Transcripts For CNBC Squawk Box 20150416

That now. He wasnt famous. No one knew him. But this is a great song. I hear it once and i like it already. Ive heard this a thousand times. Where . I dont listen to that. I like it. Anyway well hear more about larrys call on ceos to focus on longterm value in a moment. Also its a moment of news makers on the set. Well be joined by Steve Schwarzman and jack and suzy welch will be stopping by. Lets get you up to speed on the markets. Yesterday the markets did end higher. Dow up by 75 points. Things are mixed at this point but the to you pu tours are down by 26 points. Economic data at 8 30 eastern time. Weekly jobless claims plus housing tarts and then at 10 00 we have the fed survey. Its early in earnings season but only three dozen S P Companies reported but of those 80 have topped profit forecasts. Among the names posting results before the bell today we got black rock black stone. Well see steve in a little bit. Citigroup, Goldman Sachs, mattel and health united. United health just crossing the tape. That company earning 1. 46 a share. Revenue there 35. 76 billion. The street looking for 348 billion. That company, thats a big number. In a quarter. 35. 7 billion in a quarter. Anyway, they did raise guidance also to 615 to 6 30 and it had been 6 to 6. 25. But they beat by 11 cents or so. So raising the year by 10 cents, actually, yeah raising the year by 15 cents on the low end, 5 cents on the high end. So he they already sort of beat. So i dont know whether i didnt look. I didnt know where the street was for the year. The stock is called up sharply though. Its up 272. Bidding 120 after that close. Theoretically trade an all time high today. 123. 76 is the all time high for that. Its 621. So they go to 615 or 630. Other stocks to watch, we told you about netflix. Company subscriber additions rising 22 year over year and that was better than people thought. Netflix also asking its board to approve a stock split. And sand disk shares trading lower. The data storage product maker warning of a steeper than expected drop in revenue. Also plans to cuts jobs to reduce costs and panera getting a boost. They plan to share and refranchise 73 Company Owned caves and increase its stock buy back program. Why these Companies Continue to do these buy backs for shortterm gains is beyond me. Well talk about that with our guest host for the hour. What theyre doing is selling some of these franchisees to do it. Selling them out . No refranchising them. So they wont be the Company Owned stores anymore. If you lose control over that were in the mix of this turnaround. You have more control if you own more on the stores rather than franchise them. Larry. You know about mortgages and shoes. And music. We want to get to larry on all of these things. Real quick the other buzz story of the morning, ben bernanke has a new job. A advisor to citadel fed group. Hell advise the firms investment committees on Global Economic and financial committees. Hell also meet with the funds investors and i talked to him last night about this. He says that he was pretty sensitive about the concerns over the revolving door between wall street and washington. A lot of banks approached him. Other investment firms that had dealings with actually we should talk to you about this. Had dealings with the fed. He declined their offers and chose them because it wasnt regulated by the fed. He wont be doing any lobbying in this role. He will continue blogging and being a fellow full time at the institution. So its just going to be one piece of his pie. Did you try to hire mr. Bernanke by any chance. We did not. You were not on the list . It was foolish i didnt try. As i saw that. But no we did not have any conversations. See i would have hired him like five years ago. Hes not doing anything now and what does he know anymore than anyone else. He can give you texture. He designed he designed the program. Would have been much better to hire him as he was fed chairman. We can find out what hes thinking about that moment. That was your deal. He saw a problem with that. I asked him last night, its not an exclusive deal. I said is it even exclusive in Financial Services. He said he can still do work for you. Tell me if this is surprising hes getting paid a flat annual fee. He wouldnt disclose what the fee was. Of course you know i asked but the but its not he doesnt get a stake or carry in the funds. Nor should he. He then loses independence. I think he was paid differently. Im not sure if he when he went back to govern lt and then he left and i dont think he has any of that stuff now. Still talking to goldman or black rock. He is going to still do speaking enfwajgagementsengagements. Im long bernanke. Bb, is that the symbol. I would be very long bernanke at this point. Lets talk about our other big story of the morning. Blackrock oversees more than 4 trillion. Numbers came in at an adjusted rate of 4. 89 a share. That was much better than expected. 4. 52 a share. Larry fink says performance is strong across all categories and hes here with us on the set for the hour. Great to have you here. Great to be here. Especially here in new york. The numbers came in quite a bit better than the street was expecting. What happened . What did they not anticipate . Probably the number one story is the breath of the flows. We had 70 billion of net longterm flows. For the quarter. For the year is 252 billion. For rolling year 250 odd billion of longterm flows. Across our retail platform and our mutual funds 35 million and our shares and most importantly where we were weak we had 21 million and that closed institutionally and it was spread across asset categories from some of our alternative products. Heavily fixed income and modest even in parts of our equity franchise. Why . Whats happening . Well i think the low rate environment and the fragmented markets that were seeing more and more clients are looking for theyre having more problems than they had in years. In europe negative rates is truly harming Pension Funds and Insurance Companies. Especially Insurance Companies. European Insurance Companies are going to have a real difficult time to even offer insurance. Negative rates. Solvency too. So theyre having obviously we had negative rates for ten years. Many Insurance Companies would be insolvent. This is one of the come poenlts where i dont believe Central Banks appreciate what negative Interest Rates do to the longterm interest of Insurance Companies. We cannot reinvest in europe or switzerland now. Were seeing broad based interest. Its a statement of black rocks position with being in 34 countries worldwide. So its a global phenomenon that lower Interest Rates is creating huge pain and this is something that is misunderstood and not talked about enough. Everyone appreciates he Interest Rates, how it really accelerates the equity markets which it is certainly doing but its creating quite a bit of havoc with a lot of our clients. Warren buffet called in a couple of weeks ago and we talked with him about this. He pointed out they would be better off if the people werent paying their premiums. If they were good for them and just held on to that money. But his Insurance Company is on a global basis. Probably one of the net winners to this because yes warren does have a german Insurance Company but the Global Presence of the Insurance Company is less dependent on germany and switzerland when you talk about some of the large european Insurance Companies that are heavily european focused. Theyre much more harm. So it actually plays quite well and i dont think people appreciate how powerful the low and negative rates in europe are for warrens company. Meaning what . Theyre struggling in making any return and even as low as our Interest Rates are hes making a return. They have more flexibility right now. Whats amazing to watch, yields here. Ten year in the u. S. Below 2 again at 1. 9 is what we have been tracking. Its surprising until you realize that germanys ten year rate went negative. Japan is low was announced yesterday that japanese are the largest owners of treasuries. 180, 190 u. S. Ten year treasury. Its very low. Its actually quite attractive compared to the global market. Why would anybody buy a german bund when they can buy a u. S. Treasury. I agree with that. Thats one of the reasons the equity markets will continue to do fine. Because if you believe and the chair of the ecb said yesterday hes going to carry on his program, that program has another year plus going. Year and a half going. That tells me were going to have low or negative rates in europe for sometime and if you have if you think rates are going to stay that low longer youre going to see more and more people moving into equities and more alternatives and getting back to black rock, were seeing that conversation now. We have one of the top ranked European Equity funds in the world and were seeing huge in flows in our european equities and were seeing more and more people looking at asian he equities because Lower Oil Prices has a huge impact in asia because they are net importer of almost all Energy Sources so this is very powerful for india and china and japan. I want to follow up on several things you said. Yesterday we saw a rally of oil prices up almost 6 . Do you think Oil Prices Remain lower or oil is headed back to 78 . I think long run stability of oil will be between 60 and 80. I believe well see greater production. The one thing that people misunderstood when we had when we see the count collapse in the United States 30 of the wells produced 70 of the oil. So much of the inefficient wells have been taken off line. Secondarily, you can have a well sitting there and turn it off and turn it on so these, through this Technology Transformation of the oil market you can use your wells as the reserve. Depending on the break even from any specific area, whether its the balkin or eagleford. Lets say the break even is 50 theyre going to turn on that well. So my view is were going to have far greater supply issues in front of us and im not trying to navigate 5 or 6 move but i think theres going to be more supply pressure for the oil market. Putting a lid on prices. Than demand. Now we wake up one day and see Global Demand and global gdp rising back to 5 then youll have the demand curve picking up quite considerably but until we see global gdp pick up the story is going to be excess supply. Not an assumption or resumption of more demand. Lets go back to what you said about equities. You like stocks at these prices because sounds like youre t in the camp of there is no alternative. Well theres a Cash Alternative but earning 0 or negative. If you worry about it and theres a lot of worries. Im very constructive on europe. Europe is going to have higher gdp in the First Quarter than the u. S. Thats a huge change from what i said and everyone else said four months ago. This is why i think the dollar is too expensive now. Well see a very weak First Quarter. You can say its weather or Capital Expenditures but probably the Biggest Surprise of the u. S. Is the consumer savings. The oil savings, the gasoline savings. Theyre not consuming it and then in europe the lowering has created huge advantages for the companies. Not unlike what we had when our dollar was so weak. Europe is benefitting by weak oil and benefitting by a weak euro and its finally stable and secure with the october stress test. I like european equities more today than i like u. S. Equities. I like asian equities more today than u. S. Equities. U. S. Equities out perform for three straight years. Its catch up time. Its not like i dont like u. S. Equities but i see more demand elsewhere than the u. S. Can i ask a question when we get to the buy back issue to some degree how much do you think the u. S. Market is artificially inflated by corporate buy backs right now . Well the question if buy backs are permanent its not artificial. Thats a question thats how much has been retired and is why are you laughing he says theres a supply and demand. Were reducing supply and theres more demand. You have the same demand for lesser supply of stock but i dont even know what that question means. Other than ask whether that is actually weve had that for years. We have seen fewer ipos and weve seen more stock buy back for a number of years now so the if he phenomenon is accelerating. Its weird. If a corporation is deciding thats the best use for Corporate Cash thats part of running the business and i would agree with that. I dont understand that question. I think youre imlying that stock prices are being artificially held by the companies that hope their stock prices are held artificially high. To some extent if the companies decided for example to listen to larry and stop buying back their stock. I didnt say stop buying back stock. If they were to be more balanced in their approach. Thats what i said yes. Its not clear to me that the eps and stock prices themselves would hold the way they are. Because theres an anticipation in part on Many Companies today that these companies are going to continue these stock buy back programs. But andrew my letter spoke that it was some companies that may be more productive use of the money. Instead of buying back stock, if you can, reinvest it back into the company and earn a better return than the stock buy back or giving me a dividend because i have to reinvest it at zero, thats better than the stock market. Theres the whole issue of who wants to expand when for six years we had 1. 5 growth too then the idea that maybe an activist government made it more difficult to plan for longterm capital investment. I think society made it much more difficult. You think its because theres pressure for immediate returns. Pressure immediate returns. I think government is just totally focused on the shortterm. Dont you think if we had 4 growth people would be expanding plants and equipment and employees and Everything Else. The issue, joe, you cant wait until 4 growth because some of these factories or hiring a team of people may take two or three years. The good leadership of companies have to anticipate that. You can get burned. Approximate copper producers, do you see how they cut back so quickly . They already know where the copper is. Thats an easier thing to do but to build a factory like dow chemical is doing in houston, thats a ten year commitment. Right. But it also takes government tax you have to be able to see where the government is headed with some of that stuff too. As i said we have a persuasive society of shorttermism right now. You wouldnt be expanding your operations right now would you . Coal operations . The terms of regulations and epa. I wouldnt build another coal plant. But yoir picking an industry just an example theres a lot of industries that you dont know what regulations, health care i dont know pharmaceuticals im not sure where i im just making the example that regulations and government all of that stuff have an impact on what you decide to do. If its not clear then its going to be easier to buy back stock. Let me tell you black rocks story. We reinvested 550 million back into the company. Ive had 7 headcount growth annually. Here we are reinvesting back into the company. Its one of the reasons we had such Phenomenal Growth in the country but at the same time we have a dividend pay out ratio of 40 . We have a Stock Repurchase Program that brings it up to 60 and at two times i had an opportunity to buy back shares from our two large shareholders. And i was able to buy back 2. 5 billion of stock at an average price of 170. The stock at whatever 370. So what we are calling for is a balanced approach and just to raise a consciousness. Theres too much debate about rising dividends and not enough talking about if youre going to invest for the future you cant wait for a 4 gdp. You have to anticipate it and if you see the and if you believe were going to have a Lower Oil Price for a longer period of time which i believe this is going to create much more demand out of asia because they have been a net importer. It will ultimately create more demand in the United States. A consumer is benefitting from it so you can anticipate higher global gdp and for those companies reinvesting in their companies, whether in china or the United States or mexico or where ever those are the companies that will be the winners. If i were you i would have been more focused on individuals where they obviously are not grow growing revenue. So their compensation and the share price is important that it rises so they decrease the float with their excess cash and the multiple becomes cheaper and theyre able to throw in earnings by essentially moving the stock higher not based on investing for the future. In the long run you lose. How . In the long run Financial Engineering works for tell ibm that as revenue continues to go down. I think ibm today is focussing on building out their systems. Reinvesting to. So i dont think its all a stock repurchase plan. Theres companies that have done that to admit they have no revenue growth. And those are the companies we are attacking. Then you are talking about it. But were also i guess well have a commercial it to tell you what we heard. We just like to hear you talk with music. Well talk more about shortterm versus longterm and the response that larry has gotten to the letter in a moment. As we slip in a short break here this is a good time to mention that larry is a member of the delivering alpha board. For more on that event go to delivering alpha. Com. Coming up were going to get the streets reaction to Quarterly Results from dow component United Health. 35 billion in revenue for the quarter. First as we head to break heres a look back at this date in history. Thank you obamacare. If youre looking for a car that drives you. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. Help northern china reduce its reliance on coal fire heating plants and prevent 60 million tons of co2 emissions . When emerson takes up the challenge its never been done before simply becomes consider it solved. Emerson. United health posting better than expected earnings in revenue this morning. Joining us is the Senior Research analyst. The release is here. Theyre talking about business gains. So can you break down the difference between what we think of with United Health care as a simple hmo and that theres ancillary businesses now that are contributing to results . Yes, so United Health is unique among the Health Insurance sector. They have the Health Benefits business which is your conventional Medicare Medicaid Exchange Enrollment but they built out this engine called optium across benefits management and health and sites. Its Population Health management. Its a very good mouse trap to help and they may be able to offer that solution. I cant believe and remember becky, optum, wasnt there a deal recently . Yeah they purchased ctrx and that gives them the scale and the pharmacy benefits management business on top of which they have integrated medical and pharmacy benefits so they have a tirge she yated advantage versus express scripts and caremark if you will and the scale as well gives them the drug discounts considering Pharma Companies are raising prices quite a bit at this point. Its been a something of riches for United Health with the Affordable Care act and Everything Else but do we still look at hmos the way we used to in terms of how theyre executing and profit margins. Its the medical loss ratio. Do we still gauge United Healths success on its utilization and things like that . Its still a very important metric. That would be received very very well by the street. Theyre always this concerned about rising trend. Pricing competition and all of that. So this kind of steps off the season in a very positive way. Some of it is out of their control obviously. People utilize less and when you have insurance, there was the worry that people would utilize more. Youre not seeing that. So far we have not seen a cyclical rebound in trend per the manage care companies. There is some controversy around that. They announced yesterday very positive results. They had strong volumes but that could come from strong Exchange Enrollment. The comps were easier compared to last year so well have to see what the detail is and obviously todays call will give us some color. Investors are watching this very carefully. But being positive about the aca has benefitted all of these guys. Its clearly benefitted. Certainly a lot of people are scratching each others backs in this to some extent arent they . Definitely a source of growth. United had commercial risk membership higher than the street expectations. Im imagining the Exchange Enrollment season had a lot to do with that. Well have to see. Were going to leave it there. How old is optum now . They have been doing it for a very long time. They brought it under one umbrella probably like three years ago. Three years ago. When they were already going pretty well. This is now paying off. Its across both the businesses. Maybe these guys dont need to buy back stock, larry. Sounds like they know what theyre doing, right . Theyve done a great job. All right. Just wondering who you dont and who you dont. Who youre preaching to. These are not on your list. Not everybody, joe. All right. Thank you. When we come back this morning, we will have more from this hours special guest. Blackrock Ceo Larry Fink and one analyst reaction to the big jump in netflix shares this morning. Plus netflix ceo will be here and jack and suzy welch will join us on set. They have a new book out this week and well talk about that. Stick around. Squawk box will be right back. At mfs, we believe in the power of active management. Every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. Which leads to better decisions for our clients. Its a uniquely collaborative approach you wont find anywhere else. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. Welcome back to squawk box. Our special guest this hour the chairman and ceo of black rock. We have been talking a lot to him about his famous letter earlier this week. I wouldnt call it famous. Its become famous. A lot of ceos read it now. It caused a bit of debate and what we wanted to hear because you teased it before we got to the break is not just what you said in the letter but what ceos that received the letter said back to you. So we are getting a great response. Ceos are calling our team and calling me personally. Probably the greatest theme that we asked in the letter is focus on your longterm strategy. Tell us about what are your longterm plans. Part of a longterm strategy is obviously how are you reinvesting in your company and i do believe in companies articulate a longterm strategy how theyre going to reinvest in their company, their plan for mergers. And then how what is their capital plan related to stock repurchasing and dividends. If they discuss these three, you know, main components of how one grows and builds and company i believe you have less threats for activists. If you articulate a longterm strategy and discuss it obviously well be on the execution of a longterm strategy and well see how theyre going to reinvest back into the company and were going to see how they think about inorganic opportunities and well see what is their capital plan related to stock. I assume all of these because you are often times the largest shareholder, they cant say, you know they cant heisman you and just say talk to the hand. They have to be nice to you. Did anyone call did anyone call you this week and say, larry, what are you talking about . Im sure the people who like my letter called me. I didnt receive any calls. I ran into an activist we all know. He told me he saw you. Oh. He was not saying flattering things. What did he say to you . It was more flattering. That may be different. Anyway so one ceo said well be happy at articulating a stronger, more articulated strategy on longtermism and were happy to do it because were tired of having so Many Companies talk to us about good governance. Is this a change, though . Because black rockrock is the largest investor in a lot of these companies. You have been passive. Is this a sign that youre stepping out and saying were going to call more of the shots on this. What we dont follow my letter three years ago said stop following what they do. Do it yourself, you know . But you dont personally make decisions on this. You have your personal team. I have an internal team. I have no involvement on this. If you were like a star ceo. He is. If you were a star ceo, im not talking about you but lets say youre out there in one of the 500 S P Companies and youre good and you have a good board, dont you think that they already know this . Youre assuming theyre mediocre. What a ceo is trying to do is have a longterm plan. If you would have told welch, you know jack i think you have to focus on a longterm plan heres a few ideas for you for ge. Any ceo thats worth his salt sits around all day thinking about whats my longterm plan. Now you might just say lets take a step back with all this buy back and maybe, you know its my idea to think more longterm but i would think a ceo or board worth its salt is doing these things or shouldnt be ceos. Although a lot are on the run from activists. Joe, youre right. You must think theres some pretty mediocre. Im not attacking any ceos or boards. Theres good ones and less good ones but our purpose is not to attack any one side. I believe theres not much balance nil gnat narrative anymore to the dialogue. I would imagine you guys have one or two activists a week. The conversation has gone way too far and what im trying to add it has created more shorttermism in some cases they are but in many cases theyre not. You think theyre picking on good ceos at times. At other times missing bad ceos that dont have a longterm plan. The one thing i can tell you, we manage stocks that exhibited great performance and we own stocks at companies poorly run. Right. So our only power is our vote and this is why we repeat and articulate. How often do you use that vote . Once a year. How often do you go against management . Actually i dont have exact statistic but one statistic i think is around 75 to 80 we go with management and i read we actually voted with activists about 55 of the time so its kind of balanced. One of the more novel things is this idea about Capital Gains. It shouldnt be a one year period. It should be a three year period before you get Capital Gains treatment. What was the reaction from that. We can run a sound bite from ross. What was his word for it . Absurd . Ive heard comments from wilbur. I saw him at lunch yesterday. And ive heard from a large percentage the majority of people said this is interesting and maybe this can work. First of all, i wanted to highlight a strategy that can focus on long material. Im certainly aware were not going to single out Capital Gains and change the code for just Capital Gains. So this should be part of a strategy and debate when theres true tax reform. I wish you would put all of your energy into rather than this . If youre going to be on the bully pulpit i think that even at black rock it would be so much better for you if we were more competitive globally and didnt have assets falling out. Would you get behind the three year Capital Gains . No you have to be talking about not that. Corporate tax reform. I think its a part of it. I think that Corporate Tax reform is essential for competitiveness worldwide. Why are we writing a letter about that . As an evangelist on that rather than this . Im focussing on what is good for my investors. Im not here to talk about the politics for taxation. My job is not to get into a political debate. My job is to make sure that my investors because this is not my money. Its all on behalf of our investors that well find a way. You talk about changing the domestic tax laws. Thats a political debate already you got into. I suggested one alternative that i think will be better for investors. How much do you think most investors can actually consider though in their pieces . Do you think thats a huge piece of it . Anything that would substantially change the way people approach investing . I think on the margin it certainly will. Its not going to trade the High Frequency trader. Its not going to trade the shortterm hedge fund and on the margin i believe people will think more about it. Its going to help the individuals. Im not worried about the professionals. I want individuals to start thinking about longterm and their retirement. You have an incentive through tax that its a benefit. Not just through a Retirement Plan or savings plan for your childrens education. Focus on longterm holding in your benefit. I agree with that. Lumineers. Its a great idea. Coming up wow, you must have a warm fuzzy feeling now larry. This mornings big stock movers include netflix. Stay tuned. Squawk box will be right back. under loud music this is the place. 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Welcome back. Shares of netflix soaring. The companys subscriber additions topping expectations. Also asking the board to approve a stock split. The stock up by 12 . When we return we have much more from our special guest larry fink and in the next hour Goldman Sachs set to post Quarterly Results. Stick around. Squawk box will be right back. Oh, i love game night. Ooh, its a house and a car so far, youre horrible at this, flo. Yeah, no talent for drawing, flo. House car oh, raise the roof no one . Remember when we used to raise the roof, diane . Oh, quiet, richard im trying to make sense of flos terrible drawing. Ill draw the pants off that thing. Oh, oh, hats on hamburgers dancing drivein Movie Theater home and auto. Lamp squares. Stupid, dumb. Lines. [ alarm rings ] no home and auto bundle from progressive. Saves you money. Yay, game night, so much fun. I care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. Hour with us. And i dont know larry, you know, we both have seen a lot of things happen over the years, and were in a period now, some people call it a new normal or savings or whatever you want to call it its really kind of unprecedented in terms of alternatives as weve talked about to equities. In the past you could always balance a portfolio by having a bond component, which would minimize the risk youre never expecting the same type of return, but it was useful because nobody wants to be exposed to equities. You might need something fully exposed equities. Right. So now were sitting here. And i dont have a lot of money, i have i would like to be able to diversify into fixed income, but im not really sure it makes any sense to do that. In other words, would taxfree bonds make sense for people that, you know, enough income where theyre in a high bracket, in the past that made sense because you could lower the volatility of a part of your portfolio and still get a return, but would you do a tenyear 15year duration investment in something thats yielding 1 or 2 even if its taxfree. So if youre taxfree assumes that you have quite a bit of disposal income youre going to arbitrate your tax rates. Youre looking at a at a taxbasis. Those have enough savings to live in retirement well. Lets talk anybody thats trying to minimize, you know or at least trying to lower the volatility of their overall portfolio by not being in all equityies equities. I would argue cash . No the question should be asked what is your desired outcome . If youre desired outcome is to save money to buy a house in three or four years and have enough down payment, unfortunately you should not be in much equities today. Youre going to have to be in some short term instrument. If youre outcome, desired outcome is to save for your childrens education, lets assume you start that when the child is born 18year objective, i would recommend being heavily in equities because you really the valuations may be high right now, but over an 18year cycle. I believe the word is a better place. If you have a positive view of the world that over time the world improves then it really doesnt matter your entry. But speak to the bond market and where we are right now. Is this going to be ten years of low rates like this . Well this is a good question and ive asked a lot of the finance ministers and potential bankers, our rates telling us were in a severe deflation their period of time for a long period of time one can argue that, or is it just a Central Banks gobbling up everything. Is that one related to the other anyway . Yeah and i think this is a good question to ask. Certainly if youre in europe right now, and i gave a big talk in germany recently and germans heavily, allocation was 90 bond 10 equity. This is really playing havoc in germany. And my suggestion to all of them is youve got to be you have no choice but to enter the equity market if you have a longer right 9010, theres a lot of people that have 90 equity 10 bonds. If your horizon is 20 years, im not frightened of that. If its short, youre going to experience a lot of volatility. Its ten years. Tenyear youre going to have you lock in a bond . Mix of bonds and equities. I mean you take a one or twoyear bond and youre going to get 1 or 2 or something. Miserable. And ten years, 3 and if rates go up in five years i would be rolling threeyear maturities with no yield. But i would not be 100 in equities. I know the fundamental question is whether really at the bottom whether this is a multiyear talk in the bottom market. Theres only one way to go. What youre raising is what i think is fair to say, were going to be living in an environment for some time of low returns. So if youre going to have to have a component of your portfolio in bonds earning 1 or 2 and youre going to be sensibly investing in a portfolio, one should not expect double digit returns you should expect Something Like a 6 Asset Allocation totally off. No. If for the next ten years these are different rules now for people. It should lower your expectations of returns. I dont know how to minimize find something for the other part of the portfolio thats not equities. Its hard. Insurance companies are doing it, everybodys dealing with it. Youre right. Thats what i said earlier. This is why so many are coming and asking what should i do. Theyre asking the question that you just asked. Larry, pleasure seeing you and thanks for coming in. Still to come, up next is blackstones chairman and ceo steve schwarzeneggerman. Well be right back. Earnings alert. Blackstone set to report chairman and ceo Steve Schwarzman joins us first on cnbc to talk Quarterly Results and the companys big bet on real estate. 100 most influential people in the world revealed. Editor from time is here to tell us who made the list and who got left off. The wearable war is on. Jawbone teaming up to compete with apple pay. The ceo will join us first on cnbc. The second hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box. First in business worldwide, im joe quick. Nice day yesterday, didnt close on its highs, but were not indicated with the same situation. At least so far, this morning, the dow jones, see how its setting its up for trading today. Down 55 points right now, the s p down seven, and the nasdaq down six. Goldman sachs. I forgot. Thats another one i forgot. I got nike yesterday. You did. United health today. Getting better. Do you know all of them . Do you forget . Most of them. Visas a dow component. I wish not. It is but i forget i forgot about Goldman Sachs. Gog dog gone it. They are expected to report this hour. We are going to bring the results soon as they come across. On todays watch list ipos of note etsy 15 a share. That gives the company a valuation of 1. 8 million. They structured to give small holders the opportunity to buy shares. Values the retailer at nearly 2 billion. Boets etsy and party city will trade after today. Economic data of note weekly jobless claims were also be getting Housing Starts and building permits. All hits the tape at 8 30 a. M. Eastern. New gate for ben bernanke this morning, sid dell investment group. Bernanke chose is because its not regulated by the fed. And when i talked to ben bernanke about this last evening, he will get a payday flat fee, no stake or any carry. Steve schwarzman were about to introduce to you a lot of people tried to hire him, were you on his list . Actually we werent on the list. We interviewed, i interviewed ben at our limited partner meeting last year. Well that is a nonexclusive deal. We can still do that. The opportunity is still there. And speaking of new gigs we should tell you former walmart mark duke is joining carlisle group. Another peers and colleagues in the business. Naming duke an operating executive. He will help fund deals and steer companies the carlisles owns. It allows duke to continue to serve on walmarts board. Now last week General Electric announced it was selling off about 14 billion of 23 billion real estate portfolio to fund blackstone. Earnings this morning, Steve Schwarzman is the chairman and ceo and cofounder of the group. He joins us for his First Quartererly Earnings Statement ever. Net income of 1. 37 per unit, that was topping estimates, just to put a fine point on it it was 6 billion, up nearly 100 from the year prior. You distributed earnings of 1. 2 billion, the fund generated 1. 2 billion in performance fees. Which is quite remarkable. You were talking about United Health and being impressed by that, now your total assets under management are 310 billion. This is all true andrew. This is all true. Weve gone through some of those numbers. When you think about where you were a year ago let me ask you this how lumpy do you think the numbers are . Your business is one where you have to realize that now, but there could be two or three years where you dont. Well its actually not that that lumpy. And right now, this year running 12 months weve earned 5. 6 billion of profit. We are the most profitable money manager in the world. This year last year and we have an economic model that just doesnt depend on a quarters earnings. Realizing returns in one particular quarter. No what happens its really like an earnings machine, in that sense as we keep growing. Right. There are more and more assets that we invest. And they can earn their money over time and that keeps us growing. Because we can harvest those. So the cookie jar doesnt get empty. So its not a particular you dont look at the market environment were in right now and say this is a really great time to realize obviously. To sell stuff. Obviously its a good time to realize things. And we realize a lot of things but we also have huge investments that were making at the same time. And the firm is growing in the latest quarter, we raised 30 billion. Thats more money in one quarter than any investment alternative firm has raised in a year. Weve raised 77 billion for new investments in one year. Its really very profound. When you look at those numbers though do you ever get worried theres going to be a point at which size will work against you . Even Warren Buffett has talked about the fact that he is now at a size and scale to move his needle, he has to really buy massive things. And has talked about the potential that his returns, longterm, will ultimately as a result be lower. Same or different for you . Its different. And its different because were in different asset classes. Were not operating out of just one big fund that keeps getting bigger and bigger every time we see a new type of opportunity, we start something, and then that works very well. So we continuingly morph into different asset classes, we morph into different geographies, we look at different parts of the capitol structure. So we have the ability to grow and also have great returns. Last year for example, we have earned our companies have grown at double the rate of the s p. So, and theyve earned double the rate of the s p. So so this isnt about a financial operation. These are operating assets. And when we buy something, we only buy them to improve them. And if question do that in a much accelerated basis, then we should be able to do very well over the longterm. Yeah its impressive to beat the s p at the same time when the s p has been so strong over the last several years. We talked to larry fink just earlier in the show and he talked about how hes seen this inflow of assets coming too to his fund. Part is he subscribed to this chase for yield thats going on around the globe. Its a much tougher place to find find yield for investors particularly comes from europe and asia. Has that played into part what have youve seen too . Yeah i think so becky, for sure. But if you look at blackstone over 30 years, our funds, its a simple business were in. Weve managed to earn for our investors about 1,000 basis points. More than the stock market. If you do something that profound, over that length of time, you will accumulate a lot of capital. Thats exsaser baited right now because when Interest Rates are so low, if question put numbers up, that are way, way better than the stock market you would certainly suspect that youd get Large Capital flows. And thats happening from all over the world. Right. Lets talk briefly about the ge deal. One of the questions i have about that particular deal there was no auction for those assets, they came directly to you. So some people ge shareholders said why didnt they have an action . Is john gray going to make them are you going to be embarrassing ge three years from now . Or think they got a fair price and you got a fair price and there wont be a huge does that look to be a runaway winner, how do you look at it . Its a good seller. Weve sold a lot of things to ge. Weve bought things from ge. This is not our first rodeo together. And so the this deal come out of outer space. They had a need to move close to 30 billion of real estate biggest real estate deal in history. Something that we did, called eop in 2007 people thought that was a very risky thing. Well end up somewhere around three times profit on that deal. Now this is a different time in history. I think for ge to kick off their restructuring. Which by the way, we werent aware was going on. They just gave us a call. And the the only way you could really get something of this scale done was dealing with with us because we have the largest pools by far. For opportunistic real estate and more than that this was a combination of both mortgage debt, as well as equities. It was spread all over the world. So to assess it you needed the capabilities of being able to operate the u. S. Europe asia so the complexity of this made it very difficult. And we ended up finding a fair zone. I can tell you at one point, they walked away from the deal another point, we walked away. This isnt the sign of somebody whos picking somebodys pocket. I think in the fullness of time if the world works the way we think like all investments, well do fine. Look at them. Theyre up 15 . Right. And you did it in three weeks. Yeah. Well were set up to do really a lot of stuff. And we have 200 people in our real estate area. And we approved something, i approved something every week somewhere around the world. So it was really this was a stunning execution. What made them walk away from the table and what made you walk away . Its always the same thing, its called price. And, you know at one point can you give us dead deal. What percentage of the business is now tied to real estate . Ours . The latest quarter, you know real estate was less than private equity actually. But overall, for the firm. Overall, id say all of our businesses are somewhere between 20 and 30 . Right. Real estate now would probably be up at the 30 level. Okay. Did they mention you now have the designation. They didnt well perhaps thats what happens when you finance everything with short term paper. And need access to the fed. To avoid that. Well we have actually a very small operating company, and we operate through funds, we dont own those funds. Yeah. And none of the funds are cross collateralized none really borrow any money. Were a completely different conservative structure, and we had no trouble during the crisis. The funds do just just to be clear, the funds do borrow money though because theyre traditionally levered funds. No the funds basically andrew dont borrow money. Its the underlying asset owned by a fund. And each asset is not cross collateralized. So just in one fund youd have probably 50 different i understand. Different investments with huge diversification. So we dont worry about those type of, you know, sort of firmwide issues because of that. What we worry about is making sure that every investment cant lose money. Right. All right. So were really more like playing basketball and doing investments, but we dont have a 24second clock. So, you know if youre in the long only equity business. You are invested. We only invest periodically. We only buy companies, buy real estate, make credit investments. When it looks like a great, conservative, easy shot. Were going to sneak in a quick break. Where you think the economy is and where the markets are. Were going to have more from Steve Schwarzman after a quick break. Later, ceo of jawbone, American Express, theyre going to take on apple pay. And then the top of the hour we have jack and suze welsh, theyll be here. Talking about their new book the real life nba. We have a big show, stick around. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. Welcome back to squawk box everyone. Weve seen red arrows. Things have gotten worse at this point. The dow futures down about 64 points below fair value. Yesterday up by about 75 points. S p down by nine points and nasdaq down by 12. Shares of netflix soaring. Companys subscriber editions topping expectations. That is certainly helped out the stock. Its by about 13 . Lets get back to our special guest, chairman, ceo, and founder of the blackstone group, Steve Schwarzman. The six years that weve seen steve, youve done really well with the way the economy and the United States has performed. Did it help that it was, you were able to pick you know, maybe more value because its been kind of a tepid environment . Well as it worked out, it allowed us to invest more money over a longer period of time. And when we invest we invest to fix companies, accelerate their growth or fix real estate and lease it up and better prices. And sell that and do the same thing in credit. So its been, you know 2. 5 growth which i guess is what weve had over a long period of time. Has ended up working out quite well for us. Is this what we should expect . Is this where we are now as we i think given the government regulations and the society and where we are and the fact that the dollars gotten stronger. And you know growth around the world is a little less, i think if we can do 2. 5, thats pretty good. Itll look strong in the developed world. The whole worlds economy is shifting a bit now back to the u. S. Surprisingly as larry mentioned in the last hour. You know europe coming up with a bit, and the emerging markets slowing down a bit. If you could buy the United States i think the original movie wall street where, you know, say what you will about gordon he said we know how to the most Underperforming Company around right now is the United States. And theres a reason for it. Do you know what to do right now you could buy the United States and restructure it . I probably could, but im not in the political business. So ive seeded that to others, but you know, as a country, we have a lot of potential. And a lot of things that we can do to, you know sort of debug if you told us you wouldnt have that nice low 2. 5 growth that allows you to do so well. But wed have more people working in the society and we deal with other issues. Good for everybody. It would be good for everybody. Yeah. What should we do . Well there are a lot of things that we should do. And i think my going through a laundry list of the impossible sort of probably isnt the most being a guy in a maybe leans one way or the other, would you allow, this to include a big Infrastructure Program . Well i think the problem, theoretically, its a good thing. I think part of whats happened is that, you know as part of the stimulus nobody was sure what got built. And i think theres just a suspicion that if you mandate things, they may not get built. Do we need an infrastructure in the United States . You bet. Its a good way to do things. It leaves something after you, spend the money and in effect youve actually invested the money. Not just digging a hole and filling it up. Its a good thing. I think overall, we really need a full relook of tax policy its very difficult to do tax reform just because theres so many sacred cows. You can get rid of this sounds somewhat hyperbolic, but you know there are a lot of smart people trying to make tax reform work, but they cant seem to do it. Its because of the numbers dont work. What you have to do is get rid of all preferences and just go to like a single rate start from a blank slate. You take care of your poor people and the society, they have to be protected with the safety net. And then you could either have one very low rate maybe you put it in another one, so that wealthier people pay more. But if you do that societies that have done that around the world, countries that have done that do really well. Then everybodys included. There are no, you know sort of special classes. You dont need any preferences, and people pay their taxes and life moves on. If we dont grow faster steve, our unfunded liabilities are, you know, we dont talk about them anymore, but theyll come back, especially as we all age and were all 90 years old and we all want the best health care. Medicare is going to be out of control. We need to grow faster that solves a lot of things. You either you know i hope we all make, you know, im closer to it than others. Did you see larry finks suggestion on Capital Gains tax . Yeah larry had a complicated stretch it out over three years. He was trying to solve a different problem. Different issue. You know he was trying to solve a different problem. I just want the u. S. To do as well as it conceivably can do. Thats what i asked. Why dont you do something big, something that could really help youre playing around in the weeds. Here i am. Speaking my views. And im sorry to interrupt, thats what i told larry. What was the issue he was dealing with there . He was dealing with the fact that markets are so short term that in point of fact i mean if you think about this ive been a ceo for, for 30 years. I, i will tell you that when i started, i thought i was okay. I really wasnt. Right. And ceos are not born. Theyre made. Theyre made with experience. And judgment gets better and better, you learn how to do things. Average ceo in the United States is in place Something Like three and a half four years. Exactly. To me this is astonishing, and nonsensical. You cant really build a plan in that period of time. There are no longterm decisions. That person can really put in place that even they see what happens. So im used to making decisions for the longterm. Every time we make a decision i think, its the last one well ever make. I think its whats going to determine our full future and the way were regarded and whether we ever raise money. And so that duty of care and imagination of how were going to be perceived ten years, 20 years later or forever, goes into every decision. How can you do that . I think what larrys providing is cover for some of these ceos so they can make longer term decisions. The good ones end up there, the reason its three and a half is because a lot are gone. Rightfully so. Its very hard to do something thats what i mean. One of the advantages that i had is we had no employees. So i thought it was a big negative, as it works out, everyone you hire you can have sort of pretty strict criteria and they end up being really remarkable cohesive culture. It is really hard to change a notgood culture. Because people tend not to like to. Then you get guys what hes doing, 20year plan thats totally wrong and totally misses the entire although there are companies that have a bad culture that somebody steps into and you cant turn it on a dime. You need a good ceo to make the right decisions. Youve got one of the great ceos of history thats going to be coming on in your next hour. And i met jack before he was the head of General Electric. And jack had some kind of huge stutter, and, which is now gone basically. And you know this this was like the start of the long run, but the jack welsh that you were interviewing either today youre going to interview, or you have been over the years is a much different, you know, capable person as a ceo than when he started. So a threeyear corridor for a ceo, and you can ask jack hes a world expert im not so bad myself. You know thats just its just so short you cant, you havent grown enough as a person in that jobexperientially. He had good experience in plastics and Everything Else. All around they ran different business. He was one of our First Investors in 1986. He bet on us. When we were starting out was a good thing. Steve, thank you so much for coming today. We love talking to you. Now youre next door. By the way, its great here. Its not like i dont like new jersey, but fighting the traffic back into new york was a bit of a challenge. So this is throughout there. This is terrific. Congratulations. Thank you. Would you do that like once . Now you can come on more. Exactly. Thanks. Thank you sir, see you soon. When we come back this morning, we have new details on the protester who disrupted the ecb meeting yesterday. There she is. Thats why youre playing jump. More in a moment. Later, Stanley Fisher will be joining squawk on the street, thats coming up live in washington. Thatll be in the 10 00 hour stick around squawk box will be right back. Help an oil company overcome minus 47 degree temps, 5 foot ice, and 16 foot waves, to safely keep crude oil flowing 365 days a year. When emerson takes up the challenge its never been done before simply becomes consider it solved. Emerson. You used to sleep like a champ. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Introducing the sleep number bed with sleepiqtm technology. It tracks your sleep and tells you how to adjust for a good, better and an awesome night. The difference . Try adjusting up or down. Youll know cuz sleep iq™ tells you. Only at a sleep number store where youll find the best buy rated mattress with sleepiq technology. Know better sleep with sleep number. Welcome back to squawk box this morning. Among the stories front and center, heres whats happening. Japan overtaking china as the top holder of u. S. Treasury debt. This is surprising. First time japan holds the spot since before the financial crisis. Also fords new alum numb f150 pickup truck earning a fivestar safety rating. Highest from the National Highway Traffic Safety administration. And the ipo pricing is now at 16 per share. Thats the high end of its range. Gives the Company Valuation of 1. 8 million. Dont to want miss the ceo of etsy. Are you an etsy user . No. You . I have. Its a good site. Have not. We do have more details for you on the protester who disrupted yesterdays ecb news conference. In case you missed it a woman leapt on to the desk in front of the ecb president and showered him with glitter and confetti German Police said that they detained the 21yearold woman. A womans rights group claimed responsibility for the protest on twitter. Papers left behind by the woman criticized the ecb as an ill legitimate institution. It was about ending dictatorship. She registered as a journalist and passed security checks before entering the building. So i still dont understand whats the major malfunction product. What was her hello, femme its not agenda. Its just sort of a 21yearold, sort of just you remember college protests. Yes, this is what i did. Theres something here i dont like. Authority. Ecb is an authority. Maybe its the cross borders, you know the guys in brussels telling us what to do. She didnt specify any of those things. I need more. I need to know more. Anyway, coming up ive never seen dictatorship spelled like that. I think she spelled it wrong, the hyphen. You think she is accidentally misspelled it . Is that the german spelling . Speaking in english. She was speaking in lengenglish. Time magazine out with the 100 most influential people includes 40 women, 49 members are americans, encluds eight ceos, some of the good ones. 14 heads of state. As we head to break, u. S. Equity futures. Drivers, to your marks. Go its chaos out there. But the mclass sees in your blind spot. Pulls you back into your lane. Even brakes all by itself. Its almost like it couldnt crash. Even if it tried. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz Financial Services. Welcome back to squaux box this morning. Look at the futures to see how things are setting themselves up. We had earnings this morning, a number of folks reporting, Goldman Sachs will be reporting shortly if you havent already. Just moving across the wires. Look at the dow opened lower, about 54 points lower. Nasdaq opening ten points lower, and s p 500, open down 7. 5 points lower. Goldman sachs, 5. 94, that is well above what they were expecting at 4. 26. Also talking about revenue coming in for the First Quarter at 10. 6 billion. This is 93. And the company is raising its dividend to 65 cents from 60 cents a share. Its. 1 at this point. Its a dow component. Yeah it is. And it looks like that stock is trading higher already. Kind of influence we need. Gain of 2. 83. 2. 01 its a new high. There you go. And it it may be compromise you can tell there. Precrisis. And they always used to beat. You get, you get numbers like this. One of few companies that okay theres something wrong when you see a massive beat like that. Its not as massive as it used to be still more than a buck. But, used to be more of a black box too. You know more fun talking about normalized markets. Normalized markets of client activity. He remains encouraged, but the prospects for continued growth. What does that mean . Additional volatility. Additional volatility back from the low bond. Right. Especially with a fixed income. Okay. Well continue to dig into this again, dow component Goldman Sachs trading higher after beating expectations. Also Time Magazine just out with this mornings 100 list of the most influential people in the world. Eight ceos, 40 women, a 17yearold who is actually on the list for the Third Straight year matt bella is Time Magazines assistant managing editor, he is here to talk more about it. Thanks. Thanks for having me. This is only the 12th year. It seems to me like it is here and imprinted in our brains. Yeah time has always covered whats going on in the world through the individuals that shape it. So the list is kind of a natural for us. How do you come up with this list . Through a lot of debate we start at the end of the previous year, we ask all of our correspondents and editors around the world for ideas, we talk to people who have been on the time 100 before. Its community of sorts, once youre on youre part of the world. And then we begin debating the list, we dont always agree, we have fights we have arguments, and it goes right through the end of april. Lets talk about the business leaders. Bob eiger, tim cook on the list and that was a very interesting ad. 3 g. What was interesting, we got called to write about him, he told us this great story about wanting to bet him that he could beat him at tennis and then later finding out that he was one of the topranked players in the world. And deciding no money, no money on the bet, but, and thats the interesting thing about the list. Is we get people who are at their, at the members levels to write about them and to try to assess sort of why what theyre doing is important and what motivates them. What surprised you . Who was the addition this year that needed to caught you off guard. I think we got lauren pal jobs, steve jobs widow to write about hillary clinton. Which was a really interesting pick. You dont think of those two worlds necessarily overlapping. And that, you know she just wrote very very passionately about what she believes in hillarys candidacy, et cetera. And its those kinds of connections that are interesting and surprising. Ceo of airasia is on your list. Janet yellen. Yes, we got janet yellen. Stanford to write about her who is sometimes a critic. So, you know, try to find people. Martha stewart and kim kardashian. Two pioneering women, you know, who have created business empires for themselves. Its an interesting pairing and its a great entry. I think. Elizabeth warrens been on the list three times now. Thats right, she continues to be influential. People look to her as a the left or to influence the upcoming elections. You know, she continues to matter. Jeb bush this time around any of the other potential republican candidates thats a good question. Im not sure to be honest. I dont have everything memorized. I didnt see of the others. I was just glancing through the list myself. How did you pick jeb bush why did he win . We felt that his entry into the race really changed the dynamic, and there was some tension around that. And just its going to be, you know, what people were talking about. How many actors . We have a ton. I dont know the number hold up are they influential . How . Go to the movies or watch tv . Lauren michaels is on the list. I do. Lots of people do too. Influence me to go to the movies. They influence what we think. Well, you know actors are very important part of how we dress, how we, you know, think of ourselves. How we talk. You know what we spend our free time doing. Yes, they are influential. Okay matt if you say so. I do say so. Time magazine says so. Must be true then. Matt thank you very much for coming in, we appreciate your time. Coming up jawbone taking on apple pay. The Company Announcing partnership with American Express for a mobile payment chip embedded in its fitness tracking wristbands. Companys ceo will join us next. Look at shares of Goldman Sachs, we told you their earnings, better than expectations, up. Thorng. Wave banking analyst to talk about that as well in just a moment when we come back. Is designed to sync with your life it gets talked about. So you can live the way you live, and enjoy all the rewards. Chase sapphire preferred. So you can. You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Welcome back to squawk box this morning. Apple going after the wearable Tech Companies of the world with apple watch of course. Meanwhile, jawbone subpoena now firing back taking on apple pay with its newest product launching today. Its called afford. Its a brand new wear that believe has an American Express chip in it for payments on the go. Here with us with that news is the ceo and cofounder of jawbone. I wear the jawbone up, i should say in full, you know, disclosure or whatever anyway and joel always gives me a hard time about my sleep and my this and that. Anyway. The wrist. Anyway. Go ahead. You get more. Good morning. Good morning. Good morning. So tell us you have a couple new bands here. Yes. This is the up 3. Which is shipping now. I know you had announced it a while back tell us about the partnership with American Express. Because thats pretty interesting. Yes, so we teamed up exclusively with air max, and what we did is we tack all of the Sensor Technology in up 3 and added payment capability and thats now up 4. Its the most advanced device that we have. It has a chip that allows you to walk up tap on any wirelessly able terminal. Its that simple. Anyone that supports an nfc. How and ammex. Anybody who takes it and supports wireless payments. Broad category. Its hundreds of thousands and growing. How did you decide to do that . How important was it to actually put a chip like that on here and do you think people will do it . Thats the question. People have it now on people have apple pay on their phone. Yes. Theres been issues about it. Theres been questions about how successful that has been and Google Wallet and things like that. Theres been questions about wlr if somebody steals it is it easier for them to rip you off . Most the apple fraud stuff has come from people macing in and stealing their iphone, what if somebody steals that . How do you verify its you. You can disable the app straight from the app. Its one touch, you can reenable it if you want turn on and off. Its easy. Ammex is a security site to make sure its secure. We dont see the transactions, thats all thats a big thing. Signing off on that. Thats the one thick, when you dont have a physical credit card, its a lower bar to hop over. Right. But a theyve got all the back end systems. Its what they do really really well. What do you think the tipping points going to be . How many years away from people doing this . I think its two things right, one is the deployment of terminals terminals. Youve got to have nfc payments enabled, and thats happening a lot and starting to dominate. Apple has done a great job in sort of pushing that and getting the word out to people. Theres a big customer education problem, thats happening too. And then i think its got to be seamless in the device side. Thats what we spend a lot of time doing. Thats why we picked one partner with them. Do you think youre competing with apple pay . No. Its a different solution. I mean we are with ammex, you walk up dont push anything i think its the simplest experience on the market. I think its the simplest way to pay. Literally walk up tap it what do you make in the apple watch . You have an app, its integrated with it. We think that smart watches are different from what we do. So thats more of a notification device, extension of your smart phone. We actually announced that we will have an app on the apple watch, excited about it. Extension up the platform. We have apps on lots of would you wear the watch on one wrist and wear one of your your band can do sleep and other things and battery will go for a while, whereas the watch needs to be charged up every day. Right, again, we have a different sensor set. Theres Different Things youre tracking about people. Do you worry about new versions of the apple watch will make that obsolete . I dont. We have a long pipeline of innovation. Technology. When you think about this what does this track . The distinction between what im wearing now which is the up 24 and what this does. We think the evolution from an up 24 to this is like from featured phones to smart phones in terms of the capabilities. This is the first real multicensored product on the market. Its got all kinds of things in it. Weve been using this technology that allows us to track all aspects of your heart rate resting, bbtds, active stuff. Theres all kinds of sensors for temperature, skin response whats the skin response . It measures the sweat on your skin. We can tell sweat, hydration, all kinds of things. So its a whole bunch of things that make use of all of these sensors. You control, or see all the data. You saw the earthquake happen. Yeah. You saw this earthquake happening because everybodys wearing up. These things. Just statement that the u. S. Geological service did. People were waking up we saw faster than on facebook and twitter, the director reached out and said we should collaborate and see how long it took people to fol back asleep. How they were dealing with aftershocks. Its putting that big data around the person in conjunction with these, you know, big geoevents. Congratulations on getting this out. There was a wait. I know you had issues with the water. Take a shower with this on . Cant go swimming. Not yet. Yet. That sounds like the apple watch. Yeah were sort of on par with the others out there. You were hoping for more a little bit though. We were pushing for more but thats what we do. We try to sort of take a few steps forward. Perhaps well get there over time. Congratulations. Closer look at Goldman Sachs earnings, then jack and suzy are here with a no b. S. Guide to business. Ipo of etsy. Chad dickerson will join squawk on the street with an first on cnbc interview live. Goldman sachs out with quarterly numbers just moments ago. Joining us now on the squawk newsline is marty mosby. Banking analyst at vining sparks. Looking at the numbers, was it once again sort of the trading in better results in fixed income, or what was it . Well it is over 1. 5 billion in additional revenues. Fixed income was part of that but also Financial Advisory and equity execution chipped in pretty nicely. So you have a real broad revenue stream, and what it wasnt it wasnt related to their investing and lending, which is what the market likes to discount so much. Really . So this was in stuff that the market actually likes . Thats exactly right, yes. Does it i mean is it repeatable . Is it something that will be recurring . Well what its showing is there is a lot of activity going on there. We like the Financial Advisory. Theyre being involved and companies are trying to react to the environment theyre seeing going forward. Things were good enough that companies and corporations were trying to plan for the future now, versus just kind to survive, thats what engages them to these actions and activities. I guess maybe that thats kind of played out like you would have expected after 2008 or so for a while, companies dont have necessarily the money or the, the emp distance to do things like that now theyre in a position where they can do it and it makes sense to do it. And they have to start thinking strategically with the slow growth environment. Everybodys starting to assume that, you know, the economy and race arent going to safe us but you have to make decisions to plot your course and create your own success, and thats where you start seeing there. As you see, equities and fixed income, youre seeing activities in the market pickup which are positive for Goldman Sachs coupled with revenue though they also showed operating leverage as their comp ratio went down from last year 43 to 42 and noncomp expenses were actually lower even with the stronger revenues. So youre adding in efficiencies as well as what youre getting on the rental side in this quarterly release here. So you think this stock will eventually break out to new highs. I guess, thats also coincidental, not back to what it was before the crisis and now the companies are starting to do things, you know fully recovering from that and maybe goldmans stock fully recovers eventually. The biggest growth 3 growth annualized to 12 . The largest in over five years. So even if this full revenue isnt sustainable as these peek levels, you would see the underlying fundamentals to continue to improve at an accelerates pace which should just push the stock price higher. Just on those merits alone. Okay great, all right, thanks marty. This is a dow component, just in case you forgot marty. Right. Okay, good. Reminding everyone. Hes influential. Not like a sean penn or something, but hes when we come back we have Quarterly Results from citi that are set to hit the tape. Howto guide for success in the business world. The real life mba. Jack and suzy are here to talk about it, squawk box will be right back. I care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. A special hour with jack and suzy welch, the dynamic duo share secrets and talk the economy, markets, and politics. A big morning of earnings and power players. I think u. S. Equities outperformed for three straight years. And its catch up time. When we buy something, we only buy them to improve them. What will citigroup say about the numbers . Well get the reaction in minutes. Former turns hedge fund ben bernanke joining citidel. The latest on netflixs record run, big retirement announcement on the runway. Final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box, first in business worldwide, happy National High five day. Hey, high five everybody. There you go jack here. That was a low five. Youre not even doing the high fives. Look whos here. Here andrew. Okay check out the futures right now. See how the market is doing. Up for the morning, thank you for that nonhigh five. Dow jones looks like itll open down 63. 5 points, nasdaq off 13 and s p off eight points. Thanks mr. High five. Wont do it. Oh. Yeah. All right. Citigroup earnings youve been high fiving too much. Yeah too much. Yeah, and ive been trying to do algebra. This cant be a sixth grade problem. Citigroup looks like its estimate was 1. 39, is it really earning 1. 51, that would be better than expectations for citigroup. Oh 52, adjusted. 52 adjusted. 1. 52 adjusted is still well above the street. Lets turn to the excludeing cva and bva, youre right. Did you see a clean revenue number yet . Theres a lot of obviously theyre calling it 19. 7 its 19. 7 billion for revenue, 19. 8 if you use exclusive cva. This is the latest in a spring of banks that beat expectations. Citigroup remember it was when the latest stress tests were conducted it was one of two. People were saying either does it and do what he wants or theres a problem. And passed with flying colors. And it was another bank that had the problems. Was it bank of america that had had to go back. Right. So maybe we were expecting citigroup to continue to here are some extent comments from michael. Chief executive officer, particularly in executing against their top strategic priorities. They say that some businesses face revenue head winds, but they grew loans and deposits and gained wallet share among the target clients. Also talks about tightening helping achieve leverage and citi corps. We noted that a lot of banks have gone on to new highs, you will need to live to 1,000 for citigroup, right . Yeah. You need 800 or something. You need to discount that into the hereafter. Because of what happened. Theres a story out this morning about People Living to 1,000. I notice new thats what i mean. Then you might eventually be there. I dont know if you want to live to 1,000. Lets talk about a few other stories that investors are talking about today. Goldman sachs also out with earnings and also beating expectations with its Quarterly Results. The financial giant also raising its dichbd. You can see that that stock is up by about 1. 40. The nations Largest Health insurer adding more members. Its stock is climbing up by 2. 75 . That is a dow component, joe. Netflix subscriber additions topped expectations as well. Asking the board to approve a stocks flip. Thats been a good bid, its up about 12 this morning. Blackstones doubling from a year ago, we saw strong asset sales that generated cash. And blackhawk earnings rising more than expected as well. Worlds largest money manager helped by positive closes thats up by about 2. 34. All right. I saw a revenue number well below, i dont know if thats the thing that i remember. 17. 9, well get back to you on the citigroup revenue number. Bestselling authors jack and suzy welch are back with their second book. Its a manifesto on how to succeed in business today. And how to have fun at the same time. Jack welch is executive chairman of the Jack Welch Management Institute at the university. And a lot of other things. Suzy welch is a board member of the Jack Welch Management Institute of university. We need to mention, the proceeds of this book are all going to charity. You have a harvard degree. N mba. And a ba. So you asked. Not something i would volunteer. I dont walk around mentioning it. The ads were this big, was that just where was that everywhere . Journal. Journal. I dont know where else it was. It was huge i messaged you, i was looking at the book because i told you my background was not business. It was science, and i never really took a business course and having looked at the book i feel like i could end up almost like an mba, like a shortcut from reading the book. Now i wouldnt have to go to the university and do all that online crap if i did that right . Continue to do both . Its a supplement. Its for people like you that havent done it. Graduating with bas and literature and wanting to know what the business worlds about. Its about every level got an promotion and starting to manager people its like an mba in a book. Give it to somebody else or yourself i need an mba and dont to want go to a campus you cant afford it. Just read the book. And its i was thinking, its simple its not easy to be a great ceo, but, you could sort of break it down into like maybe how many chapters are there . You could almost do it. 13. Theres 13. Almost break it down and have a good notion. You know i was talking to somebody yesterday, and they said, this book is just common sense. I said what the hell are they doing . Its not something complicated thing we talk about finance and what you have to know. You have to know all those acronyms. Undertheir answer now. You know everything youve got ten questions, ask why. Something is changing so quickly and so you know the thing about it is like a chapter in marketing. And we cant teach everybody everything about marking. We dont know ourselves, but we do know what questions to be asking if youre at the table to make yourself part of the conversation. It does that in that way, it gets you involved in the conversation. As if you had an idea. We have a conversation in there about big data. Everybody likes big data. What do you want to talk about in big data what outcome im looking for with all these data that are piled up here. People get all swamped, we see it everywhere in every company, in private equity we see these guys have data coming out their ears. What is the outcome . What is the outcome . And you ought to take an action. With solid guy, last week from there. A guy that from the presentation that chief communication officer that wherever were at and we spoke, and this guy does that. You know down in the hole yelling, screaming, they are doing that as a defensive move but theyre on offense. Listen to their customers. Theyre talking to employees. Theyre gathering data and theyre trying to integrate transparentally employees to customers. He understood what big data was used for. One of the, i was attracted initially to like tips on how to do an interview with someone that youre getting ready to hire. Right. Because watching the final four, i saw great players, but i thought the team was who eventually wins its always that way. But youve got to find them to start with right, and youve got to figure out, how do you know whos going to be good and how do you get them to perform at their highest level and insent vise them but play as a team. Couple four chapters right there. Its incredibly hard to hire well. I mean you get it right about 50 of the time. You pat yourself on the back. Really is it that its hard because people present well in interviews and resumes say something, so we give some advice in the book about how to find the right people and of course you want the best people you want to constantly be upgrading your team. We do say at one point and Everybody Knows it you have to check the records, you dont want to do it you found this great candidate, you want to quickly get them in. Youre waited too long to hire. You have the pick up the phone and have that conversation and listen for whats not being said. And all you want to do is get the call over its awkward. You have to suffer through it. Ive seen jack giving reference checks to people. The people are literally, hes being candid and people hang up because they dont to want hear they want the person in the door. Its very hard though. But you can hire some people that seem like theyd be great and they are just horrible. This thing we talk about in the book is recognize it dont try and hide it dont try and do their work because people before you and above you have hired wrong. Be fair to the people. Its your fault. You own it. Love them on the way out as much as you loved them the first day you hired them. Let skme you something, oftentimes people hide it is because they think they look back thats why they do it. Thats why they do it. A, how do you own up to it yes, its your fault, its not theirs you just stole them from another company, and you just put them in an awful position. So its a very complicated thing. I actually agree with you, the question is how do you do it . You own it. The cheapest dollar is severance. Have you ever seen a happy whistle blower reported . Happy whistle blower complaints about companies . Never seen one. Its always disgruntled employee because somebody treated them wrong. Someone found you, jack someone had found you early on. Well they did. I was just out of the pool. But you earned it though too. They finally gave you the start, but then you will to crawl your way out. Get out of the pile i always call it. Do something thats different, make your boss smarter, thats one of the things we talk about. In the book, one of the things youve got to be doing every someday making your boss smarter. You have to have a boss that will acknowledge that and appreciate it . Absolutely. And if you dont, i mean you talk about generosity thing, gene or not, but the propensity there are some bosses, and you know it if youve got one, generous heart and they love to give raises and love to promote and they love to broadcast your kwds, so and so had a fabulous idea and they love to give you all sorts of psychic those guys do better. Those with the best what do you do when you have the opposite . That happens all the time and its painful, we watch friends and kids have these youre got to look elsewhere. Thats a blocker. A boss who is not generous if she doesnt in some way have your best interest and want you to grow, youve got to move in some way. Bounced around to a lot of different jobs. You got a red flag too . Less so than before. And another thing, put a time frame on it. We have a chapter in the book on getting unstuck. If youre stuck in a job, and we talked about being stuck in a job. We had a minion minion not, weve never had anyone like this, people are stuck in this grind, and we talk a lot about how you to get out of it. Put a time frame on how much theyll put up with it. How much time . The best things have been when i step around for a job a year longer. Thats not usually the case. Most say i wish i left earlier, becky. Everybodys personal situation is different. Sop for some people they have to wait longer for financial reasons, and other people they have the freedom to go. And so were going to i guess we have to sneak in a quick break. I want to talk about also that, you know, when a company has a crisis, it used to be sort of an outlier it seemed like. Twitter and facebook its like your time is coming. You know it may not be tomorrow but there will be something happening at some point, right . How do you, i dont know. Anyway and last but not least, you know seinfeld was about nothing, but they covered everything. Do you remember there was david putty, every single guy wanted the character, he wanted a high five. Do you remember him . Constantly, high five and it got so, you know, its like get away from me with your stupid its already been done. No i dont like that. Stop it thats not fair. Were you good at that game . Yeah. But i want to do it where you go like that and smooth operator you are. Yeah. All right. Jack and suzy will be with us. We will continue this conversation and the high fives coming up. More from jack and soour zi on building a wow team for business and the best ways to retain the players. Take another look at citigroup, beating revenues a bit shy. Were going to speak to an analyst about the numbers. Squawk returns in just a moment. You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Welcome back former fed chair ben bernanke has a new zwlob morning. Signed on as a senior advisor, to the 25 billion hedge fund founded by denver griffin. Bernanke chose them in part because hes sensitive to concerns over the revolving door between wall street and washington. He was saying banks and others that approached him for jobs like this as youd imagine. He does do speeches to banks and things like that but in this case they are not regulated by the fed. No lobbying by part of his role. Jack is laughing. I dont understand why. You hire him because of his expertise as an economist, and therefore being able to predict the future or for his connections that you know are so thick everywhere . I think hes a brand. Hes a brand. Go to europe and asia and talk to everyone. Hes going to have everybody in the room. Draw crowds. So it might not necessarily be hes a professor. Hes a professor, hes going to offer economic he said to me last night, im not an investor he said im not an investor im not going to tell them what stocks to buy, what i think about the environment, one input of their many inputs. Raise money. Right. He wont ask about money. Nice dinner. Nice speech and then the next morning, the guys at the fund raise lers call them back and say hope you had a nice dinner, 100 million. Hes a brand. He is a brand, definitely. Were going to sneak in another break. We have more to talk to them about. Coming up, were going to get you caught up on the business headlines before we head to the break. News from the fashion world this morning, sad news for certain of us. Gisele is hanging up her high heels from the cat walk. The worlds highest paid runway model walked her finale. She did that in brazil. Husband tom brady was in attendance. Gisele says she plans to focus on her family and work in print campaign. Who is disappointed . You know [ male announcer ] your love for trading never stops. So open an account with schwab. And when a market move affects, say a Cloud Computing stock youre holding, we can help you decide what to do. With tools that help you see how market activity is affecting your positions. So when the time comes to decide whether to scale in or scale out. You can make your move wherever you are. And start working on your next big idea. I love my mileageplus® explorer card. Were saving our united miles. For a trip to hawaii. We love free checked bags. Ive saved 75 in checked bag fees. No foreign transaction fees means real savings. We can go to any country and spend money the way we would in the u. S. One of the best things about priority boarding is you can just get on the plane and relax. I put everything on the explorer card. I really want my united miles. Welcome back. Jack and suzy welch with us today. Its called the real life mba. I like the subtitle no bs guide to winning the game building a team, and growing your career. These are lessons people can take and take with them. One of the things you focus on is leadership and how to be a better leader. Could i ask, how did you come up with a chapter on geniuses tramps, and thieves. Thank you. Take off on the cher song. I could watch that video so many times i wanted to make sure i had it right. Anyway, we wanted to write about, because this book is based on the past ten years of what weve learned. It is nothing from our previous like really the past ten years around the world. Talked about a Million People companies of all different sizes. And we wanted to write about what was really new. And we identified three different types of groups of people. New kind of groups to manage. The first would be geniuses. And that is people who work and dont understand. It used to be when you moved up the ranks, you had done the job of everybody before you got to the top. I was a reporter and name editor, i knew what they all did. Now you can be a ceo or a manager and be managing coders or financial geniuses and you have no idea what they do all day. We want to talk about how you manage those, and tramps let me ask something about that we found this person in an apple store that we talk about. We found this person in california with our daughters hand held is falling apart, and she had to have it it was the genius. And we talked to this kid who had a ba in english in from california. Berkeley. And he was running the bar. And he said how do you manage this . He said i dont know what the hell they do in the back here, but what i do know is that every customer who comes out of there, i know if theyre happy, if theyre leaving right, i know the measurement of my customers who walk in there. And thats all he had to know. He had to know that if theres kids in the back room delivering a product that most people went out and said i love apple. A really modern thing. These are people with nice terms, people who work remotely and theres figures its a growing population. Either freelancers who have their own businesses and outsource and you have people who are working from home. And its growing. I mean this is a growing population, and you want to the have them part of the team how do you do that . And thieves is not what it sounds like because were not talking about people who steal, that number is small. Were talking about the biggest thieve of all in business which is fear. And organizations are filled with fear. People are scared theres whispering in the cubicles. Then you talk about thousand combat fear. How since then fear is in everybodys mind. Are there going to be layoffs, will we be downsized . For the tramps we were talking about a marissa meyer, were making the point that look, when you make a bad hire and you have to fess up to it and own it she was heavily criticized when she fired the chief operating officer, like five months later, and about 20 million. Youre saying thats the right move for it. She also caused a huge stir when she said she didnt want anybody working from home anymore. She had a fire going on in her building and she had people in pajamas in their home. Thats not how you put out a fire. And she made a gutsy call, you dont know her that well. Every move she made creative. Anybody else that you would look to in management that say any of this is a hero . Kevin frank for sure. I love the way hes taking on nike. Hes got the guts. Hes got Jordan Spieth walking around. Im looking at chapter three, when there is no growth, what do you do ive seen two guys that said i dont care whether it grows or not. It has nothing to do with us. Kevin was one of them how do you do after 2008. I said when did you start . Well come back to this. Thats the first guy i thought when i was looking how to create the question when you said his name. Doesnt matter whats happening within six years of slow growth and look at it. Hes got his team fired up. Hes in the skin of every employee. He gives meaning to what theyre doing every morning. Right. Hes a real leader. Were going to continue this conversation with jack and suzy welch in just a moment. [ ] there is an ancient rhythm. [ ] that flows through all things. [ ] through rocky spires. [ ] and oceans swell. [ ] the endless. Stillness of green. [ ] [ ] and in the restless depths of human hearts. [ ] the voice of the wild within. [ ] breaking news march Housing Starts up a couple percent. Big miss on expectations we were looking for something over a million units. We ended with 926,000, and that is better from the slightly revised 908,000, but disappointment nonetheless, remember the last number was down over 15 . Lets switch gears to permits. Better view down the road here a better number but still missed expectations. That is indeed down by. 7. Its closer to the estimates but sequentially a miss because not only do we have an upward vision of last months number it was always on the positive side. That was 1. 1 million units. So, you know, you have to take your medicine either way. Youre missed on expectations better on the sequential on starts, but permits running at a higher level for the future. On the initial jobless claim scene, last week revised the 282,000, add a dozen, 294,000, continuing claims dropped just a bit from 22. 1. How did all that play in the marketplace . Were still within a basis point of 186 like you have been almost every morning, above 250 on the 30year preopening equity still down about 50 points and of course the headline market for this month, may be many months to come is Foreign Exchange and the dollar down about a half cent in the dollar index, andrew, ross sorkin back to you. Jack and suzy welch still with us. They are talking about their new book the real life mba. Proceeds all to charity. Weve raised 20 million over the last three books. And its all gone to charities. Three books, thats incredible. I want to talk about the book more. Im going to ask one more question then you have to talk about jeanne and economics. Heres my book question. Social media question, which is you guys use social media effectively. If youre an employee of a company, how out there are you supposed to be promoting yourself . Well everybody is told today to build a personal brand because youre not going to be the same Company Forever and ever. Companies change and Industries Change and you might be at a company and industry and your skills are irrelevant. So we actually encourage our own children to get out on social media and build sort of a personal a public profile, but frankly, not everybody wants to do it. And you actually have an obligation to the company youre working for not to be out there and outspoken about your own company. You wouldnt talk about your family a lot on twitter or facebook. Its a great place to me. I mean if youre somebody in the workplace, getting your profile out there, commenting on things, and being smart about it. Do you think the worry that you are going to comment on things and get yourself in trouble . No smart enough not to. Dont be an idiot. Linkedin is a place where people go and they hire from and they look at them. Then they go back and look at profiles and what theyve said. Its a place where you can develop a mini brand in there. And i think its a great spot to hang out. Were going to come back to the book in a second what about the news of the week still within the past week i think we had Steve Schwarzman on in the last hour we talked about the ge deal selling the real estate piece or some of that to blackstone, nice little shoutout for being an early investor. Congratulations in doing that. You invested on behalf ge. On behalf of ges money. But when you look at the plan that jeff has put in place around ge to effectively get out of ge capitol business leading 90 million. You think what . In terms of the reshaping of the business, in part that you created. Yeah, i think its the right thing. I think the world changed. And itd be like saying wait a minute, lets kick the buggies, forget these automobiles down the road but when i got the job, we had bought international. Mining company. My predecessor bought it. Jimmy connor was there during that period and the crime rate was 21 . And inflation was rare. I sold it in two years. We didnt want to lend with a Mining Company anymore. Why is ge the only company in the dow jones since the beginning . The only one left. Change with the times, in 2008 the world changed, and dodd frank changed, and if youre sitting with him, and a huge Balance Sheet of cash and your Financial Services cant lever it. Its very Steve Schwarzmans got a nice deal. Ge has sold all sorts of things over the past decade mixed record in terms of the timing. I would argue. There have been certain, certain spinoffs and things that have worked very well others where two or three years later, you say to yourself i wish had been holding that maybe. I think about nbc for example. Well i mean good as any, its not going to get better for a while, ill tell you that. Its not going to get better. Not going to get better because you think the economy is going where . The regulation. The regulations. Yeah, this is a stifled, Elizabeth Warren wants more more, more i mean its a piggy bank in this business. Piggy bank for the government . Yeah. But ges making the right move. Courageous move, its the right move. Done at the right time and thats why ge will be around 100 more years in the dow jones. What about, we can talk about the buyback or for example, the energy stuff. You could probably add to the energy, if you want to stay in that business and you think its good, you bought a dollar some of those businesses are worth probably less than they were two, three i think hell be looking at that. Hes got plenty of cash. In addition to the buyback. Absolutely. It is smart, hes got to keep it, hes losing. Made 42 of the profits last year. Right. So the e is going down hes got to get down. Hes not going to be able to be buy that much. He cant buy 40 of the quote. 50 million. Hes using 40 . Hes keeping 90 billion. This is still going to be a Strong Financial company, and ge and those are strong businesses that support the industrial business. I think its just right. And then theres things you can add in all the businesses that jeff likes, there are things he can find right now to add to those, right . Absolutely. We created number one, number one in pile assistance. Number one in medical. And he took them to higher levels in number one. When we always had that strategy. Number one, then number two, closed us out. Hes done a hell of a job at building loans, like we did. And the Financial Services gain is a changed game. Right. Bad thing if youre in that game. Jill mentioned buybacks weve been having a debate around this table and i think on the 6 00 hour but at this letter earlier this week i dont know if you saw it. Where he suggested that there was not enough balance going on in terms of longterm thinking for companies. Like theyre too focussed on giving back money to shareholders through buybacks and dividends, do you agree or disagree . I dont know its a one by one case. Preachy. I took it as kind of preachy. Almost providing cover. Yeah. Under attack. But how long do you hear this crap all the time . Lets look at the longterm. Larry fink okay and a quarters bad, theyre dumping you right out the window. Exactly. If he really believed that why wouldnt he say, forget it . Rose colored glasses. Lets look at the world like it really is. Thats all i was asking you to do. I think the argument he would make is he doesnt dump it. He owns indexes, hes stuck with it. Were lucky he ends up dont you think everybody, i think ceo z are thinking longterm. I like that. Activist culture, youre been watching this a long time the activist culture, does it put more pressure on the board room to get the quick one on . Only if you are called into the activist and youre paying more attention to them than the shareholders and your customers and employees. Look like jack was saying, its the job of the ceo, but all of them. If youre managing 12 people think longterm and short term at the same time. Otherwise, why would they pay you . Thats a hard thing to do. Is this paradox to think long and short at the same time but youve got to do it. And if you start with activists, then youll get that all thats another point that Steve Schwarzman made when you look at the average term for a ceo, three, four maybe five years. He didnt know what he was doing three to four years into the job. He is different 30 years later. Jack, hed guess the same for you. Theres no question. Let me tell you, one of the problems, my voice is a disaster selling this book. Let me tell you that the problem with that activists right now, lousy boards. Cowardly boards. And you have a strong director you have ken for example as a board member and some activist comes tripping on the door with 2 of the stock. Throw them out the door. Right. Just dont hang out with him. Now some activists have a real case. Companies been sleeping they provide a value, but ill tell you, better get an understanding of your board, your boards got to have guts. Guts. Well take the 2 as the media and blow it up to almost the others. Right. Remember with the guy from coke . Your pal, winters. Yeah. He owned like yeah on the case every time we talk about him. What about the plan . Warren buffett ended up changing his view didnt vote in favor. Thats because we helped the activist there. Jack and suzy are going to be here. Were going to take a break, by the way, best tweet the morning from you guys getting ready to go out for my run and you guys meaning squawk bring on jack and suzy welch for an hour looks like its the bike instead. Love you. There you go. I want to high five yourself. I want to do that. All right. Okay. High five day. When we return reaction to citigroups Quarterly Results from the street. Take a look at the stock. Right at this hour, watch the shares of netflix please. And into companies subscriber editions, topping expectations netflix also asking its board to approve a stock split. 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This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. Welcome back everybody, citigroup came in with 1. 52. Revenue was just slightly shy of expectations. Joining us now on the squawk newsline is gerrard cassidy, he is head of rbc capital markets. And gerrard, we know this was a little better an the street expected. Also looks like some of the costs were down for both legal and restructuring. What did you think . Yes becky, in fact this is as you know the big turn around story for the large cap banks. And citi delivered on lower expenses, lower credit costs. The turn around is continuing as expected. The stocks up 1. 5 would you be a buyer today . We would, the stock on Valuation Base is attractive. This is further evidence that the Senior Management team is turning this around and taking time, but they are making good process. What other Big Bank Stocks do you like right now . Which are your favorites. Jpmorgan chase, what youre going to see the is continuing improvement for all of the companies coming from lower expenses. Higher Interest Rates will be the real swing factor on a go forward basis. We dont expect to see that any time soon. Youre absolutely right. Whats interesting is these companies are getting leaner and meaner because of what you just said, were not going to see a rate increase any time soon. When it comes to the levers for higher profitability will be quite high. Great, thanks for joining us today. Youre welcome, becky. Still to come jack and suzy welch are here. Secrets on what it takes to keep your career from stalling. Great interviews in a moment. Squawk on the street will have the eves antitrust chief live to discuss its case against google. Then later in the day, interviews from washington where the Worlds Largest Drug Companies are meeting. Talking medicine tax reform and competition, big day on cnbc ahead, stick around squawk returns in just a moment with suzy and jack. [ 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. It is a big day for ipos, the company structuring its offering to give small investors the opportunity to buy some of those shares by the way, dont miss the ceo coming up on squawk on the street. Shares of virtue financial set to start turning the electronic market maker postponed its poep because of controversy over the book flash boys. Pricing at 19 a share. That is at the upper end of its range. Party city pricing at 17 a share. That values the retailer at nearly 2 million. When we come back jack and suzy are here. Its going to be a free for all. Take a look at names that reported this morning. Blackrock earnings beat the street. Larry fink was on with us earlier. Its a global phenomenon lower Interest Rates is creating huge pain. This is something that is misunderstood and not talked about enough. Everyone appreciates low Interest Rates, how it accelerates the equity markets, but its creating havoc with a lot of clients. Blackstones quarterly profits doubling from a year ago. Strong sales, generating record cash. Goldman sachs raising its dividends. [ male announcer ] your love for trading never stops. So if you get a trade idea about, say organic food stocks schwab can help. With a trading specialist just a tap away. Whats on your mind lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move wherever you are. And start working on your next big idea. I care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. New york state is reinventing how we do business by leading the way on tax cuts. We cut the rates on personal income taxes. We enacted the lowest Corporate Tax rate since 1968. We eliminated the income tax on manufacturers altogether. With startupny, qualified businesses that start, expand or relocate to new york state pay no taxes for 10 years. All to grow our economy and create jobs. See how new york can give your business the opportunity to grow at ny. Gov business jack and suzy welch are with us talking about their new book the reallife nba. All proceeds go to charity. Jack said 20 million in the last couple of books have gone to charity. Andrew went 20 . That was rough. For me too 20 million from book sales. Thats tough. Thats a lot. I asked should the fed raise rates. There is a big division. You said absolutely not because of what will happen with the dollar. When you start seeing layoffs at these big firms based not on equity as much it will hit the fan. I understand we could be misallocating funds and put people number risk assets. Its a tradeoff. I worry about the fact the economy is not that strong. The economy is tough. Every dollar of exports we lose from our companies here is troublesome. It could crater us. I worry about the dollar breaking parity going below the euro. These companies are going to kick butt all over the world against our guys. Youve got 40 improvement in productivity in six months. See this is you emulating one of the rules in the book. That is things have changed. Therefore, in the past you would have said 5. 5 zero fed funds, its insane. Now youre looking at the way things are. There are a lot of very smart guys who are saying weve got to get back to normal. Well whats normal in this world today . Back to the ge capital story, that was a beautiful business in 2007. Right. It had gotten to 50 of the company. Then the whole world changed. Lets go to another lesson of the book. One thing people are looking for is what should they do with their lives, with their careers, how do they do that . You created an area of destiny. What is that . You know how many times people have said what should i do with my life . I feel like im in the wrong job. We are not talking about out of college or Business School but people in their 40s and 50s. We have this idea of this thing called area of destiny. Its a very rich territory which is at the intersection of what youre uniquely good at and what you love to do. If you overlap this. We talk about how to do that in the book. Thats where you should be building your profession. People are over there, over there but not in their area of destiny. They know in their hearts they are not. Really tough once you are that far in your career. Take the three view examples. You got there, but you didnt start there. Journalists to this. Journalist to this. Stockbroker to this. Thank god you didnt disparage me. I actually had a real job. Whenever you see somebody who is happy and driving and successful, you can back it out. Theyre in their area of destiny. The trick is finding yours. A lot of people arent there. They wonder whats wrong. Why isnt it meaningful and why isnt it fulfilling . Its not being in your area of destiny. You have one leg back in the inkstained world. I know it. But he is uniquely good at it. I try. Joe tells me im no good at this. You are perfect examples of not starting here. People graduating college are going to go where the jobs are. We were all lucky and blessed finding something we are passionate about, but i know so many people who cant find what they are passionate about. Or they dont feel free to admit because there are no cars there. A guy was about to come out of his suit. He was so frustrated in meetings. He was a marathoner. He is running a big executive equinox. He thought he had to be in regular business. I worked for us in private equity equity. This guy quit the corporate world. He said im getting out. Hes a very talented guy. We have a story of him in there. He found this game that just fits him to a tee. Hes the happiest guy ever. We heard yesterday 70,000 is the perfect amount to make. Youre unhappy if you make less unhappy if you make more. It sounds absurd but if you earn success a person making 70,000 versus someone who doesnt have a job, you could be at happy as 70,000, doing what you like as someone who makes more money. Thats possible. What about taking risks later in light. A lot of great entrepreneurs have taken risks early because there is not a lot of downside. You look at the great outside success, mark zuckerberg, steve jobs, bill gates. All under 25 years old. Its harder to take risks as you get older. Youve got so much infrastructure you are scared of losing. We talk about constantly reinventing yourself. You fail if you take risks. You realize you dont die. You pick yourself up and keep going. Youve got to take risks. You cant retire. Youve got to reinvent constantly. Case in point right here. Thank you, guys. Thank you so much. The book is the reallife nba. So much great stuff in there. That does it for us today. Right now its time for squawk on the street. A day for ipos. Etsy and party city giving away candy, literally. Well talk to the ceo of all three companies. Welcome to squawk on the street. Im Carl Quintanilla with simon hobbs and david faber. Cramer is off and sara eisen is in washington. Well have a series of big