Transcripts For CNBC Squawk Box 20150527

The tech giant accounting for 10 of the move down in the blue chip index and joe you were right. Not yet. As it goes. So goes apple, so goes the market, right . Not just that but made very little headway since it was put into the dow. The dow made little headway and apple made little headway. Theyre joined at the hip at this point. Our fortunes are tied with tim cook. Hopefully he knows what hes doing there. My point to you that you sneered at about exxon, exxon was able making 10 billion every quarter. They were going to make 10 billion every quarter for the rest of he certainty. Then suddenly they were making 5 billion so suddenly that price. Makes sense. Thats what worries me. Apple is a Great Company with great stuff but their comps year after year to grow its huge. Its 56 billion in revenue in a quarter. But at this point they are on track for some of this stuff. It was up from the year before. If theyre continuing to grow it should be above what is it . Still 7 is goith tong to get to 8. 7 2770 and does it go above 8 or does it go below . I dont know. Im worried about snap chat now. Everybody has market comments right now. A lot of comments. Its a start up type thing and we worry about private valuations valuations. Lets tell you about the big stories were watching this morning. Including ben bernanke saying chinas economic slow down should not worry the markets because theres no risk of a hard landing. Also arguing a move to raise us. Rates should be viewed as a positive sign for the Worlds Largest economy saying please dont worry about it. Making those comments today at a private sector forum and doing eight cross the ocean in seoul. Theres no need. No need to worry. No need whatsoever to bring up his comments in 2007 that there was no housing bubble. No need. Didnt forsee any issues whatsoever in housing. Thats a cheap shot to bring that up. Who would do such a thing. Nobody. Thats why im not going to do it but he had absolutely no idea that there might be an issue as far as housing. I would take this to the bank so to speak. The central bank. Youre generous. I am. Plus not only that he is still in legacy mode because yellen habit done anything but just continue what he did. So it matters to him how this plays out. Its going to be good news when they raise rates because it means the economy is improving. It would be good news because if we dont raise rates this time around then were just stuck. Were just stuck in limbo forever but take it with a salt lick. Is that the expression . Grain of salt. Whats that big thing . Grain of salt. Get out your salt shaker. Amazon is hiring 6,000 full time workers for its u. S. Distribution center. The company is opening locations across the country in order to speed up delivery times. So its spending a small fortune these days to build out its infrastructure at a time when everybody else is trying to get rid of ininfrastructure and i wonder whether people will be willing to actually pay for the speed an convenience because ultimately theyll have to charge a premium relative to other people that will get it to you a day or two later. Ill look for things that are prime. Thats because you pay the Club Membership and you get the shipping for free. I would pay twice as much for prime or three times as much if they could get it there faster. In new york city now they have amazon now. We get stuff literally in an hour. Really . What do you pay for that . If youre well for 7. 99 you can get it in an hour or for free, you wait two hours. Thats not bad. By the way, so you know last night i got into an uber and i get in and the guy looks at me and goes the guy, i just watched you on tv yesterday saying saying its you. Did he give you a bad rating. We talked about the rating the whole time. I heard from people saying i was watching and i cant believe it it. I said welcome to my world. Is it against paypal or pea pod . Theyre out of business. Are they . Yeah. But he was a nice guy. We should have him on. He was fascinating. Webvan. But the amazon stuff youre not ordering food or something. You are ordering food . It takes an hour . What are you getting in an hour that you want . I got robitussin when i was sick. Thats cool. Two hours. Even when you were sick you wouldnt pay 7. 99. Well it was 7. 99 on top of what it costs these days. If i was dying i would do it. Crude prices bouncing back. Analysts looking for stocks to fall for a fourth straight week. The data from the American Petroleum institute will be released this afternoon. Well keep our eyes on that. Read about this we can talk about this did you see the imf says that its fairly valued. Its weird. It is out of step with the United States. For ten years they have been saying significantly undervalued. Over the course of that time wouldnt it be has risen 25 . Because the dollar got so strong were now saying that it probably i dont understand. What changed their mind here . What currency fluctuates changed they have steadily allowed it to flow higher. 25 . It hasnt i dont think. Its up 25 over the last decade. Its been slow and steady. Remember hank used to talk about when he was treasury secretary and the baby steps that used to come along the i was. Way. Undervaluation caused imbalances in the past. The real effective appreciation has brought the exchange to a level that is no longer but its still to cheap. You were going to talk about this story which is the french workers. Ten weeks. Right now the company gets ten weeks vacation. They have been put on notice that theyre no longer going to get that. Ten weeks and 35 hour weeks too. They were working 37. 5. Actually to us that is 37. You have to put in some extra time. We should talk. Lets not even bring that up. Also on the squawk three hours of live tv is difficult. Its nerve racking. Right. Anxiety producing. Tiny little violins. Exactly. Yeah housing and some people we know, i cant wait until their alarm clock starts with a 3. I cant wait. Its oh i can do this. Monday and then tuesday, its 3 00 again. And then wednesday rolls around and it says 3 00 again and by thursday and friday youre like i cant go on and next week it all starts over again. 3 00. Try 3 00. Try it. Weekly Mortgage Applications due. And get Weekly Earnings reports from tiffany, michael korss, chicos and Toll Brothers and then theyre meeting with treasury secretary jack lou and imf boss Christie Legarde and even weekends can you go past 8 00 . I cant. I thought you were talking about in terms of going to sleep. Whats the latest you sleep on a saturday or sunday . I wake up i could wake up briefly at 7 00 or 8 00 and then i could actually go pack to sleep. Really . Oh, i can be back asleep at 10 00 but i may be sitting on the couch and just find myself asleep again but yeah. Yeah were fun. Were really fun people. The thing is ben franklin i really believe that. Early to bed, early to rise. Its a better way than being up. I think it will extend our life spans ultimately because it keeps us from being out late at night. Do you want to talk some soccer. We have fifa corruption action. Are they trying to rig games so that someone actually scores a goal . Are they just tired of zeros . Maybe thats what the corruption is. Theyre talking and whispering maybe the sport would become more popular if someone scored a goal and maybe money is changing hands to allow you think i dont know. I didnt read the story. Well get you an update right now. Soccers leading government body has been rocked by raids in alleged corruption. He knows all. Have you ever seen a goal scored, jeff . Yeah absolutely. Have you, good . Plenty. Plenty. But, you know my joke before i came on my head of news threw this at me and thought it might be helpful in explaining to you that the ball is round in the game that we play and well inflated unlike the recent scandal that you had. Is that why its so easy for the goalie to catch it every time because it never goes in because its round. Try deflating it. It might help. Try deflating it. You might have a little more action in the game. Maybe. Maybe. But, you know this story, joe, theres more drama than weve ever seen on the field thats playing out with fifa executives and it would take the long arm of the u. S. Feds to actually make this story happen we have nine fifa members and five executive members arrested by the swiss police. They were asked to do that by the department of justice which is planning charges that relate to wire fraud and corruption. And ultimately the timing of this is extraordinary because it comes as this friday we were set to see a vote take place as to who would be the next president of fifa. Sepp blatter going for his term. They say we welcome this. We want to see the organization clean and at this point, we will go ahead with the vote and we also will not change the destination of the 2018 world cup which is russia and the 2022 world cup which is katar. The allegations relate to the voting that took place around the 2018 and the 2022 decisions. So i think the fifa head of communications at the moment desperately spinning to try to put journalists off the sent here but with so many fifa executives and Committee Members arrested you have to figure that this story is only going to get bigger from here on in. This is a Massive Organization and for a long time people have said unaccountable. You have to remember that after the brazilian world cup, 4. 8 billion in revenue passed through this organization after costs they saw around 2 billion in revenue. They made a profit in excess of 330 million pounds. So there was a lot of money swirling around in this business and if you believe the department of justice allegations, some of that at least 100 billion of it found itself way into inappropriate bank acounts. Just to say before you point to the rest of the world, joe, primarily those that have been arrested represent latin american or south american countries and of course jeffrey webb who is the president of the confederation of north and Central America and the caribbean is among those who have been taken into custody. Back to you. But jeff it sounds like you are skeptical about the idea that those world cup games for 2018 and 2022 wont be changed for location. You dont necessarily believe that. This is an organization in controversy for sometime. There was an investigation done by fifa itself back in 2014 into the allegations of wrong doing around the bidding. They seem to have cleared themselves in that report but the bad smell has not gone away here. Why i think at this point its still 50 50, fifa has never in its history taken away a world cup from a country awarding it in the bidding process. If it happens for russia that would be a first but these are serious allegations. The story clearly has further to run. I would be amazed at this stage whether the vote for the presidency takes place on friday and there will be some serious questions answered because if you know your soccer as joe clearly does it was a real head scratcher. The players were expected to play in 45 degree heat and those games would be lower scoring. Great strides were made in the United States in terms of fan interest and everything. And we had a great goalie and i watched everything and actually nbc has some Major League Soccer stuff that i watch a lot and its very compelling and definitely worth watching. So its coming into its own in the United States. Its been a Long Time Coming after false starts over the last 20 or 30 years and this last world cup did a lot. I finally convinced you. It finally convinced me that its pretty good. And then i remember the Major League Soccer. You were there already. I was already there. All right. When is the next world cup . 2018. He was saying 2018 2022 are the venues that theyre talking about about. Anyway, lets talk more about the markets this morning. Weakness in apple acounting for more of the decline. Lets get more on markets. Joining us this morning is kevin holt. He is cio of u. S. Value equities and a senior Portfolio Manager of the fund. Also with us on set this morning, the global chief investment strategist at City Private Bank and welcome to both of you. Kevin lets just talk about stocks right now. You think things are relatively fairly valued. At this point were getting to a multiple on the snp. Im a longterm investor on a historical basis. Generally theres a lot of stocks fully valued after a good six year run in the market. Is that why you think things are relatively flat this year . Weve not seen too much activity . Yeah i think the market is torn. Weve had relatively weak retail sales data here in the last six week which surprised me a little bit. I think its a little concerning. But youd rather see Stronger Economic numbers coming in understanding that may make the fed raise rates earlier rather than later . Yeah its interesting. Weve been waiting six years for an Interest Rate increase so any hope that Interest Rate dos go up mean wes actually have an Economic Cycle and were not stuck in a low growth grinding japantype environment. So the market is really wanting rates to go up as long as it does it in a slow fashion. How and why is important. Ultimately they only want to provide measures for tightening. The global backdrop is liquid right now. What happened around the rest of the world is powering tremendous liquidity. The u. S. Is lacking that right now. We had that earlier and the thing thats needed here is a strong growth acceleration and im afraid that after six years this is what it is. It isnt any stronger than this. Declines in the Unemployment Rate at a relatively slow growth rate. Fortunately enough we started this cycle with 45 per share for earnings and now were 125. I dont think its just the fed that did that. We were talking about the comments earlier this morning about how he expects to see a rate hike later and that would be good news for the market. You agree with that . If its for the right reasons. If its just to show we did some tightening as opposed to acknowledging a stronger cycle and getting it the two things mean Different Things for the markets. When you look around in term of where people should be putting their money what alternatives do you prefer . Very tactically if you look at whats going on in europe you have a combination of accelerated kpik growth quantitative easing financial excel rant but were starting with an 11 Unemployment Rate. Theres more room to run. In terms of investors if you try to figure out if the dollar is going to continue to advance, do you still think its worth putting in european stocks or would be be hedging that . Hedging this makes sense. Theres times when hedges go against you. When equities correct and you dont get the benefit, right . Because you were hedged. You see occasionally currency appreciation in the case of the euro at a time when risk assets sell off but for longer term investors, yes some currency hedges just as we saw in the case of japan where the best returns were enjoyed by those that were currency hedged. Kevin you dont think were necessarily going to see a big sell off in stocks over the summer. Maybe a slight pull back but not a massive. Yeah theres no reason to expect a massive sell off at this time in my opinion. We want to thank you both for coming in today. Coming up when we return red hat is red hot. Shares of the Software Company soaring 25 in the last six months and 50 in the last year. Red hat ceo is going to join us on the set next. First as we head to a break, heres a look back at this date in history. Verizon say neversettle. Tmobile agrees. Never settle for verizons overpriced gimmicks. Try the uncarrier riskfree for 14 days youll love it, or well pay for you to go back. Welcome back to squawk box. Heres more news for you this morning. Years of near zero Interest Rates created an asset bubble and led people to create riskier investments than they normally would. He answers questions about when the Company Might go public. That matters. We need to ipo. We have a plan to do that. Obviously i cant give you too much color there. But how about what planned ipo by . Again, i cant give you color there. All right. What does an ipo look like for you . You have revenues . You have what is the an ipo looks like a lot of things but most importantly it looks like just another dot kind of in the growth of our business. We dont view that as the end. Its just the beginning. But an ipo is a goal. One of them. A goal along the way. We started talking about exits. Well have more in the next half hour including a keynote speech from senator Elizabeth Warren. He had very interesting things to say. Well have to debate that. Red hat stock is white hot. Their shares up over 50 in the last year and up over get this 160 over the past five years. Ceo of red hat he is here this morning joins us and also the author of a new book called open Organization Igniting Passion and performance and good morning to you. Thank you. Can i ask you a comment, do you think were in a bit of a bubble in your world . Of course we are. Its just a natural thing when you can borrow money in investment trade for almost nothing it gets easy to overpay for an asset that you know youre overpaying for but its with someone elses money so it builds on itself so the valuations are ridiculous. Hard for me to comment on the market broadly. Im thinking tech sector and private company valuation. So i have talked to several ceos of Companies Looking to ipo and instead they decided to do another inside round privately because the valuations are higher. Does the correction not just hit the private companies . How much do you think theres a correlation between Silicon Valley valuations in the public space and private space . Theres a correlation as the private Company Valuations come down they have been putting pressure on the public Company Valuations because you can start to justify those. The whole thing will come down. The question is is it 5 or 35 . Thats a question well find out. You have your finger on the pulse of the cloud. Joe is always talking about the cloud. He loves the cloud. He lives in the cloud. I do live in the cloud. He does live in the clouds. In some way. Help us with this when you think of the biggest players, theres a whole sort of game going on between whether its amazon or ibm or who do you think right now is sort of winning the cloud game. Were in a transition from the old guard to the new guard in terms of cloud so youre seeing the amazons and people coming in with what i call ip light or property light models so youll see those companies win. That doesnt mean theres not a room for ibm so i think what hes doing with analytics and saying this bottom level of technology is comod tiezing that doesnt matter for ibm so lets do big data solving big problems like traffic in new jersey. Those are actually valid Business Models and something that a company like ibm can support. The issue you have is an old part of your business that youre trying to replace with new ones. You walked into this organization and said it was completely disorganized by the culture is a little bit more disorganized than you were used to. I came in thinking this was chaos. I learned its a different way to run a business where you basically say im willing to live with a lot and give out a lot of control to my people and then you have to kind of build around that context purpose and make the right decisions going forward. Have you read about whos the fellow that just announced. Tony shea. That got rid of all managers. I disagree with that. Its like saying let me have a brain that doesnt have synapses. You to have connective tissue to make things work. For me they get a bad wrap for a valid reason and Traditional Organization that controls information flow and now when you have a world where broadband information that goes away but that doesnt mean theres not a role for people to basically make connections to provide context to decide how much someone should ultimately have to build an organization. So you need people to do that. So its a differ role but i cant imagine not having that role. Its like neuros firing. I dont understand how that works and maybe he has something new but certainly that wouldnt work at red hat. Something you learned by giving up some of this control you get something in return. Thats the big part that you learn is most people want to do the right thing and if you flip your mind set around to im here to drive performance to im here to create an environment where the best people want to do their best work people will do Amazing Things and it sounds like a small shift in mind set for a leader but its dramatically different. Who was the ceo at delta . Jerry. Yeah new guy is good. Yeah. Very good. Yeah. All right. Thank you for coming in. Happy to be here. Congratulations. The book is called the open organization. Coming up, the irs says that thieves stole Tax Information from about 100,000 filers. Those details next. First, though its crunch time in the nhl playoffs. The rangers i saw the game on sunday, they couldnt have bought a goal for all the money in the world. Scored 7 last night beaten the lightning 73 in tampa. New york now 40 and facing elimination this year. They did well last year with that too. Friday, game 7. Friday back here at Madison Square garden. Automotive innovation starts. Right here. With a control pad that can read your handwriting, a widescreen multimedia center, and a headup display for enhanced driver focus. All inside a redesigned cabin of unrivaled style and comfort. The 2015 cclass. At the very touchpoint of performance and innovation. In the us, three in ten College Students drop out. But how can you spot whos at risk . The one who lives far from campus . The one who works the night shift . The one with new responsibilities . One thing cant tell you, but the right combination can. Universities are using ibm analytics to understand pressures in and out of the classroom some expect to cut dropout rates by twentyfive percent. Ibm analytics is working to make education smarter every day. Another developing story this morning, the irs says that tax return information for about 100,000, 100,000 u. S. Taxpayers were illegally accessed by cyber criminals over the past four months. It was from february to may and attackers tried to gain access to information 200,000 times through the get transcript online application. They called up information from previous returns. About half of the attempts were successful. What do you do . Get Social Security number . Social security number. How much money they make. The problem is theyre concerned that they are compiling all of this information so that they can go there was a small number of returns put in this time, bogus claims where they got about 50 million back but they are concerned that they are compiling all of this information and it could be used to get your refund next year or the year after and one of the experts they talked to said this is five years of information and hacking coming home to roost because this was not just a simple situation where they pulled the information. They had to go through and answer questions like what was your high school mascot. They knew all kinds of information to be able to get into this and theyre pulling things off facebook. For years we hear about the hacking attacks and everyone says Nothing Happened but they have been amassing this data base to go in and do this stuff. Its another reason to abollish the irs. There has been i talk about the bears because there was a bear at my house. Someone that lived in my house 34 years ago used to have a bear in the yard at this time of the year sometimes. So it happens. Bears are so cool and so smart. But this bear i see thiez thingese things. We didnt take enough of it. Look at it here because it didnt take the top part of the shot. Way up here if you take the shot because you cant see it take it off because you didnt get the shot right. So take it off of here. Right here. Thats a nest up there. Thats a ravens nest. He saw that from the ground and then he got on the inside and walked all the way up climbed up to have some eggs for breakfast. And you can see the ravens didnt like it but next time youre outrunning a bear and say im going to climb this tree find someone, you only have to find one person slower than you. One person slower than you and outrun that person and then youll be fine but how smart is this smarter than the average bear. Yes yogi. How did he even see that up there. To see it from the ground. Smell it sf . Maybe he did. Theyre around. You see dogs here. I see dogs occasionally. And then we have a fox around a lot. A little fox. Yeah. But bears are interesting. When we come back were going to talk about speaking of wild crazy were going to be talking about Elizabeth Warren headlining a major tech gallery. What she said at the code conference that has washington and wall street buzzing this morning. But first check out the dollar. Squawk box returns in just a moment. Hi, im Henry Winkler and im here to tell homeowners that are sixtytwo and older about a great way to live a better retirement. 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We need boldness in our leadership. We need lots of people who will get out there and talk about it shall. Including people that disagree with you . Absolutely. Look thats how you get better. You listen to people who dont agree with you. That was senator Elizabeth Warren giving a keynote address at the code conference last night. John joins us from washington to talk about that and more. There were a couple of other interesting things she said specifically about what she called the 1099 work place. So many people now working part time and she said that the code is being misused which suggested to me that maybe her next target is going to be the uberization and employment and what that means and going after companies were allowing people to work part time in what she says are full time jobs. Well one of the things that democrats and democratic economic philosophy is trying to adjust to is shifts in the economy that have reduced the presence of full time work forces with big benefits so how do you adopt if youre a democrat and you believe that people need health care and pensions and work of protections, how do you adapt your approach to those issues and republicans are on the other side resisting and looking for less regulation and making the argument that thats how you get more ubers. What kind of influence do you think shes going to do you expect her to go after this issue in a major way . Do you think the next sort of battle for her is going to be business and these quote, unquote, 1099 workers . No. She is pretty squarely focused on issue of income inequality and expresses that in part through approaches to a finance driven economy and i think that the whole spectrum of issues whether its minimum wage of worker benefits shes going to push. What can she get done . She is a major force within the democratic party. Shes not running for president which on the one hand she can put pressure on Hillary Clinton and try to influence where she goes but shes not running herself and ultimately hilary is going to make her own decisions. She has to figure out where she spends her capital and how much influence she can have with it. What do you attribute the obsession have you ever seen a first term senator garner so much Media Attention . I guess i just answered how it happens. I guess its Media Attention. Does it make sense to you. Its surprising in some ways. Not really now that i think about it. Its Media Attention. I dont know if the average person on the street i dont want to hear every waking thought from he lizElizabeth Warren. I heard a lot of it when she was an academic at harvard. Its partly Media Attention but the media tension landed on her because were near the end of a twoterm democratic presidency at a moment when obama is on the way out and a lot of liberals are antsy about when is our moment again. They had their moment in 2009 and 2010. They had numbers in congress and now they dont and theyre trying to figure out how to push forward and they have Hillary Clinton thats an appealing figure on many levels because of her experience and her, the fact that she leads in the poles and has a relationship youationputation. But you have a lot of people that want to push and Elizabeth Warren is the vehicle for that pushing. Yeah. They got a lot done. Did you see that right now the court system Judicial Branch deciding on whether obamacare stays in the current form. Immigration, big news on the Appeals Court that was supposed to throw out. That was an outlier decision. Climate change. Theres four or five things that could all be reversed. And joe, thats a symptom of what we were talking about. Because the president has been in the congress he is looking at executive action and trying to sustain a democratic agenda that way but Everybody Knows its fragile and subject to what courts do on climate and immigration and health care and thats why you have the he liz Elizabeth Warren faction looking at how can we cement something. The media is obsessed with her but in truth she had impact in washington for better or worse. I was going to bring up a story but we wont do it now because we have to go. It was going to be an undersecretary but the idea that a first termer can actually knock somebody like that effectively out of their job, theres a big debate going on about who is going to be on the sec. He ended up at treasury anyway though. He did. They snuck him in without a vote. Democratic voter at the fcc. Were trying to get the president s attention on ramadi. So we got climate change. Thats in the post today. Maybe if we can get his attention. Climate change headed for ramadi. I dont know. Anyway, that was an editorial in the post. Not here. I was going to say. Anyway, john thank you. When we come back this morning japan stocks trading at the highest levels weve seen in 15 years but the nikkei is still more than 18,000 points below the all time peak which was hit in 1989. Well ask if now is the time to send your money to japan. That conversation is next right here on squawk box. The design evolves the engineering advances. But the passion to drive a mercedesbenz is something that is common. To every generation of enthusiast. The 2015 dream machines, from mercedesbenz. Todays icons. Tomorrows legends. Visit the dream machine event today for up to 3,500 towards purchase. Time upon a once people approached problems the way same. Always start at the starting. And questions the same asking. But that only resulted in improvements small. So weve got some ideas new. Garbage can create energy. Light can talk. Countries can run on jet engine technology. When you look at problems in ways different you new solutions find. The nikkei climbing to a 15year high. The hang seng and shanghai have been rallying to sevenyear highs, in large part riding the strong dollar. Also worth noting chinese stocks could start becoming a bigger part of your portfolio soon. Here is the chief strategist at silver crest asset management. How . How are they going to become bigger . You mean chinese stocks a bigger part of the portfolio . Do you want me to read it again . Well, the issue is theres an argument out there that because china is moving towards a more convertible currency then msci and other indices will adopt shares as part of their index and people will have to allocate more towards chinese stocks. I dont think that is correct but thats a view thats out there. Like it or not, it seems like its only natural, with the increasing influence on global markets, we should be probably more paying more attention to what happens in those markets and probably if theyre going to continue to go up whats shanghai up to a percent or something . But this view it jumps the gun on currency convertible. They have to give up control over the Exchange Rate or Interest Rates, and they dont seem inclined really to do either. In fact if they did have a fully convertible currency its not clear that the net inflows of capital from Foreign Investors would actually be larger than the net outflows from chinese investors out. What do you attribute that chart right there to . Its a total disconnect with the chinese economy. But whats one possibility is that youve got people disengaged. Chinese investors that have always been pouring their cash into the Property Market are now disengaged from the Property Market because its been down for over a year. They need somewhere else to put their cash. But this is exactly what im talking about in terms of the pressure for capital outflows from china, because people people in the u. S. Might be underweight china, but the chinese are underweight the rest of the world. So if you have a fully convertible currency and im not saying thats going to happen tomorrow but if you have a fully convertible currency you might see more money flow out of china than flow in. We had a big move in the s p obviously since the lows and they responded to qe and all the monetary stimulus here. Is it possible that in the last year shanghai and some of the asian markets are responding to their ease with Central Banks around the world . Thats the rationale a lot of people will give. When you get bad news out of china, the market goes up because everybody says we did that here for a while. But the thing is that china has had easing since 2008. In fact if you look chinas qe over the past several years has been the largest in the world. So they played that card. They played it over and over again over the past several years. The premier says its essential low played out. What china says is reform not more stimulus and hes right. The strong dollar why would you use that as a rationale for why shanghai is up 200 . I dont think its a rationale for shanghai, i think its a rationale for europe and for japan. But not for we dont know why shanghai is doing that then . I think its very disturbing actually. Really . Absolutely. I think its clearly in bubble territory. This is a replay of what happened in 2007 where the shanghai index more than doubled, actually tripled and then came down just as abruptly the next year. Look, it may go up further, but its being driven by momentum and this idea that somehow stimulus is going to come in and save the day and its ignoring whats really going on with the chinese economy. Thank you appreciate it. Youre going to enjoy this next segment, i think. This is like this is not winnebagos and andrew do not go together, i dont think, do they . Maybe you dont think of them hand in hand but theyre changing and going after millennials at this point. Hes not a millennial. Hes not. But theyre going after younger people. We are about to go on a squawk road trip this morning. We are actually inside a winnebago. Well talk to the ceo in just a little bit. Check this out. Can you see this . A little bit of a bathroom back here, a bed here. This is like the ultimate mobile office. We have a kitchen. Our kitchen is right here. You can call this a tesk ordesk or a table. This is it. Its called the travado. A hundred grand. Well talk about this and a lot more with the ceo of winnebago when squawk box returns in just a moment. Within a few city blocks. Working with ibm theyre combining micro weather forecasts with detailed data from local sensors. To predict where outages are likely to occur. And send crews exactly where theyre needed, when theyre needed. Ibm analytics from the internet of things is making energy smarter every day. You, my friend recognize when a trend has reached critical mass. Thats what a type e does. With e trades investing insights center, you can spot trends before they become trendy. vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Breaking overnight, the u. S. Justice department indicting top soccer officials, alleging a 24year scheme of bribery and racketeering. An update on the arrest in switzerland and indications for the world cup just ahead. Taxing america. Tax information for more than 100,000 households stolen from an irs website. We have the details. Earnings alert. Retileailer michael kors and tiffany reporting. Well bring that to you from wall street. The second hour of squawk box begins right now. Live from the beating heart of business, new york city. This is squawk box. Welcome back to squawk box. Were back from the winnebago. Im Andrew Ross Sorkin along with joe kernen and becky quick. The dow looks like its going to open higher actually everything is. Dow up about 51 points s p up a little over 5 points and the nasdaq looking like it would open about 12 points. Some breaking news overnight. The department of justice says that nine fifa officials and five Corporate Executives have been indicted in the United States for racketeering wire fraud and money laundering. At least seven of those officials have been arrested in zurich at the request of u. S. Authorities. Separately prosecutors in switzerland have opened criminal proceedings relating to the reward of the 2018 and 2022 world cups to russia and qatar. Swiss federal officials have seized electronic data and documents at fifas headquarters in zurich. Also ben bernanke says there is no risk of a hard landing for chinas economy. Speaking in south korea overnight, bernanke also said that he expected the u. S. Rate hike would be anticlimatic when it happens. He said when rate hikes again, it is good news because it means the u. S. Economy is strong. Also g7 finance ministers are meeting in dresden. Where was bernanky speaking . In south korea. Where . An open forum. Was it one of those 300,000 most people dont spend im thinking thats not the big money one. Big money ones are the private one. It was a private event but it was open to the press. All right, so thats probably not. Bill and hillary turned it down. Thats right. Larry bosse is here. Did you go barging into that winnebago . If the winnebagos are rocking, you dont come a knocking. I went right in there. I almost took a little bit of a rest on the bed. Theres a bed back there. I wondered how long was it . Would you have fit on that bed . Its more like a caught. Its kind of a baby bed. Its got a kayak on top. Its definitely a baby winnebago, could be a mobile office. Just do not go kayaking with me. I dont know if youve seen the recent news but we should not go kayaking. The dollar coming off its best oneday advance in two years yesterday and hitting a new eightyear high against the japanese yen this morning. Boris shlossberg is here. The original larry legend larry bird. I thought it was probably a good replacement. Former chairman and ceo of honeywell. So i was looking at this stuff today and i dont have a good feel for why the imf would decide that. Whats behind the scenes do you know . You know i dont really know. You talk about the that its not undervalued anymore. Yeah. We still think it is. No because i think your best prior made some good points about this. Theres no guarantee there will be capital inflow. China is kind of a storied past in terms of capital inflows. So i dont think it is undervalued in any serious shape or form. Its the dollar thats flying right now. Larry, while youre here the First Quarter results all about the dollar and there was a respite. The euro went back to 1. 14 and im going over there. I was like stop. I did, stop. Back to 1. 08 which is good. But 95 is the right level for me, i think. This is going to hurt us again, isnt it. It is. When youre in business youre hoping for a weak dollar because youre looking for exports. When youre a private citizen you look for a strong dollar because it makes you feel like youre a patriot. But for Business People the dollar is higher thats why i want the strong dollar, because im a patriot. Not because im going to europe. I know you better than that. You are a patriot but youre also eyeing where youre going to be. Is 95 on the horizon . Is 1 on the horizon . You know the currency market reminds me that about old line about hollywood. Nobody knows nothing at this point. Everything is just so muddy and cloudy. The fed clearly wants to raise rights but the question is whether they really can. Janet yellen lit a fuse under the dollar on friday by basically saying we think theres a rate cut coming i mean rate hike. That was a freudian slip. I dont think they have the data to stand behind that policy position just yet. I wonder if Charles Evans whos been saying its not time until 2016 maybe the one thats ultimately right, if you see that, youll see a lot of disappointment. The whole currency market now is basically prodollar antidollar trade. It doesnt matter what happens in europe with greece. The reason the euro went up is because of disappointment in the dollar. The reason its moving down is because yellen started to communicate the fact they might go at least maybe by september to a rate hike. It will be a huge sigh of relief when they finally get a rate hike under their belt. I wonder if the market breaks or something, theyll call that a tantrum and that will chicken out. If we get any weak data theyll chicken out and were in for forever. Remember, we had the same issue with qe when they tampered it down we were going to have all kinds of market reaction, Nothing Happened. I think a rate hike is way overplayed. I dont think it matters. If it goes up 25 or 50 basis points in june 25 is probably better than 50 you would do june . I would do june too. I think they waited too long. I think they may do september but i think they ought to do it in june. Thats what they want to do. The question is do they have the data to support it. The data has stalled bigtime. We have gdp this friday. It will be interesting to look and see. Their whole argument is its going to get better. Boris, wouldnt you say for the rest of the year youre going to see mixed economic news. One day youll see positive stuff, the next day youll see some disappointing stuff. I think were in a low growth environment for a long time so why not get on a more normal rate psych sglelcycle. The japanese have tried for years to get themselves onto a normalized Monetary Policy and look how hard its been for them. Everybody underestimates how hard it is to get out of the quick sand of qe and how hard it is for Monetary Policy officials to begin to normalize policy without consequences. Boris, youd say what the japanese did hasnt worked either whether they raised rates or not nobody has argued that its working. Its a question of how i think theyre going to perceive the situation. Obviously gdp, the one thing they want to see is just at least steady job growth steady wage growth. And if they can see that then i think you definitely do have september as a potential rate hike. But its not guaranteed. Thats why i think the market may be getting a little ahead of itself. Larry, when you you know i heard the bernanke comments and thought its not like he doesnt have a horse in the game. He wants a graceful exit. Hes hoping against all im sure that it matters a lot to him for his legacy that we extricate he left the extrication to his successor, so i dont know if id take anything he says really at face value. How about i dont see any issues. Did you remember when he was there was no housing bubble in 2010 . Is there any reason that he would know any better than us . He ought to know better than us, hes been subject to a lot more data than weve seen over the years. But i think he speculates like everybody else does now. I think his opinion is worth listening to. I wouldnt place a bet on it but nonetheless when he says things like he did yesterday about china, people listen. Maybe hes got a point. On the other hand, there may be other viewpoints as well. I wonder if theres middle ground. Hes either going to go down in history as someone that totally saved us and was early on easing because there was no demand and the rest of the world caught up with what we did and he saved us or if this ends badly, hes going to end up a goat. My guess, bernanke is a hero and will end up heres the question. Does he get credit if he saves us from the crisis but then overextended himself on the other end . Meaning we still have a bubble. A new bubble. A new bubble. Meaning you say to yourself it becomes this mixed picture. But theres no perfect solution. Thats the whole point. You take yourself out of a prior crisis by reinflating. But some people would argue that its the past two years. Some people think there should be a central bank and some think there shouldnt. People who think there should be no central bank should live in the 18th century. If you live in a modern mixed economy, it requires lots and lots of policy. I think he goes down as a hero. I do too. I think that that extension of no rate hike is going to be on yellen more than on him. Really . Shes been there long enough now. She had chances to change it. She was there for the underlying policy before that too. I think her policy guidance is pretty good. They didnt listen to her for the last five years. We were supposed to be at 3 ten times. Shes more transparent than the rest. Well see whether shes better than the rest. I said this earlier. Fed officials fancy themselves to be an anticipatory institution but theyre always reactive. Their function is to be cheerleaders for the u. S. Economy. Theyre always going to sound more confident than what the economy is because they want to create confidence to have economic transactions. So theyre always going to be more positive than negative in their communication. It would help if inflation was 2 . Is it . Yes. Thats a big thing. The market went a little crazy on the cpi data last week. I was shocked because i didnt think there was anything within there that suggests theres even pickup in any inflationary pressures. If woe do see a little bit of that rate hike definitely a done deal. Maybe you get euro at 1. 05. Im assuming 1. 05. I want less than that. Buy out paris. Start it off with parity when it was established. I know. Even if it goes to parity a croissant and an espresso will still be 30. Ridiculous. I dont want it to be 40. All right, thank you. Of course larry will be with us for the rest of the show. Coming up the squawk ceo call is in session. The ceo of winnebago is here and brought a model from the floor to look at. Well look at Quarterly Results from michael kors and tiffany. Well talk the effects of a strong dollar with a retail analyst. And then a major hack at the irs. We have the details on a breach that put millions of dollars in tax refunds at risk. Were back in just a moment. Nnovation starts. Right here. With a control pad that can read your handwriting, a widescreen multimedia center, and a headup display for enhanced driver focus. All inside a redesigned cabin of unrivaled style and comfort. The 2015 cclass. At the very touchpoint of performance and innovation. Welcome back to squawk box. Retailers out with Quarterly Results. Tiffany earnings and revenue topping estimates. A different story over at michael kors. Profit and sales falling short and its fullyear forecast below current consensus. Becky. Aaa is estimating that more than 30 million americans traveled more than 50 miles from their homes over the Holiday Weekend thanks in part to the lowest gas prices for memorial day weekend in over five years. Joining us right now this morning on why gas prices are affecting recreational Vehicle Business is randy potts, the chairman and ceo of winnebago industries. He brought this travado to take a look at. Andrew got a tour of the inside. It looks pretty nice. Randy, thanks for joining us this morning. Thank you for having me. I know youre in a quiet period right now, but tell us a little bit about lower gas prices, in general what that means for sales of rvs. Well it helps in many ways obviously. It lowers the cost of ownership. It lowers the cost of materials, it lowers the cost of freight, inbound, outbound its just a positive any way you look at it for our business. Interest rates are positive. Most dealers floor their inventories so financing is available and rational to them. Same thing at the retail level. All very good tailwinds. I always think of winnebagos and think of my parents buying one but youre going after a younger and younger audience at this point. In the particular case of the unit that were showing today, yeah, thats aimed either at a younger buyer, and thats why we decided to bring it today to a more urban environment, but theres also down sizers, people that retired, got in a big coach and they have just decided that they want to settle into something smaller and maybe only use it for weekends. A hundred grand is like thats what a porsche costs, a hundred grand. Thats a hundred grand, right . A little less than that. Whats a tesla . Its well over a hundred. So you can get that and go across and we actually have motor homes for less than that. This particular model happens to be that much but we do have some models between 60 and 70,000 msrp. Thats the kind randy quaid had, though. I know some people who had one and on some of the earlier models the gas gauge moved faster than the clock. What have you done in terms of fuel efficiency . Well we still make some of those models. You know its a very broad market, to a customer that is interested in buying a 400,000 motor home the price of fuel really isnt a factor. So i mean we go all the way to that range all the way down to a smaller coach, like were showing, that can get over 20 miles an hour. I think up to 24 in a diesel version of that. How big is the bed in that back of that . Can two people sleep in that . Yeah its a twoperson bed. In this particular case it folds up. Its not shown folded up but it folds up and the whole rear of the coach can be used for storage, more bicycles camping gear. Its a very utility oriented outdoors oriented how many people could you get in that thing . I think it seats four for driving. As far as spending the night its a twoperson coach. Maybe twoperson and a child. Like a volkswagen like teenagers . You could fit 40 or 50 people in it. What do you mean . Do you mean comfortably . You could have one sit on the toilet even in there. Yes, you could. Thats a nice way to ride. And probably sleep too there. Randy, how about the environmentalists, what do they say about these units . You know we really dont get any interaction with environmentalists. It is a relatively small industry. Its a very broad industry and its an outdoors oriented industry. I think for the most part people that use rvs are environmentally conscious in most ways. Yeah a vehicle that uses a lot of fuel to drive across the country isnt as environmentally friendly as other modes of transportation. But, you know they dont put on a lot of miles. I think typically we say a motorized rv owner puts on about 5,000 miles a year. Really. Yeah. They use them a lot just in luxury resorts. Everything in luxury resorts to state parks. And you can find luxury clean, beautiful places to park your rv for a couple of nights . Oh absolutely. That would be a great way to see the west. It really would. More of those are oriented in Southern California arizona, snowbird florida. A lot of snowbird traffic go to those kinds. But again its a very broad market. This happens to be a motor home. Theres a whole market thats a lot bigger in unit volume different customer. Randy, we want to thank you very much for coming in today. Thank you for having me. Thanks for bringing the travado too. If you leave that well use it. Well put a squawk sign on it and well just drive it around. Yeah, well go. As i understand this particular one happens to be sold already. Oh wow. You brought us a sold winnebago so you knew you couldnt leave it. This model is really in demand. Maybe cnbc bought it. What about that kayak. Why is the kayak on top . Were demonstrating theres a bicycle on the back a kayak on top so really orienting this one towards the outdoor enthusiast, the backpacker kind of crowd. Thanks, randy. My pleasure thank you. Coming up a potential sandwich ipo in the u. S. And a patriotic fast food chain in russia. Those stories next. Later, more on the theft of tax data through an irs website. Crazy. Welcome back. Sandwich chain jimmy johns is preparing for an ipo that could value the company at more than 2 billion. Thats according to a reuters report. Jimmy johns has around 2,000 locations, most of which are franchises. The company is owned by founder jimmy john leotode and private equity firm westin presidio. Id like more info. What do you get at a jim eemy johns, do you know . None around here. Ive not been to a jimmy johns. You put first names together billy bob, jimmy johns probably not in manhattan. Billy ray. Tennessee, alabama. What about you, youre in florida . Nothing in florida . Not that im aware of. What do they make . Suband Club Sandwiches and signature potato chips. Theyre gourmet sandwiches, they call them. Really . Is it a geographic . We should get some jimmy johns up here. Shake shack, ive been to shake shack, i like that. With my grandkids and loved it. All right. Russian president Vladimir Putin has backed the creation of a new chain of patriotic fast food restaurants to rival u. S. Brands there. Two russian film directors will reportedly receive 14 million to set up a chain called yedin doma which means lets eat at home. E funded under a government scheme that helps small and mediumsized businesses get bank loans. I dont know about that menu there either. I dont know. What is russian fast food what would you serve . Vodka. Thats what i was thinking. Theres like 25 jimmy johns in new york and new jersey. No, there arent. Ive never even seen them. Heres new york. Whats in new jersey . How quickly can we hoboken, lakewood. What about new york for andrew . New york . I think were no no thaepgs the state of new york. None in the city. When we come back this morning, well take a closer look at this mornings retail reports. Well talk to an analyst about Consumer Trends and the numbers from michael kors and tiffanys. Take a look at the u. S. Equity futures. They have been trending higher this morning after a down day yesterday for the markets. Right now the dow futures up by 53 points above fair value. S p futures up by 5 1 2, nasdaq up by 12. Its part adrenaline and part adventure. Its part geek and part chic. Its part relaxation and part exhilaration. Its part sports car and part suv. And the best part . The 2015 gla. Its 100 mercedesbenz. What if there were only one kind of dog . Then it would be easy to know everything about that one breed. But in fact, there are over three hundred breeds of dogs. Because no one can be an expert in every one. An app powered by ibm watson will help vets tap Specialized Knowledge in the cloud for every breed. And whatever else walks, flies or slithers through the door. Ibm watson is working to make medicine smarter every day. Welcome back to squawk box, everyone. Among our top stories, the u. S. Department of justice indicting nine fifa officials and five officials for racketeering, money laundering. Also Mortgage Applications here in the United States falling by 1. 6 in the last week. This is happening as Interest Rates rose. Well have more on the Real Estate Market coming up at 8 38 eastern time with the star of a es flipping boston. Amazon is hiring 6,000 workers for its distribution centers. The company has been opening locations across the country to speed up delivery times. The hr Software Maker seize billings below market consensus. Hormel is buying Applegate Farms for 775 million. It doesnt use gmo ingredients and feeds its animals a vegetarian diet. Hormel wont change the way they raise animals or produces meats. Why are you shaking your head over there . They make spam. Theyre going to go health conscious. They make spam. Applegate is likes a hybrid. I know but theyre going to change peoples impression of hormel . They make spam. You cant get lower than spam. Its mystery meat. They dont know what animals are in there, much less what part. Hormel is going to become pc. They make spam. Theyre trying to expand their business. Tiffany is buying zales. Didnt the ioc get in trouble once for the way they were doing yes. Theres huge money in picking cities . About 100 million in bribes. How can that be possible. But youre talking about 4 billion in revenue. So the guys that are in charge, theyre just bureaucrats and theyre getting approached by its unbelievable. We should also tell you back to hormel for just a second. I dont know where the segue was for that. But the company ceo will join jim cramer on mad money tonight. Shares of tivo getting a boost. Earnings and revenues beating the street. Cyber security provider fire eye planet issues 600 million in convertible debt and use a portion to fund their upcoming share purchase program. And Toll Brothers topping estimates. Revenue is a bit short but the company is raising its low end of its average selling price forecast for the full year as demand, it says strengthens. Mr. Hormel chili in a can too or beef stew in a can. Thats why would you have that. Because youre out in your winnebago. Or youre worried about the Zombie Apocalypse because that lasts forever, right . In a can. Its good eats right . If youre camping, it is good. Youve got to be camping for it to be good. The ceo of snapchat says they have 100 million daily active users. Speaking last night at the code conference, he addressed the companys future in a tshirt. That really matters. You know we need to ipo. We have a plan to do that. I obviously cant give you too much color there. How about a little what plan to ipo by . Again, i cant give you a color there. What does an ipo look like for you . You have revenues. An ipo looks like a lot of things but most importantly it looks like just another dot kind of in the growth of our business. You know we dont view that as like the end really. Thats just the beginning. I only wish he was in one of those im not going to say what theyre called but one of those, you know the sleeveless ones. Just go all the way. Just sit there like that and, you know just talk. Because he can, right . You do it because you can. Because hes worth hundreds of millions of dollars. Billions of dollars. Is he worth a billion already . Yeah probably. Just him . Just him. And that tshirt, i bet you, is 100. That was not your hanes variety. But it was a baggy vneck thing, right . Thats what the cool kids are wearing these days. What are they called . Snake people . What are we calling millennials . No there was an app that was designed. We saw it this morning, there was an app that was designed to call millennials snake people. You can change it in all your applications. It was written by a guy whos almost on the cusp of being a millennial who thinks the media is way too hard on these people. Instead of going out of your way of saying theyre lazy and slow well just make the change for you. It was done tongue in cheek. I like all those words. Anyway anyway, well have more from the code conference. Did you see how they did that . Yeah, they filmed itlipped it on you. Go ahead. Lets talk retail. Michael kors and tiffany out with Quarterly Results. Tiffany looked to be the winner of the morning meeting on the top and bottom lines. Earnings and revenue falling short on the other side for michael kors and the company cautioning its fullyear forecast will fall short of current consensus. The Senior Research analyst at crt also with us is cnbcs retail reporter courtney reagan. So tale of two cities. Ill go to you first on this. Sure. I think when you look at tiffany, much better rev you than expected. They beat in every geography with a nice uptick in europe. Luxurywise europe is on sale right now. So i think youre seeing a lot of tourist flows there. The u. S. Comp back in positive territory. I think a lot of investors were nervous what happened for holiday. They went from a doubledigit comp to a flat. Macys called it out. I think this is a good sign to give investors a little bit of confidence that the business is going in the right direction, Gross Margins are better. They maintained the year to keep a conservative look for the back half but good numbers. Michael kors on the other hand, not so much. Not so great. Im no analyst but last summer i looked at michael kors and said look, you cannot keep turning in these astronomical comps forever. Is that a new normal . Wall street will have to evaluate that. I wonder more michael kors if we want to call it a luxury brand, which i dont. I call it premium, not luxury. Every person has a michael kors bag and at some point you lose a little bit of the cool. Is it a michael kors specific problem or is there a larger issue in the premium segment relative to the luxury segment . I think the handbag space is a lot more crowded than it was ten years ago. Ten years ago coach creates the category. They have 35 operating margins. Competitors come in it becomes a little more challenge. I think a lot of this is kors specific. Margin is very high wholesale distribution very overdistributed in the u. S. I think 40 decline in the stock the last nine or 12 months has kind of been anticipating this event. This is a fashion story then . Yes. So the comps which used to be 25 , 30 12 months ago are now negative. So its a big, quick deceleration which is concerning in a fashion product. To the extent the tiffany story says something about this premium area what do you expect out of its competitors over the next two quarters . On the premium side on the luxury side . Yeah. I think youve seen a lot of the european Luxury Brands report already and they have reported okay results. Thats what you see from tiffany, on the surface its okay. Its better than what they guided to and thats a good thing. But less than last year. Yes. Comps, remember the japan comp down 25 . Theyre lapping the sales tax. That will normalize. Youre an amazon expert and we were talking about the 6 00 hour about this news that came out last night. With the distribution . Theyre going to hire 6,000 new employees and build out more of these factories not factories, but infrastructure in terms of warehouse. I now use amazon prime now in new york so i can get the thing within an hour or two. For the eligible products which sometimes are hard to determine. But the question is long term for them to build out this infrastructure the way they are, i assume theyre going to have to charge a premium for mow to get it within a day relative to the guy whos willing to get it on day two. You would think. At some point theyre probably going to have to and to give the customers that elastic. And consider how close you are to the distribution center. I think the cost models could get a little bit more complicated depending on where you are, what you order, the combination of goods and how fast you want it. Amazon has been willing to eat up that cost for a long time but how much longer can they do that especially as competition gets faster and folks like macys and walmart are using their distribution points. 90 of all of americans are within just a couple of miles of a target and a walmart. But ali baba their model is the opposite. They dont want to own all these warehouses, they want to be the middle man in all of this. Whats the Better Business . Thats an interesting question. I remember eight years ago when a lot of these businesses started to roll out their ecommerce in a bigger way and all of us analysts are saying higher margin theres no rent and no fixed costs. What were learning today is because of price comparisons and people looking for the better deal and the fact that theres shipping and returns. Actually not nearly as profitable as we thought it would be for the retailers at this point. I think thats a pretty big thing to keep in mind when you think about how these businesses are rolling out ecom and driving revenue but at a less profitability. Why do you think that amazon will raise the price . They have had 50 chances to raise the price down through the years. Their stock doesnt get hurt by virtue of their lacking profitability. I dont see that they change this Business Model because of this invags. I guess some of it does depend how impatient shareholders get and if they want to see that profitability turn around at some point they might ask for it. Youre right, right now they havent. If i look at amazon i would be so frustrated every time they report and they still just get rewarded. Although the difference has been jeff bezos said that up from the beginning. He never told anybody any different. If youre a shareholder, youre probably more patient because it wasnt a bait and switch. Weve got to leave the conversation there. Ike, thank you for coming in. Courtney, thank you. Dayton right . Jimmy johns and dayton. There are 24 jimmy johns in cincinnati. Theyre very big at miami university. We love jimmy johns. Oxford. There was one there. They were a hot spot up there. I found one where i can go. Im going to try them. Highend for college. He called you an amazon expert and i took that wrong. Shes very petite. Shes not an am do you think about what you say . Do you know that you can get Skyline Chili in a cannon amazon . I plead guilty. I had some. Not dinty moore chili. Do you know what else is on the miami campus . A hormel shop. There you go. Coming up i love spam, im kidding. They have sent us stuff over the years and i love hormel. Just the whole gmo thing, its like dont take any pharmaceuticals because theyre all all the new biotech stuff is gmo. Its like sausage and stuff. And Chicken Nuggets that are all white meat. A major hack at the irs. Identity thieves stealing Tax Information for 100,000 households. Eamon javers has those details, next. The network that monitors her health. The secure Cloud Services that store her genetic data the servers and software on a mission to find the perfect match. And the mom who gets to hear her daughters heart beat once again. Were helping organizations transform the way they work so they can transform the lives of the people they serve. Welcome back. A major breach at the irs. An Identity Theft of Tax Information for 100,000 households. Eamon javers joins us with more. The biggest questions are what does this mean and what do people do . Its a little scary, becky. Its 200,000 households that were attempted to get into by the criminals here in this case. The irs says likely criminal gangs from around the world possibly that were involved in this. Only 100,000 of those attempts though, were successful. The irs said that what was fascinating in this particular case unlike other hacks that we have seen these people actually had a lot of information on the accounts that they were trying to get into already. They had things like names, Social Security numbers and other information and they were able to use that to pose as if they were the taxpayers themselves and get copies of those taxpayers returns. One of the pieces of information that i found stunning that they had was in some cases the i. D. Questions. What was your High School Team mascot. They said that they apparently already had that level of detail, possibly from scraping social media, things like facebook and other places where people put so much of their information out there on the web for all to see. Now what we might be seeing is that information plus the profits from previous hacks all coming together in a massive criminal database that criminals are using to get access to other things like they did here at the irs. The big question, though is what can people do about that. The answer is not much. We all interface with the irs, becky, so the question is will the irs take steps to make sure that this doesnt happen again. I was trying to think about it this morning. We have things like pin numbers to prove that its you coming in. Was that some of the information that was compromised . I dont know about pin numbers specifically but a lot of what they had was those second tier questions, when you have those security questions when youre asked to verify that it is you. Mothers maiden name High School Team mascot, things like that. Those are the kinds of things that the hackers already had before they got into the system. So this is somebody that is sitting down and combing through lots and lots of information. This is not some Master Program that you can easily get away from. Well it may be both actually. It may be a Master Program that is going through lots and lots of information. They said that they think this might have been automated. Even though theres a lot of information here a lot of research on each person they think that it might have been an Automated Program that was set up to scrape all that into a database and then input it into the irs site until they got a hit. I think the irs has been reluctant to give every taxpayer a pin number but i would think that Something Like this certainly raises concerns. I guess the question is if you are somebody who was put in this position a, how do you find out if you were somebody who was compromised, and, b, what does the irs do in return. Weve come down fairly hard on corporations that have had data breaches like this but this sounds like its pretty extreme as well. It is extreme. Its only 100,000 people who were affected here so thats relatively small but because its the government, because its the irs tax return information, we all feel a little more creepy about that than we do about some of these others. What the irs says is they have reached out to the 100,000 people who were impacted also to the Broader Group of 200,000 whose information was attempted to be accessed to tell them what has happened here. They said theyre going to offer Credit Monitoring Services to all those people to make sure that Nothing Happened here. Ultimately, the fraud here could be on the u. S. Government not necessarily on the taxpayers. What irs commissioner said yesterday was that he thinks theyre going to submit fraudulent tax returns going into the next year to try to get that refund money redirected to other accounts. He said theyll be able to do that by getting last years return so they can make the fraudulent return for you look a lot like your previous return because now they know your income, how many deductions you take and a lot about what you filed last year so they can make it similar and that way it can get through the irs automated filters that flag anything too far amiss from what you did in the previous years. At least they can try to put up safeguards between now and then. As you mentioned, it may be the government that picks that up but that is taxpayer money at large too. Were all paying for it. Eamon, thank you very much. You bet. Coming up when we return this mornings big movers. Plus our guest host will talk trade and politics. Were back in just a moment. Its part adrenaline and part adventure. Its part geek and part chic. Its part relaxation and part exhilaration. Its part sports car and part suv. And the best part . The 2015 gla. Its 100 mercedesbenz. Welcome back. Lets take a look at stocks to watch. Reynolds american winning government approval to buy lorilar. And movado was impacted by currency fluctuations but said it was able to overcome that as well as a weaker retail environment. That stock is up just slightly. Lets get back to our guest host, larry bossidy, former honeywell ceo. We teased that you have some political viewpoints. I dont know which ones we were referring to. Have you got anything you want to get off your chest in terms of where we are right now . Well no not really. But i do think that this republican primary shaping up to be one thats going to be very controversial. As you know, the first debates, theyre deciding theyll only admit ten how would you do that . They have going to do it on the basis of polling. What if Carly Fiorina is not in . That will bow one of the problems theyll have to deal with. My guess is theyll then have 11 because i dont think theyll exclude a woman on the first debate. The idea is a good one in the sense you dont want 19 people in a debate. You cant accomplish anything good in that. My guess is at the end of the day theyll have a couple that will show the front runners perhaps in one debate and then those who are excluded in the second debate but it looks like its going to be very awkward to me and im not sure its going to be very successful. Do you foresee the candidates toning down the divisive attack mode that we saw last time that hurt romney badly . They gave the democrats all their talking points. Ive been told that they have been asked to do that and i think theyll start out that way. I think the closer it gets to iowa and some of the early primary states that that will change somewhat and the rhetoric if youre not gaining traction, youve got nothing to lose and you are going to do what you need to do. I think it will intensify as we get closer to the election. I dont know what a better system is. I dont either. You want everyone to have a shot at it you dont want to pick you dont want to anoint who the people would be early and say this is it. But then you have certain people that seem to be there every year. Whens the last time Rick Santorum was in the senate . The last time he was a former he had lost right . Whens the last time pataki was governor . I think thats going to be tough. I do think on the subject of trade, it puzzles me as to why theres so much controversy. I know the current discussions about the tpa, the authority the president gets and i think in this case he needs it because i think the transpacific partnership, so called tpp, is a good thing with 11 nations. If you look at the trading results in the last century even we do better with those countries that we have trade agreements with. You take chile, up 400 mexico up 375 canada 111 . So i think these things are good for the American People. I think theyre good for the American People overall, but i think there are some corners that get left behind in a process like this. I was thinking about it yesterday because of a story in the New York Times over the weekend i think about how middle class jobs are really disappearing and it used to be the Union Workers were the ones who had the solid middle class jobs and then it was government workers. Right. And that over time both of those have eroded and we havent necessarily replaced it. No i think thats right, beck, but remember the world was globalized. That was going to happen anyway. But youre going to have politicians who are representing those constituents. Youve got unions who represent those constituents, but those things are going to happen anyway. You can have all kind of thoughts on whether or not nafta was successful or not, depending on who you talk to. But the fact of the matter was we were losing jobs to mexico long before nafta. But then what do you do about it . Warren buffett had that oped in the journal on the earned income tax credit on friday. He basically said what you said. Its going to become a winnertakeall society no matter what. The question is what do you want to do about it in terms of his argument was you have to subsidize everybody else then. Youve got to have better education, everybody agrees with that. Youve got to continue to use the earned income tax credit. He would make it bigger than it is now. I think thats sensible. But you might as well get your best trading partners in line because these things are going to occur and you want to be in as good a position as you can. Warren is saying dont do the minimum wage so you know the democrats, the minute you say Something Like that but there are other people that say the minimum wage should be zero and there would be more jobs. If it was totally market dictated dictated, it would make more sense. One thing that the trade issue does show though is how split the democrats are. They have the same problem the republicans have. The far right and far left of each party is so far from each other and the center is and the union does have influence here obviously. They dont like free trade agreements. And the republicans, there can be a fight. With hillary i dont know why she has to move anywhere. If shes going to be in she should stand her ground and stay middle. She hasnt said much about trade. No, but shes going to topple the 1 . All she talks about shes going to be more careful with the 1 given her earnings. Theyre using different language now, as you know. After the last 20 years of the clintons do you think anything sticks . Nothing sticks. I could see im not i dont know which crimes to bring up, but i can see anything where people go oh yeah but thats a clinton. Its like theres nothing. I dont think theres anything that nip could ever say that could change a true hillary supporters mind. When we come back well get the buzz from the code conference. The ceo of snapchat on the tech bubble. Plus why senator Elizabeth Warren is mad as hell. Stick around, well be right back. Time upon a once people approached problems the way same. Always start at the starting. And questions the same asking. But that only resulted in improvements small. So weve got some ideas new. Garbage can create energy. Light can talk. Countries can run on jet engine technology. When you look at problems in ways different you new solutions find. When youre not confident your companys data is secure the possibility of a breach can quickly become the only thing you think about. Thats where at t can help. We monitor Network Traffic worldwide, so we can see things others cant. Mitigating risks across your business. Leaving you free to focus on what matters most. Markets looking to bounce back after a rough start to a short week of trading. Should investors worry that were in for a long volatile summer. Larry cantor is here to tell us why we should keep calm and carry on. The ceo of snapchat warning of an asset bubble. He says a correction is coming. We dont know when but its something we factor in. Julia brings us all the technology buzz from this years code conference. The flipping frenzy is back. A look at whos reaping the rewards and which markets are booming right now. The host of flipping boston dave seymour joins us with the dos and donts this time around anz the 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 here on cnbc first in business worldwide. Im joe kernen along with Andrew Ross Sorkin and becky quick. The futures at this hour look pretty solid for most of the session, rebounding from what was ugly yesterday but it was down over 200 for a while and rallied to close down about 190 points. Indicated up 55 today on the dow. Up about 6 on the s p and the nasdaq indicated up about 13. In europe what are they doing, is it compared to yesterday or today . Looks like its more akin to today. But fractional moves. France and the ftse up half a percent. Some day were going to have a resolution in that matter. 1. 08 on the euro 1. 23 on the yen and 1. 53 on the pound. And the 10year, the yield has been definitely under control as has the german which is back down around 50 basis points last time. It was threatening at 70. 70 basis points. The meteoric rise up to which would strangle any economy, 70 basis points. So back down. Same with us at 2. 14. So that was what caused some of the angst. I think there was a time when thats all we need is where we have 0. 2 gdp growth and suddenly rates start going up in europe. Its like oh my god. Then we had the other thing. We thought we had 3 growth and 0 Interest Rates. Weve got some other stories to talk about. Investors will be talking about today as well. Heres whats going on this morning. Mortgage applications falling by 1. 6 in the latest week. This as Interest Rates rose. Also jack lew says he fears a greek accident could happen. Speaking at the London School of economics today, lew warns the country and its eurozone creditors need to double down their efforts to avoid missing the next debt payment deadline. As weve discussed, you can make that deadline but a month in it doubles and triples. Its sort of a cascading effect. Also oil in focus today. Crude prices bouncing back a bit after steep drops yesterday. Analysts there looking for crude stocks to fall for a fourth straight week. The data from the American Petroleum institute will be released at 4 30 eastern time this afternoon. A lot of folks will be watching that. We also have media news. Vox media is acquireing another company. Cnbc and comcast had a stake have a stake in recote so there you have it. Lets tell you about other corporate news. Express scripts is looking for deals with Drug Companies that would set pricing for some cancer treatments based on how well those treatments work. This is a front page story in the wall street journal. It says this move comes as the prices of some medications soar and some cost over 100,000. This is the reaction though. Now some insurers and prescription benefit managers are pushing back saying they should pay less when those drugs dont work well in certain patients. Gentlemen, this is where we get into a very tricky situation. The pharmacy benefits managers are the Insurance Companies of 20 30 years ago when they are really trying to push back on these high costs coming in and you can understand the need to do just that. However, in situations like this when they Start Talking about paying based on how well a drug works in a certain patient, that seems to me like it starts to interfere in the doctorpatient relationship. Lets say that it extends life by six months for 100,000. You tell the person whose daughter is getting married in three months you tell them by the way, it works different on every patient. And also with cancer just showing any anything that significantly shows efficacy is progress. You stand on the shoulders of those cases that have come before. Theres going to be some push back. I think its ridiculous. Not only are you interfering with the doctorpatient relationship, you are also talking about starting the bureaucratic red tape where youre not going to get approval. Youre going to die while awaiting approval. This is not a free market situation. I dont get to decide who my pharmacy benefits manager is. But 10 of the patients use 90 of the money. But again one of the one of the aspects of this that i think is gone unreported is this may just be a way to warn the Drug Companies to price their product a little differently. In other words, if they think if they think this is on the offing, theyre going to be more careful as to what the initial price is. I dont think at the end of the day its going to be anything more than that. I think youre probably right, larry, but this is not the first move express scripts has made. This is one of three or four moves they have made over the last year. Dr. Steve miller who we have had on the program to talk about some of these changes, is quoted in this article. Youre right this is the battle lines being drawn. You cant defend some of the high prices. However, the price of the drug itself doesnt reflect all of the research that went into those drugs too. Youre right. And you know this is merck. I do. This is a debate that will have to get resolved but my guess is this wont happen as its reported this morning. But Drug Companies will be more careful in terms of how they set initial prices. And when youre the big complaint is that obamacare didnt allow medicare to negotiate prices as a huge so the pharmacy benefit in a free market the pbms at leasting agate a lot of cash and can put some pressure on the Drug Companies if it needs to be. What worries me about reading Something Like this is its the patients who are stuck in the middle while this debate rages on who cant get the care that they need. Youre right. And thats the concern. Lets talk a little bit more about the stock market today. U. S. Stocks are set to bounce back this morning. We are joined right now on set by larry cantor the head of research at barclays. Thanks for being here this morning. Pleasure. What do you think about where things stand right now . The steady march of the market but not necessarily posting gains like weve been used to the last several years. Right, and even Holding Steady after the gains weve seen the last couple of years is pretty impressive. If you look at the global backdrop, it still looks to me pretty friendly to all financial assets. If you think about whats happened since the recovery started, whether youre on fixed income or stocks youve done really well. I think a lot of this though we still have a pretty modest recovery. Its not too strong for sure. Inflation is super low and youve got Central Banks still with their foot firmly on the accelerator. Yeah the fed is done with qe but the ecbe just started theirs. You have another 2 trillion of money coming in and its been a rising tide. Just consolidating and not going down is pretty good. Just treading water with all this easy money and stimulus you could look at it the other way, youre barely able to keep it where it is because of all this stimulus and once its gone, it goes down. You can look at that half empty or half full. Right. Thats fair enough. But again, like for example, just the yield on dividends here, if you look at the s p 500 is a little better than the 10year bond so you know investing in dividend stocks and especially stocks where you see Dividend Growth still looks pretty good. If the stock goes down 15 , the 3 dividend is not yeah if it goes down but were talking about Holding Steady okay. Tell me something, there are three potential outliers here gross, russia and china. Yep. Which is the most likely to happen and what impact will it have . Well greece is the big worry right now. I think the history of European Crisis since we started in 2010 has been at the last minute they come up with something and were okay. So the market i think is implicitly pricing that were going to be okay. And im not so sure im a little more nervous about it than that. I think the next big payment is june 5th. I think they will do something to get through that but it will be more kicking the can down the road. Youve got a pretty intractable situation. Youve got a new government thats been elected. You can understand with unemployment at 25 , they have lost a quarter of gdp. These are depression figures that that would happen. Dont they need to devalue, get out of the euro. I will make an extra trip on my europe they go down in half on the drachma and well visit, well go if its on sale half price. Is there any other way out . Youre making the right point in the sense that they cant pay this debt. Devalue is the only way to do it. Heres the problem for europe. You cant in a sense this system was not designed for any country to exit. In the short term its probably okay but the ecb will probably buy the debt. But in the longer term once you introduce the possibility of whos going to put money in italian banks. This is the problem that the euro system is facing. On the other hand, if they give in to greece that provides a signal to these other countries and opens the door for more radical governments to come in. This is a real issue here. But at the end of the day the greeks win here dont you think . There will be a deal. I mean the risk of getting out of the euro for the other euro participants is greater, i think, than if the greeks just decide to abandon europe. I think youre right. I dont think it will ending up in an exit. Heres the problem. I do sense that the strategy of the european officials and imf may be moving toward lets maybe force a crisis in the short term here in the hopes they get a more moderate government in. In other words you know if things collapse in greece where lets say there is a default on one of these official loans, the banks go under and so forth, governments dont survive that. This kind of thing of a total collapse where you have capital controls and all the rest. Now, if that ends up being the strategy hey, we cant deal with this government, were going to force it out, then things get a lot worse before they get better and this would have big effects on global markets. And do you lose control once you let its a risky strategy. So i think we could be in for theres your main case if you ask whats the main risk for a big correction. We havent seen a correction in a few years. Thats your risk for 10 down or Something Like that. I think youre right, it gets solved and you probably ought to buy if it does go down 10 . Larry, thank you so much for coming in. Its great to see you. Same here thanks. Coming up tech heavyweights and aspiring entrepreneurs gathering to talk innovation issues and deal making. Well head to the code conference where the ceo of snap snapchat kicked things off and warned of a correction. Later house flippers seeing record returns. A special report on which markets are hot, which are not. Plus with the host of flipping boston, dave seymour will join us with his take on the numbers. Squawk box will be right back. Here at td ameritrade, they love innovating. And apparently, they also love stickers. Whats up with these things, victor . We decided to give ourselves stickers for each feature we release. We read about 10,000 suggestions a week to create features that as traders wed want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. Who reads all those . He does. For all the confidence you need. Td ameritrade. You got this. The annual code conference kicked off last night in california with evan speegle, the ceo of snapchat took the stage. Cnbcs julia borsten is there in california. I thought we were going to run a clip. Its nice to see you, julia. Reporter good to see you too, andrew. With snapchat valued north of 15 million, evan says there is a bubble and he blames the fed. Its the result of easy money policy effectively. When you have near zero Interest Rates or negative rates in some countries and the government has printed a lot of money, you know, i think that people are making riskier investments. And i think there will be a correction. Its a question of when. I think everyone sort of has thoughts about that. We dont know when but its definitely something that we factor into our plans as we think about the growth of our business. Reporter now, when it comes to the growth of the business, speeg spiegel says theres plenty of plans to add ads. As snapchat nears 100 million daily users, he says going public is a must. That really matters. You know we need to ipo. We have a plan to do that. I obviously cant give you too much color there. How about a little what plan to ipo by . Cant give you color there. What do you what does an ipo look like for you . You have revenues, you have what is the what is the an ipo looks like a lot of things but most importantly it looks like just another dot kind of in the growth of our business. You know we dont view that as like the end, really thats just the beginning. Right. Reporter spiegel turned down a 3 billion offer from facebook back in 2013 says he is not interested in selling, saying its more fun to stay independent. Andrew ill be here all day and back in squawk alley with spotifys ceo, daniel ek and mike mccue. Coming up seven fifa officials arrested over corruption charges. Those details are next. Then later, hackers hitting the irs. Should taxpayers be concerned . Plus new data on how much breaches like this cost. Squawk box will be right back. The pursuit of healthier. It begins from the second were born. After all, healthier doesnt happen all by itself. It needs to be earned. Every day. Using wellness to keep away illness. And believing that a single life can be made better by millions of others. Healthier takes somebody who can power modern health care. By connecting every single part of it. For as the world keeps on searching for healthier. Were here to make healthier happen. Optum. Healthier is here. Welcome back to squawk box. Bill gross just out with his latest investment outlook. Among the highlights he says his famous or maybe infamous short of a lifetime trade on the german bund market was in his words well timed but not necessarily well executed. He suggests it was a prime example of opportunities that came from the excesses of global Monetary Policy. He argues Central Banks and their respective economies seem to be on different time cycles and therefore, he says quote, there will remain significant disparities that potentially can be successfully arbitraged. He is underperforming his peers. And a developing story this morning, fifa getting a red card from law enforcement. Seven highranking International Soccer officials have been arrested as part of a u. S. Investigation into corruption of fifas governing body. More arrests are expected. Nine fifa officials and five Corporate Executives have been indicted by the u. S. For racketeering, wire fraud and money laundering. Fifa officials have been under investigation boy the fbi for several years. Questions are swirling and have swirled over whether top officials were paid large bribes to select world cup host countries. Seems like kind of stickling here, if someone wants to show some gratitude for a city being considered. To the tune of hundreds of millions of dollars . I dont know the details. But why else would you pick qatar for the world cup . You know jeff when we talked to him earlier pointed out it was 45degree heat there. He was talking in celsius. Thats Something Like 114 degrees or something. I dont eat out much andrew. Jimmy johns once in a while ou grease the guy at jimmy johns . It used to be to get a table. But all i want i ask for a table near a waiter is all i ask for. You never heard of henne youngman . You told me. Thats sad. I wouldnt want to go throughout life without take my wife please. So far its been a good life. Do you remember Hennie Youngman . I do. Sort of a slapstick comedian. Slapstick . Coming up when we return well talk about the return of the flip. Thats home flippers locking record returns. Well talk to the host of flipping boston, dave seymour. Take a look at u. S. Equity futures, happily in the green. Were back in a moment. Welcome back to squawk box. Heres whats making headlines this morning. A new study showing s p 500 Companies Cutting back on Capital Spending over the past decade and increasing the amount of money that was funneled back to shareholders. Particularly true of Companies Targeted by activist investors. No surprise there, i dont think. Weve seen a lot of that. Also theater goers bought 1. 4 billion in broadway theater tickets for the just ended fiscal year. Thats a record. Attendance records were also broken with more than 13 Million People attending shows. And then theres the sandwich chain weve been talking about this morning. Jimmy johns trying to go public. Thats according to reuters. The company is said to be in the process of interviewing investment banks for a possible ipo later this year. Lets talk about some stocks to watch this morning. Browns shoe beating the street and raising its forecast. The company says it was able to move past the negative effects of a late start to spring as well as west coast port delays. The stock at this point is unchanged. Dsw topping estimates. Results were led by a jump in athletic footwear sales and that stock is up just over 4 . Check out shares of chicos. Earnings matching estimates but the revenue falling short and that stock is down by 5. 8 . Meantime earnings at Toll Brothers topping estimates. Revenue fell a bit short but the company is raising the lower end of its average selling price forecast for the full year as demand strengthens. There may be fewer house flippers today, but those in the game are reaping some record rewards. Cnbcs diana oleic joins us with more. Reporter good morning, joe. House flipping, which is defined as buying and selling a home in the same calendar year made an average gross profit of 72,450. Thats a record high since reallytreal realty track started watching this. Todays buyers are looking for Turnkey Properties and they are willing to pay a premium for them. Still, for flippers like crystal goetz in d. C. It is getting tougher to flip with very tight supply in the market today. Thats why 4 of home sales this year were flipped. Thats the lowest again, since 2011. It is like finding the needle in the haystack. Youre trying to find that diamond in the rough that is in bad enough condition. For us our goal is to completely come in and redo the house from top to bottom. Completely gut it and remake the house. Reporter and thats how they ended up getting over asking price with multiple offers for this home in a transitional neighborhood on capitol hill. D. C. Incredibly competitive for flippers because it can offer great returns. Where else is good . Tampa. 57 returns. Pittsburgh, memphis, chicago, boston, seattle, and again, of course, right here in d. C. At a 44 return. But perhaps the toughest market to flip in is seattle because it has the tightest inventory. Goetz says the flipper must do all the work up front, choose the right neighborhood the right renovation and the right sale price. This house was a flip by a builder. It took nearly six months to flip it because they did not price it right for the neighborhood. Joe. So he had the price you buy in at is the most important, i would think, right . Youve got to find someone that doesnt know what their house is worth or something . Reporter no you want to find one that has a lot of work to do. Not you dont have to gut the whole thing entirely foundation to roof but you want to find a house that needs a lot of work. You do the right renovation and then again you have to price it right and know what your neighborhood can afford. You dont want to do a massive renovation really high end in a neighborhood that doesnt afford that kind of price. So you want to do a few things just to make it look a little better and see if you can at least with all the closings costs and all the hassle i dont know. You need a good Housing Market right . Reporter it depends on your risk. I mean how much you want to risk. The woman i just showed you in the piece, they did a very big renovation, even added a third story, but they knew that market, they knew what people were willing to pay and they got above asking with multiple offers. So youve got to do your research and see what kind of risk you feel like you can handle. Plus youve got to be pretty handy. Her husband is a builder. I think you look for houses that need cosmetic change. In other words that arent going to be terribly expensive, but nonetheless can improve the appearance of the place significantly and with the Interest Rates being what they were, its been a pretty good market for flippers. All right thanks diane. Joining us now with some firsthand knowledge on the current state of the flipping market, dave seymour, the cofounder of city light homes and costar of a es flipping boston. I know this is good for me because i know every neighborhood up there, dave. Where whats hot . Not the south end anymore. South boston is hot now, isnt it . Southeast hot, east is hot, somerville is hot. All of the markets surrounding boston are hot. Ive got to go at you a little bit here. Were not doing paint and carpet anymore, joe. Its not cosmetics. The buyers in the flipping market now are looking for that new home feel that new home sensation when they walk in the door and are demanding it. If you want those doubledigit returns that you guys just quoted there, joe, youve got to do it right. Youve got to be educated in this marketplace to be able to get in get out and get paid. Some of them . What about not medford. Medford. Medford is where its at. Saugus . Yeah down on revere beach, yeah absolutely. I cant believe that. When i was there, nobody you wouldnt admit you lived in somerville. I know, joe. Somerville was tough. It was a working class neighborhood. And now its got that ultra sexy cosmopolitan feel to it. Does it really . Yeah three Unit Properties were turning those around and selling condominiums in that marketplace anywhere between 650 up to a Million Dollars for a condominium. A little house in west roxbury bought it for 90, put 120 into it, selling it for 375, 380. So theres a lot of movement in the marketplace and its not locally, its nationally. But its pockets throughout the u. S. Youve just got to know what youre doing. I always talk about it go ahead. I was just wondering if it gets scary. You know if you get a downturn. What would Louisburg Square cost to buy a place and do something . 5 million, 10 million . I dont know specifically. Its all zeros. It doesnt matter at the end of the day whether its a 50,000 to a 5 million process as long as you run the numbers accurately and you know what youre doing. Its all percentages. Its all relevant at the end of the day. So i dont i dont get scared by the amount of zeros on the back end of a deal because theyre the same amount of zeros on the front end. You run the numbers you do it the right way, you know what your costs are, you hold the contractors accountable and we make what we call in boston wicked smart money. In my opinion that beats mad money all the time. Its sticks and bricks thats what we do in our business. Dave theres more competition today, is there not, than there has been in times past . There is. There is competition in the marketplace. But look the fundamentals are what keep you in the business. So everybody who sees a flipping show on tv wants to be a house flipper, but if they dont get the fundamentals of the education of the business, and its a business then theyre prone to some damage. So its the amateurs who are charging us too much money on the purchase side. Dave, youve got a show it looks like a lot of people there seems to be more and more flipping shows. I just wonder whether that represents a bubble unto itself and whether all these people who are watching these shows, you know, can actually do it. You know what thats an incredibly smart commentary and i would go along with that. Its easy to sit on the couch on a saturday afternoon and watch, but its not so easy to get your hands dirty, whether you physically get them dirty during the construction end of the business or whether youre run get spreadsheets and knowing your marketplace. What you cant see on a tv show is the mechanics of House Flipping, because to be honest with you, its a spread sheet. Those are kind of boring at the end of the day. So the House Flipping show shows the Ugly Duckling being transformed into that phenomenal piece of real estate. People come in oh my god, its beautiful and then cash in a check at the end but theres mechanics behind it. Do you want people watching for the entertainment value or for the education and do you want them to go out and do it themselves . Personally look the Networks Want the education factor. I as a Real Estate Investor who teach these process with my partner, peter, all throughout the 50 states and up in canada i want people to understand the education behind it because educate, dont speculate is what will make you wealthy in this business. As long as you stay the course. Again, smart money. Wicked, smart money will outweigh mad money every time. Thats the way we look at it. Dave, just finally, back bay. Are there places hasnt that been picked clean . Are there places there that you could do some work on and sell again, even at this point . There are, yeah joe. Joe, look its the motivation of the seller. I know for a fact that there are families still in the back bay who purchased these properties back in the late 60s, early 70s deferred maintenance, havent done any repairs, havent given the building any love. Boom, today, theyre ready to sell. So if i can get in there in that scenario, purchase for 1. 2, 1. 5, were doing one on mass av right now, we talked about it last time on the show. Thats a 1. 5 acquisition. Deferred maintenance. 500,000 in repairs. 2. 7, 2. 9 exit numbers going out, depending on you know what youre doing for comparable pricing. So theres always a market for an educated flipper, always. Dave whats the average hold time . From the time you close on the transaction to the time you sell and close that deal on the other end . Sure it all depends on how were doing the deal. If im wholesaling and transferring paperwork, i can be in and out of a deal in 24 hours. But if im actually doing the full renovation and flip we always allocate a sixmonth turnaround from the day we start to the time we sell. Sometimes a little quicker, four, five months. Sometimes a little longer eight, nine months all depends on the extent of the renovation. But on average we always shoot for four to sixmonth turnaround. All right dave. Is anyone where you are mad at brady or the pats or is everybody mad at indianapolis . Why, joe . Joe, why did you have to do that . I was at the super bowl. Why . Because i think they were set up. I think they got set up. Theres a bunch of patriot haters because they hate all the success. I think youre right. I think youre right, joe, and im with you. Preponderance of the evidence that he might have known something. Ridiculous ridiculous. Imagine trying to go into a court of law, a criminal court of law with those kind of statistics and that kind of information. I know. The judge would laugh you out. Tom brady, i love you. I love the new england patriots. I love them. I knew i could get plus theyre playing the steelers on nbc on a thursday night without brady. Its not fair. They better get rid you got me joe. Take care. See you. Somerville. You been to somerville . I have. We used to play them in the american league. Right next to cambridge. We used to have body guards when we went down there to play baseball. When we come back this morning, the information of over 100,000 u. S. Taxpayers compromised after a breach at the irs. We have the details. Plus the vp of strategy at ibm security on how much breaches like this cost. Right now as we head to a break, take a look at the futures this hour. After the dow was down about 1 so was the s p yesterday. You can see a little bit of a bounceback this morning with the dow futures up by 67 points the s p futures up 6. 5 points and the nasdaq up by 15. Well be right back. T, the num beof mris has increased by ten percent a year. And a radiologist might view a thousand images to find one tiny abnormality in shape, contrast or movement. Because its so challenging a Research Project is teaching ibm watson to see. In the future, it could help clinicians spot key patterns quickly and precisely. Ibm watson is working to make healthcare smarter every day. Welcome back. Making headlines this morning, the Obama Administration siding against google saying the Supreme Court should not hear the tech giants appeal in a case against oracle. The case has to do with how much copyright protection should extend to the java programming language. Analysts say it could have wide implications for the tech industry. Hackers hitting the irs making off with information from more than 100,000 u. S. Taxpayers. Eamon javers has been following the story and joins us with more on this. Good morning again. Reporter good morning, becky. It was 100,000 people who were apparently hit in this irs hack attack. The irs said yesterday that more than 200,000 people were attempted to be hit by the hackers who were able to get into these accounts based on appearing to be the account holders themselves because they had enormous amounts of personal information already on these alleged victims. According to the irs yesterday, one of the security questions that they were asking was what was your High School Teams mascot. And the hackers allegedly already had that information. They said probably from social media. So a real question here for the irs about how can they protect these accounts if the hackers already have this kind of information from scouring the web, social media and other databases and presumably other hacks as well. All that information going into a giant criminal database. The irs saying yesterday that they suspect global criminal gangs are part of this and they think that what is going to happen now is alleged irs return fraud where the people actually file fake irs returns and get that Bank Account Money get the refund sent to Bank Accounts around the world, becky. Eamon, when you talk about this, the service thats been shut down from the irs, how does someone know if they were one of the ones compromised . Is the irs reaching out to everyone . Reporter yeah, the irs said theyre reaching out to those 100,000. Also reaching out to the 200,000, the broader pool where they were attempting to hack into those accounts as well. If you were one of these people, never fear youll hear from the irs and theyll offer Monitoring Services for those peoples credit as they go forward to see if any damage is done from this hacking. Okay, thank you. Also we should tell you ibm security is now out with a new report on how much the way data bleach breaches are going to cost us. Last year all these hightech breakins had a Global Impact of 4445 billion 445 billion. The Vice President of strategy for ibm security is here to break down those results. I want to go through some of the industries where the costs are the highest. Given the news we just learned about this morning with the irs, the question is is the government on your list . Yeah. I mean what were seeing in the news and it wont surprise you is that these breaches are becoming more prevalent. You mentioned in the story already that what we see, we monitor billions of events across our customers around the world on a daily basis, and across these 15 to 20 billion events you see that 80 of these crimes are being committed by organized criminals. So these are people going to work every day like you and i. Theyre making a salary and theyre making a bonus if they do it well. But they are paid to try to break into companies in the u. S. In europe and elsewhere. Thats what the study really shows. Over the last two years, weve seen a 23 increase in the cost of the breach. 3. 8 million on average for a company to deal with this. Its become a very hard problem and were working hard with customers to try to prevent them from being the next headline. In terms of industries that you see right now being the most vulnerable . That was interesting in the study. So this is an annual study. You know, weve seen this as well with an ibm security the highest was health care. And so this is interesting to think about, andrew. If you think about on the web, your Social Security number or credit card number is now only worth about 1 on the black market but your health care record, thats worth 50. So theres a real premium here for data. Education was number two in the survey. So theres a real premium for being able to break in and get more than just simple data your credit card number your Social Security, and get a rich treasure trove of data. Health care clearly showing that the hackers are showing thats a rich target area for them. Retail came go ahead, sorry. What are they doing with all of this data . We hear about these hacking attacks constantly but on the flip side we dont hear for example, what peoples Bank Accounts are going to zero. Or that there has been some massive robbery thats taken place. I just wonder what all this but then we worry when we hear about things like this irs hacking that actually theyre taking all this data that they might have been collecting for years. Is there, you know some big payoff down the road . Theyre succeeding if you look in the good ole days one of the Largest Bank Heists that ever happened out in california in the 70s was 30 million stolen the oldfashioned way from a bank. Banks now, large banks are earmarking significantly more each on an annual basis for some of the cyber fraud that theyre facing. So there are successes out there. The hackers are succeeding. They follow the money. What theyre doing with the data, these guys are smart, right. So they have they have a collaboration capability. Theyre using big data theyre using the cloud just like we all are on the good side. And theyre correlating the data. Your previous speaker mentioned it that they are theyre patient, right. So theyll gather the maiden name, the last four of the social, the mascot from high school, all these things that weve been talking about during the show and put that together. Over time when they have enough information, they will make use of it, so there is unfortunately, they are succeeding. One of the things that were trying to do is we took all of our data that we have on how these people collaborate and we made that available publicly a few weeks ago. So think of it like hospitals and doctors on viruses are collaborating to share data. Ibm security put all its data out there. We have over a thousand companies, six out of the top ten retailers, five of the top ten banks on this platform collaborating. If we can get the good guys to collaborate with our data thats what the bad guys are doing with customer data. Mark larry bossidy. One, do you have to hire hackers in order to think the way people who are trying to invade and attack your system . And two, when do you think that you can get some containment here . Does this go on forever . Or do you think that youre going to ultimately be able to build sufficient protection to at least roweduce the number of attacks that occur, successful attacks. Thanks, larry. Clearly we are very careful in who we hire. I can say that for sure at ibm security. But we do have people what we call white hats. You have to have people on your team and ibm has thousands of these researchers that think like a hacker and can think like a hacker. They are in the dark web looking at whats going on. Theyre following the chatter. You know theyre really doing a really great job of making sure that they know whats going to happen so that our thoiusands of customers around the world have a leg up by working with us collaborating and getting access to our data that these white hats on our team are doing. We collaborate with our customers and other vendors in the space to make sure we do that. Mark, thanks for joining us this morning. Scary stuff, but we appreciate it nonetheless. Thank you very much. Thanks. When we return jim cramer from downtown new york. Find out what will move the markets today at the opening bell tomorrow on squawk box, the state of business the global economy, Interest Rates and much more. We are joined by the ceos of stanley, black and decker Waste Management Southern Company and American Electric power. Great lineup tomorrow. Well be right back. Boys . music stop less, go more. The passat tdi clean diesel with up to 814 hwy miles per tank. Hurry in, and you can get 0 apr for 72 months on 2015 passat tdi models plus a total of 1500 in available bonuses. You probably know xerox as the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. Lets get down to the new york stock exchange, jim. No more, i look forward to the Monthly Sales figures from mcdonalds. I think they were losing the franchise ease. I like what hes doing. Hes simplifying the menu making it move faster. Turn around in europe he also turned europe beforehand. It slipped back. Everything i see is good from this guy. I think when i talk to the franchise, theyre excited hes listening to them. Thats something thats not happened in many years. Well have to gauge the turn around kwaurlly from now on if we dont get the monthly numbers. I guess kind of a pain. We seen it with young turn. These things do turn. By the way, lets not forget that the Restaurant Group as a whole was doing great. Theyre doing great again. Mcdonalds got that great yield. Theres a lot to like about it. When the market finally decides which way to head from 18,000 you think on ward and upward . I dont think its possible to do an onward and upward when we have fed reserve officials getting on the tape at any given moment and killing whatever rally there might be. They can say what they want. If they could just speak once a month, i think the rally is possible. You cant have one when they prepu for the inratable increase. Theyre suppose to be data dependent and still prepu. You saw the comments. Did it make you want to say they have no idea and start yelling . I think he did the right thing. Theyre really in the cross currents of major problems in europe. We have mayor deceleration in latin america. Our business our durable numbers worked out good. The retail is not that good. The idea that what we should be doing is raising rates because arent we suppose to raise rates. The Federal Reserve figures we got out of texas yesterday is pure data. You know what they want to prep us and they can kill any rally. If they want to kill a rally they have every ability to do so. Someone right now could be speaking to steve killing whatever futures increase. Real quickly, jim. We had on a guy from flipping boston earlier. Save seamore. He said we could money beats mad money any time. Is it personal or a front . Buying places in brooklyn and sales them. Hes right. Im not allowed to invest in stocks. Maybe im being nonstop. You got to do something. Im with the fellow who wants we could mind. Did favor live in summerville . Davis square, i believe. Had he just bought summerville places and not got this job he would been with rutledge but no he chose to be a reporter. He did. Yeah but he didnt own in summerville. The turn in davis square is incredible. It was right there for him to be had. Did he take it . No. 23 years. All right. Thanks jim. When we come back the summer investing list. What you need to watch as the summer stocks creep up. When youre not confident you have complete visibility into your business, it can quickly become the only thing you think about. Thats where at t can help. With Innovative Solutions that connect machines and people. To keep your internet of things insync, in realtime. Leaving you free to focus on what matters most. We want to get a couple of things. Economic outlook. I sense you think all this talk about when the rates are going to rise. I think were going to have a mediocre here. I think the combination of improvement stock prices buy backs, dividends get a 78 return. The president dont want to reduce rates. The small Business People still get taxed individual rates. Now we cant have territorial situations which we need desperate desperately were not going to have tax reform. Thats disappointing. You cant get trade. Make sure you join us tomorrow. Squawk on the street coming up next. Good morning and welcome to squawk on the street. We are live from the new york stock exchange. Is it the code conference . Look at hem. Even at this time in the morning hes going to have a lot more on that event