . Well, you know, i tried to write the whole book on the income and wealth economy over 20 centuries and so it could be read by your Broad International audience. Its not a story about numbers. Its about the social groups disputing having always a very complicated conversation about a distribution of income and whether its political history, control, social history. You know, yeah, i tried to make it readable to a broad audience. The research was over a number of years, though . I was thinking what a perfect time to strike with where we are in this case of income in equality. You werent able to write it, pound it out in six months. No. It took years and years and years . Yes. That was the plan. This comes from a collective Research Program where we have been putting together Historical Data on income for more than 10 years. Over 20 people over many Different Countries. Whats new here is just to put everything together in a readable way and try to tell a story that is as consistent. People are so enamored. The rigor of the research is what people love. Many people disagree with a lot of it. Thats fine. Look, there are some where i draw conclusions for future. But you can still find interest in the historical directives. We are in social science. There is no mathematical certainty. It is trends. Everybody is going to try to make up their own mind. That is also what i try to do in this book. It generates debate. When you started the project, though, people argue selection bias. You had a thesis that there was increased in equality. I starting collecting the data. I didnt know what i was going to find. Let me say clearly you have different focuses going in. Emerging countries are catching up. And sometimes theres proper institution to spread education. Going into the project you didnt have this thesis . No. Theres no single one in the book. There are different evolutions. There is one that can lead to reduction in in equality, which is dilution of knowledge, schemes and education. It can work between countries and sometimes within countries. People have a very pessimistic reading of the book. I feel sad. Because i dont have this economic future. There are good things in the book as well. Again, there are different focuses. I dont think we should only focus on the forces that push in the direction of rising in equality. Sometimes we need to worry about that. But it doesnt go only in one direction. Its been pointed out the reception for the book in france and reception in the United States has been different. The rock star status in the United States versus france, where almost a collective, oh, we have seen the writing. Then you have the four other economists that basically write off even the conclusions because of housing. Because Housing Capital has risen so quickly. It accounts for all the income in equality. And you didnt take it into account. That is a very part. That is a very important part. If everybody was to agree but why not . Is that a valid criticism . It is included. But if most of the difference in income was due to housing and not to industrial income, then doesnt that undermine the entire premise . Well, no. Thats part of the story. The story of capital i am trying to tell in the book is an emotional story. It is not the same as financial weight and business assets. In Different Countries you have different level of stock market bubbles. It is chaotic. It follows different timing, Different Countries. The point is that if you want to become owner in paris with only your income, this will have to be a pretty about income. Whether its a bubble or not, it is going to matter for the generation in the 70s, 80s, 90s more than it did for the baby boom generation. Its partly a bubble. At the end of the day it is a real source of difficulty in terms of accessing wealth if you only have your label income. This is from one of 240es professors who writes rent, not housing prices, should matter for the dynamics of wealth in equality. It represents actual income of Housing Capital for landlords and dwelling costs by owner occupiers, People Living in their own houses. Largely, to properly measure capital, the value of Housing Capital must be corrected by measuring on actual rent price and not rising house prices. Rent is an issue if you want to representative. But housing if you want to become an owner. You can say those prices are not a problem. Maybe you are the owner of a big piece of property. You know, i have no disagreement with these people. I think it is a whole different aspect and perspective. Well get to the philosophy of in equality and whether it is something you need to accept to some extent. But just a couple of other points. You saw the feldstein piece. He said to not go back when tax rates were much higher in the 50s and 60s and nobody left any money in taxable accounts. To they changed the tax law so everyone all of a sudden reported taxable income. That accounts for a large part of the gain at that point that the wealthy started reporting. The other is the cbo report, which tries to look at what its not just how much money you make. It is how much the government is giving you. How many subsidies there are. So even the lowest percentile is up 49 . But you didnt include that. Of course i did include those. The point is you need transfer for the bottom of this country to get some income growth. Thats a problem. Well, great. The world is great. I think its a problem. I think if you would like primary income, wage income, labor income to be sufficient to generate. So we need those transfers . You want people to have access to jobs so they get some Growth Without the transfer. Yeah. But i agree with this transfer. You get some rise in the bottom 50 group. But a lot of it has to do with the rise in income and other area. Is this an increase on the bottom 50 . It is an interesting issue. Taking into account income transfer, is a tricky business. We tried to do it. We had high tax rates in the 50s, 60s, 70s. In the 80s, a huge reduction. Over 70 in the 70s. And down 20 in 1986 following the Tax Reform Act of 1986. So we are saying look, in the 50s, 60s, 70s, top managers were just as rich as today. Instead of taxable incomes they were getting fancy cars, fancy restaurant. Now, if you look at the data it looks as if they are still doing that even more. It looks like cash income and nontaxable were compliments. But theres very little for what they are saying. So at some point you have to look at the numbers. He is saying they had the wealth then as well but you couldnt detect it. So it hasnt risen up as much. Look, we are always talking about the same nontaxable perks. But they are bigger today than they have ever been. Can i ask just a question what you think about the policies of the Federal Reserve over the last five or six years. Because the Federal Reserve has taken policies that have made the wealthy weightier. Ben bernanke said he has done this because he wanted to protect main street. Do you agree with that . Do you agree with what he did there . I think we have been asking too much to create policy. We need a good Federal Reserve. At least what the fed did in the last five years is not to let the system go bankrupt. And this is what happened back in the 1930s. This put the world in a complete tail. The one thing we have all learned from the 1930s is Central Banks should make sure the Financial System does not go bankrupt. No, we cannot solve every problem with the central bank. I think we need to ask more fiscal policy. Of course fisk policy is more complicated. Central bank, you can print billions of dollars or euros in one second. That is very easy. Sometimes you dont know what you do. So writing the tax code is more complicated. You need to debate. But at least if you have progressive tax income and wealth you have a better sense of who is paying. And you have a better sense of where the money is going and whether you have equitable distribution. As you were saying, with policy, those who are gaining from all this preaching of money. It is obvious. But i dont know what would have happened if they hadnt intervened, if we had seen a great recession, great depression. It is better to do what they did than to do nothing at all. But i think we should separate monetary poll with an active fiscal policy. You need to change. In this country you need to some more of the groups. You have twothirds and threequarters. At some point you have to look at the numbers. If it was a mere few spots then that wouldnt have mattered too much. But when this is getting as large as the equivalent of threequarters of every day the past 30 years. Again, its growth performance of the u. S. Economy had been exceptionally focused then it would be okay. Everybody would get something. But 1. 5 , threequarters. Its not a good year. All right. All right. Were going to continue this conversation in just a moment. In the meantime, we will slip in a commercial break. More from Thomas Piketty. And the president of Merck Research labs joins with us an update on the companys melanoma drug more from Thomas Piketty right after this break. vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. On car insurance. Everybody knows that. Well, did you know that game show hosts should only host game shows . Samantha, do you take kevin as your lawfully wedded husband. Or would you rather have a new caaaaaar say hello to the seasons hottest convertible. Ohhh. And say goodbye to samantha. [ male announcer ] geico. 15 minutes could save you 15 or more. Lets get back to our special guest, Thomas Piketty, associate chair at the paris school of economics. Here is where we get more philosophical. If you look at the history of the world, and you did this. You looked at marx and the way they looked at things in the introduction to your book. If you look at how long it took for the globe to change in terms of gdp per capita, 10,000 years, it was probably 700, 800 per capital. Then 17th or 18th century you could patent something, own property. And then we saw it take off. In this country it got to 50,000 per capita. Even in china i know its 20,000. So its hard to dispute that capitalism itself hasnt raised the level of almost everyone on the planet. Thats for sure. Which you would agree with. Of course. And one of the criticisms in the book. Heres one quote. Americans have long accepted in equality as a necessary consequence of a system that, by definition, rewards merit, productivity. And where the government comes in is so make sure its not distorted by explanation or larceny any. But you need to be able to win. You need to be able to differentiate yourself. So Egalitarian Society is almost impossible to orchestrate without adverse circumstances for the way you are achieving prosperity. Of course youre right. We need some level of in equality. In equality is not bad, per se. Sit useful to some extent for growth, innovation and fantastic increase in Living Standards we have seen the past two centuries. The question is what point is it useful . Extreme in equality. In equality is not useful anymore for growth. And it can even become bad for growth. It can lead to in equality. It has never been about inheritance here. Right. Your evolution in france over here, our revolution was about our english over lords. In france it was a few little i list stock increase. You look at china and criticize rising in equality in china. At the same time the amount of middleclass upward mobility we have seen because of free markets and capitalism there, that doesnt and i believe in free market and capitalism. I believe in globalization. It is positive. We just want to make sure everybody benefits from it. Otherwise we will feel the gains of globalization goes to a small income. There is whats the line . Let me come back to what you say. For a long time the United States of america viewed themselves as more than europe. Today there is a level of in equality and concentration of income that you have in this country. It is getting close to what we have in preworld war i europe. Let me say it is a country that invented progressive taxation of income and wealth back in the 1920s. Why did it do so . Its very interesting. This is because america at that time did not want to resemble classic europe. Right. And the big concern at that time is, look, we are getting almost as much as europe. And, you know, this is our the taxation of wealth was introduced in this country at the level in which the kind of productivity which we have never seen in europe. So i think the relationship of with in equality is a lot more complicated than the simple story the answer of redistribution, doesnt redistribution in and of itself undercut the way that capitalism allows prosperity . And dont we see evidence in the welfare state model europe has adopted . We have grown much more slowly in europe than the United States in the last 30, 40 years. We have grown 40 faster. And per capita. If you look at productivity, this is gdp. Look at the statistics. You will see you dont believe redistribution and the other vitt similar is youre applying, looking down at the way but youre not looking from the ground up. People need incentives to work hard. Sure. Education. Public infrastructure. If you dont invest in education. If you have a large group thats not properly educated, thats not good. Now you are talking about equalizing opportunity. Not equalizing outcome. You may have to redifficulty beauty wealth to that to that. We do already. If you compare gdp in sweden, germany, france with the u. S. , you will see gdp is almost essential. Theyre up different ways to get to the same productivity. And, you know, again, its all a matter of degree. Take the rise of the cellular in this country. It is pragmatic question. When you pay 10 million instead of 1, do you get the extra performance for the economy and for the rest of society that some people claim we get . Now, when i look at the data, i dont see it. When i compare the Different Companies and i compare the gross performance of Different Industries across countries and across time, i dont see this extra performance. Now, if i was to see it, if it was in the data i would say conversely, for every dollar that you redistribute to a segment much more productive than the original segment that youre talking about you even make the point im talking about where capital is treated best. For whatever reason and in this country at this point 75 of our millionaires are selfmade. Thats just a statistic. But its not its not mine. Its the Federal Reserves statistic. And actually liberal economists. There is a problem with this forbes ranking and listing of billionaires. By definition it is easier to spot a selfmade man because they want to be seen. Its in a liberal guy at nyu. Its a complicated business. What you see in the data is a very large part for you. So whats the level . Whats the level at which you think in equality theres no mathematical formula. Only what we have is the experience. And then it becomes ideological. No. It becomes democratic debate and political. We have to be look, there is no mathematical formula. Only what we can do is to look you run the numbers so you must have a view. Let me tell you two views which are not very precise. A huge rise in equity in the u. S. I see, again, gross performance had been focused, its not a good deal. Let me take another example. The extreme level of concentration that we had in europe until world war i was no middleclass. 90ers of the wealth going to the 10 was excessive. When you have such an extreme concentration of wealth, you know, you also have very unequal access to political voice and it makes it difficult for democratic solution to work. This was not bad for growth. Its not bad for the economy to have a middleclass with a sizable share of wealth. This is good for democratic. We dont want to return to that kind of 19th century are we going to return there . I dont know. All what i am saying is that we need more transparency about income and wealth so that we can address our policy. Were going to take one more break. Then i want to pause at something. I want to go there. Thank you for being here. We will come back with our special guest Thomas Piketty in just a moment. Take a look, though, at futures at this hour before we take that break. Dow opening 20 points higher. S p 500 up a little over a point. Back in a moment. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your Information Safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Tdd 18003452550 life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. Welcome back to squawk box, everyone. Hurry up with the headlines. Lets take a look at some of the stocks to watch on this first trading day in june. Broadcom is higher in premarket trading, exploring Strategic Options for its cellular business and hired Jpmorgan Chase in connection with that. It controls signal process anything smartphones. You know the ones. Ventas is realty for 2. 6 billion in cash and stock. They specialize in health care and Senior Living facilities. It is the largest in that category. And take a look at shares of zillow. They are under pressure. Down 4 . They downgraded to sector performed from outperformed. And Pershing Square calling for a special allergan meeting. They want to remove six board members. They want the board to talk to valeant. And 30 in 2030 from 2005. The fishbowl announcement by the epa is set for 10 00 eastern time this morning. Up next, we do have more with economists and author of capital in the 21st century Thomas Piketty. He will be with us after the break. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Back to our special guest Thomas Piketty. You mentioned the word of transparency in omaha, Warren Buffett and Charlie Munger made a point that the transparency around ceo has cost shareholders in the world money and scaled up those numbers as opposed to gone down. And in the world of envy he would say because you could see what the guy next to you was getting paid it kept laddering up. Does that make sense to you . It is not exactly the kind of transparency im talking about. I dont get so much of the names of people who are making these. We want to know as a society the different income and what the groups are doing. For instance i called in to the forbes ranking. Some of them are entrepreneurs. But they have been doing well past 30 years. They have been rising three times faster than the size of the economy. Not only in this country in the u. S. But also in europe. And also at the global level. Right. If you take the size of the economy, they have been rising three times faster. Now, this cannot go farther. It is going to go in terms of concentration. Nobody knows. And i think we need transparency in the sense of we need to be able to track the changes so society and the debate can react. Someone would say we embarked on a redistributive path with the election of president obama. That we became much more open to the idea. But at the same time we have seen food stamps explode. Disability explode. To the point where now the number of people that really are benefiting from the government has increased. Its almost as if it made it harder for people that dont have jobs and dont have capital to actually get a job and create their own make their own way. Earn their own success. And off camera we talked. Shouldnt we be creating more capital theists instead of trying to punish the successful capitalists we have right now. Wouldnt it be great if Social Security was a 401 k . And if we create a whole new class of capitalists in the bottom half with jobs and with capital, instead of, you know, disparaging capital and trying to increase labor, wouldnt that make more sense . Sure. The purpose of my book is to try to see how we can spread education and capital. What kind of policy can allow us to do that . Investment is key. We need proper institution and including as fiscal demand. It is not to punish. It is to allow everyone to make it. Right now as a proper tax in this country we will tax everybody at the same tax rate. Whether you have a huge liability or a huge gauge or huge financial asset. Some people value is below the gauge. Thomas, did you by adding a progressive tax it is also a way to did you say before we can learn to efficiently organize Public Financing to twothirds to threequarters of national income. This is a joke. But when i read it this is tongue in cheek. Thats the whole point. Public sector doesnt seem to track capital. This is what i wrote. How much . It is 50 of gdp spent by the government . Is that okay . Were of the impression we can do no more than 20 . Some like sweden are still keeping up with productive. Taking progress with this kind of tax to gdp ratio. Some countries like france should make a lot of progress in terms of making taxes simple, more transparent. So im not saying look, every country has a lot to learn by looking at all the countries experience. Europe has a lot to learn from the u. S. And sometimes the u. S. Has a lot to learn from europe. Will you sign my book . Of course i will. And i have a gift for you too. I brought this. This is defending our kids from the liberal assault on capitalism. And i know you have three daughters. And i had my daughter. Juliette deborah. We have the accents. Free markets forever. They are 11, 13, 16. Theres still a chance for them. Sure. Thomas piketty, great conversation. Thank you for joining us this morning. Sure. Appreciate it. You have committed it to memory, havent the whole thing to memory. I will bring mine out in a second. Coming up, jim cramer from the New York Stock Exchange. Well get ready for a big week in the markets including the may jobs report which comes out on friday. Were back in just a moment. Announcer tomorrow on squawk box, the latest in small jobs index from paychex. The companys ceo joins us with result. Plus looking for a hot deal with a Summer Getaway . We talk travel trends with the ceo of troyce hotels. No matter what kind of business you own, at t Business Experts can help keep it running. Seamlessly. So you can get back to what you love. When everyone and everything works together, business just sings. Lets get down to the New York Stock Exchange with jim cramer. Normally i ask you about the markets but i want to get your reactions to mr. Piketty this morning i dont know. Im kind wf jof with joe in terf where capital is. When joe brought up china and capitalism there. Look, i think that, i am surprised this book has had such an impact, given the fact its been the dialogue since the president was elected. So i dont know. It is kind of amazing, isnt that, what theyve been arguing about the last eight years . Its great, a book does crystallize things. First thing we talked about, he started writing it long before that started. I was thinking that it was certainly a good time for this book to come out for him, for his own income redistribution. Hes going to do well. Look how well krugman has done. Were seeing the ceo pay packages and because of the way the taxes work out for companies, and given the fact that each board looks at another board and says that ceo gets 40, we should give them 45 million. I think people in america hate that but its been a complacent democracy and no one seems to really care. Maybe this book makes it so some president ial candidate talks about it. Good luck. Its a nice focus for the moment. It will go away just like High Frequency trading. Jim, well see what he has to say about the markets. Well see you in a sec. Coming up, more about who William Walters it, a closer look at the high rolling vegas fwambleer who is part of a federal inquiry into a trading probe. 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With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Welcome back. Jane wells is taking a look at exactly who William Walters is this morning. Jane . Hey guys. Billy walters is a mythic creature according to paul basir of prediction machine, a sports handicapping company. Walters is considered the best sports gambler in vegas, an industry which draws more than 3 billion in legal betting and creates the odds for an estimated 380 billion in illegal gambling elsewhere according to the american gaming association. Walters is very wellknown and yet elusive. Basir tells me for someone with such a high profile, few people know about him. Hes an action junkie looking for value and he walks the line. His money moves lines. He says many in vegas would like to know where the money comes from. Walters gave a rare interview to 06 minutes complaining hed been hustled by wall street, losing money in enron and tyco and find the world of gambling much less nefarious. If you look around the room and cant find the mark, youre the mark. Walters has been indicted four times for money laundering, three times for the same charge in nevada. Nothing has ever stuck. Paul basir is not surprised if walters is in trouble its outside of sports betting. No legal market is better policed and better understood than his sports handling. Just like about everyone else he doesnt know walters but if he was a bad guy id know about it. Ive never heard a bad word about him. Later well talk walters, vegas, mickelson and golf. Just to make clear the reason why were talking about this man this morning. Because he did go back to wall street. No, hes related to the mickelson icahn situation and i dont think we set that up to explain why we were going to see jane to talk about all this. We know that at this point. Jane thank you very much. That does it for us today. Join us tomorrow. Right now its time for squawk on the street. Good morning and welcome to squawk on the street. Im david faber with jim cramer. We are live from the New York Stock Exchange. Carl quintanilla is back from San Francisco at apples Worldwide Developers conference. Well have more moments from now. A look at the futures as we start off the week we are looking at a potentially higher open and as for the tenyear note hitting records last week, we are inching above the 2. 50 level that after hitting what