Transcripts For CNBC Squawk Box 20160426

The hang seng was up about half percent. And the shanghai up about. 6 . The European Equity markets. This is the early trade. Relatively flat. The dax is flat. Cac is down less than. 2 . The ftsi up about a. 25 . And the italy index about 1. 5 . And spain just over 1 . And up about 0 30 cents. Brent up about 33 cents. Couple of big stories this morning. Bp reporting overnight. Quarterly profits dropping 80 . That topped expectations, oddly enough. The company says it now could cut Capital Spending further as a result. Ceo expecting prices to recover towards the end of the year as pruszers stop work on fields and demand strong returns. Also dupont is raising its full year guidance. The chemicals and seed producer planning to merge with dow chemical but last year regulators needed more time to review materials related to the deal. And today were expecting results from dow components 3m, numbers from Pharma Company eli lilly and hear from its chairman and ceo at 7 30 eastern time. And facebook is reported by developing a camera app similar to snapchat. The social Networks Goal is to try to increase user engagement. Facebook is also reportedly working on a feature that will allow a user to record video through that app to begin live streaming. They Just Launched facebook live. People are already doing that. And steve did facebook live. And now i see people constantly snapping the pitcher from their snvp and putting it on instagram. The point with snapchat you send a picture and within six seconds it disappears . I think that was the original plan. What are the other advantages . Well you can add also animation to your picture. You can write animations on. You can stick your tongue out there are all sorts of do dads. Do i get to decide . No you decide. If im receiving you decide how long its out there for. Thats what concerns me. If you put your kids on these things. Somebody sends them something that disappears and there is a reason you want it to disappear in six seconds i think its moved away from. If i could move it away interest that away from that entirely we should also tell you an Fda Advisory Panel from sarepta did not meet requirements because it involved only 12 patients and didnt have an adequate placebo control. This is the story we talked about yesterday with howard dean who on top of being former vermont governor and politician is also a medical doctor and he said situations like this are incredibly important because patients using this dont have other options. They are in pain and so those are things the fda panel could consider at the end to. Im not a doctor on so im not im not here so im just repeating what he said yesterday. Yes. Little bit of the Corporate News for you. Alibaba and closing a funding round. Lets check the broader markets. We also want to look another the treasury. The treasury market right now. The 10 year note is yielding 1. 904 . While expectations are not that well see a rate hike from the fed this time around, you could hear language that suggests there is a hike coming potentially as early as june. That is what the market has been moving on. And weve been looking at improving economic conditions. Also if you want to look at the currency markets today. Looks like the dollars down across the board. Right now the euro is trading 112. 86. The yen at 110. 88. Finally gold prices which settled up yesterday are down about 4 this morning. 1236. 20 an ounce. This morning, again, you see fair value with the stock markets indicated slightly higher but the fed is kicking off its two day meeting today. No policy changes are expected in this announcement but investors will be looking for hints about whether the fed are raise rates in june. Joining us now is Global Market strategist of j. P. Morgan asset management. And david joy. Chief of somewhere. And the bank of england, the ecb and what the boj are doing because that seems to be driving our policy here. What do you expect to happen to rates globally over the next 612 months . I think there is a team here. Used to be a theme here. You have a fed talking about the gradual rate hike. You have the ecb pushing out further measures to really attack the Corporate Bond market as well. So they have been cutting Interest Rates in negative territory. Now buying Investment Grade Corporate Bonds to try to bring down costs for companies in the euro zone can the uk keeping things completely on hold. Very much an easing mood here in uk and European Central bank. In terms of who moves first, it seems to me like the fed is tied in and waiting for something to change overseas. I guess whos going to blink first and say okay we have to get out of the negative Interest Rate mentality . Is it going to be the ecb . The bank of japan, or the Federal Reserve which is okay, were going it alone even though everybody else is looking so much weaker . The strength of the u. S. Economy and the fact that janet yellen and the others have been signaling so long there is going to be a gradual rate hike makes us certainly think the u. S. Is going to be the first to move. Definitely not this week but if she hints for june, then that is on the table. Maybe december this year. But the ecb and bank of japan are certainly in easing mood and bank of england a wait and see. Particularly because we have brexit. Lets talk about that dave. Stocks have been on a tear because the fed has sounded so dovish. Do you expect that to change today or tomorrow . No i dont. I think they will leave the possibility open for a rate hike as early as june. They want to leave their options open. There have been as you pointed out just a moment ago you are starting to see the yield curve steep an little bit here. Rates have moved up across the yield curve and that is suggesting that Economic Activity may be picking up. The fed may be getting a little bit of a whiff that the disinflationary pressures in the u. S. Are coming to an end. But i think they are a long way from moving. I think the next central bank to do something is the bank of japan. Its not going to be higher rate, right . No. They are going lower. And they also need to do some fiscal stimulus it looks like as well in the wake of the earthquakes. But they have to be careful. Because the last time, when they moved to negative rates. They are going to have to finess it. Pointed out that she thinks the fed rates could increase as early as june. If that did happen what do you think would happen in the u. S. If it had happen i think the stocks would take it poorly. And were just going to find out what happens with the First Quarter in the end of this week and it was decidedly weak it appears. Thinkty market would say that is way premature and i dont expect that to happen. Under so much pressure because of this low Interest Rate environment . Valuations are part of our attraction. But if you listen to their earnings reports earlier in this reporting season they were fairly upbeat. And you are seeing better activity in march and april. Net interest margins moved up fractionally. Although corporate loans are a little weak consumer loans are strong. The Financial Sector looks a little brighter to us but again valuations are a big part of that and you saw a big example of that last week in the kb index up over 5 . So that stock starting to get a little attention here. The issue of brexit, because you are in london. For us here in the United States it is always a bit of a distraction. Or at least it doesnt feel as real. Does it feel very real to where you are . It does feel real in the referendum is coming up soon and you have a lot of media pushing agenda on either side. So the discussion and the back and forth does feel real but the implementation of what will actually happen is still very abstract. If there is a vote to lead we dont know how quick trade deals can be negotiated or what will happen to the residences here in london etc. So thats all very hayes but the voting itself is very distinct. What was your reaction to president obamas comments on this issue . There is a bit of backlash in the media here where you have the comments on the length of time it will take to negotiate a trade agreement is far too long. But again this just illustrates the fact that there is so much unknown or uncertainty and both sides are using the language that obama presented over the weekend or even the language that certain politicians have followed up obamas speech with as campaign measures. Because we are in the official campaigning period. You know, the polling the general sentiment keeps switching back and forth day by day. So it is going to be a hard one to predict in june. In terms of how the market is going to be reacting to the immediate knee jerk reaction from the fed tomorrow. Do you expect the tone from the Federal Reserve to be any less dovish than what janet yellen was just a few weeks ago . I dont think so. You know, she indicated more or less the possibility of two rate increases. We think that is still a realistic possibility. Although probably one is more likely between now and the end of the year. But no. I think they are going to leave it exactly where she indicated. You know, for the reasons that i mentioned. It likes like wages are starting to accelerate here in the u. S. The market remains very strong. We saw a multi decade low in new claims the other day. So we could see inflation by the end of the year. We think the headline level up around 1. 8 and the core rate maybe as high as 2. 5. So well leave our options open and watch the data. And leave it at that. Thank you both for being with us today. Coming up it is primary day, again. John horowitz has a run down right after the break. Back this a moment show me top new artist. Ah, ha ha. Show me top male artist. My whole belieber fan group. Its not a competition, but if it was i won. Xfinity x1 lets you access the greatest library of Billboard Music awards moments, simply by using your voice. The Billboard Music awards, live sunday may 22nd, 8 7 central, only on abc. Welcome back everybody. Steph curry will miss some game time. Injured his knee sunday evening after slipping on the court. Right now it is a sprain and it is said hell be out for at least two weeks. Jordan spieth losing the masters in the final round. And yesterday deflategate blew up again when a court reinstated the courts four game suspension of patriots quarterback tom brady. And looks like he might have to sit out. I am it makes no sense. This of course is the opposite. The court didnt even rule on whether he did or not. It was the contract. And basically goodell can do whatever he wants. This is very important for Labor Relations in any negotiations taking place. Because what the Appellate Court said in the leading opinion that came out on this is that we dont have to figure whether he was right or not, just whether or not goodell had the authority to do this. And based on these contracts he does have the authority. More and more employees are signing over things, handing over more power to employers in situations like this. And for labor relation raises the question why you would even have the debate . Why even have any arbitration if they can make the decision. All the lawyers involved. If you cant appeal it. It doesnt matter. This is Labor Relations writ large. There is ive seen a trend in employment where lawyers are saying look were not going through the court system. If you agree to be an employee here. You are going to agree to our arbitration system along the way. Sara eisen has a rare interview with phil knight, nike chairman. Thats 10 30 a. M. Eastern time, squawk on the street. Democrats and republicans hitting the polls in five more states. This is a northeastern flavored primary. Pennsylvania, connecticut, rhode island, maryland, delaware. If you looked at what happened in new york last week, expect a replay. And on Hillary Clintons side she almost has an unassailable lead on Bernie Sanders. And on the republican side donald trump isnt going to get to 1237 tonight. The polls show hes ahead in those with significant numbers of polls. But he can break the will of the opposition if he shows that hes winning across the board. He can get closer to 1237. His campaign argues they will get there on june 7th in california. It is unclear whether hell get just over or just under 1237. But the better he does today, the closer he gets to that number. And the significance of this northeastern primary is i think it is going to clarify the focus on a trump clinton race in the fall. Does that mean you will see either one of those candidates dropping out. They are not going to give up. Just their hopes get bleaker and bleaker. We saw yesterday the hail mary pass that cruz and kasich threw in trying to come one this deal. They werent even talking about the races today. They are looking beyond today because they know trump is going to do very well. And they are talking about indiana on the third where cruz is going to try to come from behind now that kasich is diminishing operations there and kasich is going to try do the same thing this oregon and new mexi mexico. But when you start to have deals like that you communicate to voters that none of us really have a chance to knock off this guy and you are taking desperate measures. So today i think is likely to brighten that fairly bright picture for donald trump right now. Were moving ahead of ourselves. Could we talk Vice President ial candidates. What is the Carly Fiorina story . Whats happening here . That is a ted cruz vet. And so one of the things you do if you are trying, you know, hail mary strategies before a convention is to name a Vice President and hope that brings you some support if you get to a contested convention. So for example if donald trump falls short of 1237, if hes not guarantee a first ballot nomination. Donald trump would say well im going pick Carly Fiorina and hope the attractiveness pulls a bunch of delegates. Ronald reagan tried that in 76 against ford. He was behind and named a pennsylvania senator as his running mate hoping to convince mott moderates it was okay to go with reagan. In the end ford squeezed him out. Thats purpose who would be the perfect pairing for donald . Who is the perfect pairing for cruz . And is Carly Fiorina that person . You know, what is a perfect pairing . The Vice President ial candidates dont add all that much electorally for a candidate. Carly fiorina is from california. Is it possible she could help get suburban women in virginia to tip that state to ted cruz . Not likely. But it is possible. The case of trump, he said he wants some political experience. And then hes got to find somebody with political experience who is willing to run with him. Because it is a more consequential decision given trumps reputation for somebody to decide to join his ticket. Because trumps baggage becomes their baggage. It is more likely you are going to get somebody towards the end of the their career than somebody at the beginning of their career who might welcome forward to running for president on their own. Could we play the vp game with hillary too . The speculation i find most compelling is about tim keane, the senator from virginia. You also hear talk of the castro, the hud secretary. Mark warner, the other democratic senator from virginia. Moderate, businessoriented guy. Sherrod brown, a populist, closest thing in the senate to Elizabeth Warren or Bernie Sanders. Those are all possibilities but were all guessing at this point. I think it was interesting what Hillary Clinton said to Rachel Maddow if he continues to win, her point was she has more than 2. 7 million more voters. There is a much bigger lead between her and Bernie Sanders than between her and barack obama eight years. And she didnt sound like she was bending. Im not going to adopt his strategy just to hope that his voters come along. Thats a reasonable position if you are about to lock up the nomination. And shes not about about to adopt Bernie Sanders tax policies and spending policies because she knows she would get hit over the head with those in a general election. And fur close to locking up the nomination you are the one who gets to dictate whats in the platform. They have to find a way to pull the sanders supporters back into the fold and prevent deflections but they could be fairly confident. But because democrats tend to think alike. Because tribal loyalties in politics are so strong now. That is likely to occur. John, thank you. When we come back were going to talk about a new survey of rookie ceos that found that most werent initially as prepared to run a company as they thought. Lessons from first time executives next. Plus earnings due for the opening bell. Well bring you the reaction and numbers from the street. Take a look at yesterdays winners and losers. Were back in a moment. Today, were seeing new technologies make healthcare more personal with patientcentric, digital innovations; from selfmonitoring devices that can interpret personal data and enable targeted care, to Cloud Platforms that invite providers to collaborate with the patients they serve. Thats why over 90 of the top 25 Global Pharmaceutical Companies are turning to cognizant. Our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way Clinical Research sites collaborate with pharmaceutical companies, and enhancing Patient Engagement with innovative platforms and solutions. Our populations growing healthcare needs present growing opportunities for our clients to advance the future of medicine with digital, and improve the quality of lives. Real is touching a ray. Amazing is moving like one. Real is making new friends. Amazing is getting this close. Real is an animal rescue. Amazing is over twentyseven thousand of them. There is only one place where real and amazing live. Seaworld. Real. Amazing welcome back everybody. Eli lilly out with Quarterly Results. Coming with a profit of 83 cents a share. 2 cents below the street of 85 cents. Revenue came in above expectations. 4. 7 billion. They are giving guidance for the full year. They are coming in with adjusted earnings of 3. 50 to 3. 60 a share. Revenue should come in tween 20. 6 and 21. 1 billion. Coming up. That is picture of sandy weill. Hes coming up at 3 00. We have John Lickliter joining us at 7 30. Couple stocks to watch this morning. The Container Store posting inline earnings. And a slight revenue beat. The retailer also gave a mix outlook in cost cuts. Canadian National Railway trimming its 2016 outlook because of weaker currency demand. And sandy weill, he and his wife donating 180 million to university of california san francisco, to establish a Weill Institute for neurosciences. One of the largest ever for Brain Research in the u. S. Brings their total giving to more than 1 billion. And sandy and joan will be appearing on closing bell today at 3 00 p. M. In the meantime it is now time for the executive edge. And a new survey out. 75 ceos. Turns out they were less prepared. From around the globe. And these the big guys here walking about the. Lyons joins us. Was this surprising to you . Not really. I took an evaluation. I was 40 at the time and they reached down and they touched me. I evaluated. I thought on a scale of 110 i was make a 6. Six months later i realized i was probably a 2. In the greatest company that i had ever known. You didnt tell anybody at the time. I did. Had a truster advisor. I asked his assessment. Of the ceos t in the river group. They came out 7. 2. Self assessment. These were done 1 on 1 interviews. I think it was very honest. I think it is probably not a huge surprise. Anybody take an new job with expectations what the job is going to be heading in, usually the stuff that takes your time and commands your attention is not the things you would have anticipated before you go into it. You are relying on your history and your experience and how well you performed to get there and you had have to performed well to get there. I just think it is interesting. Speaks a lot to what you learn on the job. Probably means you need somebody who can learn on the job. Any time you go in. One of the things that research showed is basically you are an apprentice in a role that everybody expects you to be the master. Right. When you become ceo that announcement is made. People look at you as a ceo. No longer as yourself. If you look at how long people tend to exist in those job, i think it is Something Like 4, 4. 5 years. Going down. And its going down. Seemts to me like this is a job where the longer you are in the better you understand. Without question. And you are an order of magnitude better the second time. And you absolutely are. What about the idea that . Ceos feel alone. Youre at the center of attention the same time. The whole aspect of its lonely at the top . You dont create that. It is created around you. When i became ceo my predecessor said tomorrow morning, because it was a surprise. Tomorrow morning, you are going to be smarter, you are going to be funnier, you are going to be more handsome. You are going to be taller. And all because your title changed. People treat you differently. This is the Pinnacle Leadership job. What ends up having. You go in the room and sit down and you know only two seats no one are going to take. Left and right of you. And even your closest friends treat you differently. When you are there, you are trying to get honest feedback but people are cautious about what they tell you. That to me is another lesson for look, dont believe your own bs. I think wasnt of the biggest problems new ceos can have is they actually believe they are the ceo. Because you are not. You are the person that occupies that seat. For whatever duration that happens to be. Thats interesting though. At one moment you feel some of these ceos feel terribly insecure. And at another moment you feel they are almost too secure. Too confident in this themselves. Can you zplan that distinction . Yeah. And that came out of research also. One of the things is you walk in and are you insecure . Any human being who walks into a job and everything has changed from their experiences and the bigger the company, publicly traded, the spotlight that is on you, you are going to feel that way. Because you are still assessing this has changed. My world has changed. How people react to me. When i look in the mirror i see the same person. But others are looking at me differently. Are you better off trying to the person in the mirror as opposed to the person you think they are looking at because the second you start acting like the person you think they are looking at you have a real problem. You have to be true to yourself. But at the same time people expect you to be confident. So there is a ambulance. Balance. One of the statistics is getting honest feedback about what is going on in the company. That is part of the loneliness. Also part of the ivory tower built around you, by wellmeaning intended people. Because you have a finite amount of time with infinite demands. So how do you get the information whats really going on and how do you get honest feedback . And we talked to the guys who went in and helped to restructure gm. One of the things they said was the gm executives parked in the gm executive lot, took the gm executive elevator to the gm executive floors, gm executive dining room asks didnt have access to people on floors or different things. And that is some insular mentality is dangerous. And even more so in todays world. With the social media, scrutiny ceos are under. The spotlight, the turnover, the expectations. You need to have humility. But you need to have confidence. You need to be willing to listen. And the question about trusted advisors or coaches. In my opinion you have a coach. It says that you are secure in who you are. The ceos ive seen that ive worked with that ive worked with that ive watched fail is because they think they know all the answers and they think they are not allowed to show weakness and it is a foolish path. A path to failure. Can people find this online . The river group. And i think it is going to be published online. But expect the unexpected. It is published online. It is the trg, the river group global. Okay. Google it. Yeah. When we come back apple is set to post closing results after the closing bell today. All amid slumping iphone sales. They are expected to put an end to apples streak of growth. And as we head to break a quick check in the european equities. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of the at t network, a network that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Youto get the help yourefar looking for. Thats why at xfinity were opening up more stores closer to you. Where you can use all of our latest products and technology. And find out how to get the most out of your service. So when you get home, all you have to do is enjoy it. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Apple getting set to roll out results after the bell and revenues are expected to be ugly. Dropping on weaker iphone sales. Joining us is the analyst at maximum group. How ugly is this inning gob to . Its going to be going down year over year coming in an s year and you are at the end of the product cycle so yes it is not numbers like this in years though . Yeah, i mean ugly numbers like this in years. Yeah. You also didnt see pre such strong sic cycle. Is this going to continue into seven or not . And the key answer is absolutely not. And also you can just look and see what was the number of users that got into the system at five . And you can see you are going to have more users buying the seven sorry t six. How many users buy the six. [inaudible] so if i have a six. This is the 6 s. This is the big one. The question i have about this. Is this at some point do i just decide its good enough . Meaning extend the life cycle . Yeah. I would be two years in. Question is next fall when the 7 arrives, do i say, you know, ill probably hold off another year . This things pretty good. That is definitely a key investment risk of longer life cycles. So now the question is will people start to elongate the life cycles . That is one of the reasons i think apple introduces the program where you can buy a phone and keep upgrading every 12 months. What percentage of the customers in the u. S. Are now on that kind of program . My guess is probably in the 25 range. Apple watches . All of these other products . You dont even think about that stuff. Iphone is. I dont see the watch as something that has a potential to be a material needle mover. Maybe 3, 4, 5 . But what i would be excited about three to four years down the line is an icar. That will be a significant asp. If you look at the annuity value and the profits that can be associated with it. That is a needle mover. You dont see anything between the watch and an icar that gets you excited . Not from a hey weve got the whole new product Revenue Cycle that is going to double did you think that was a mover two years ago . No i did not think what do you dot thats a long period between big product launches. And if that thesis is correct, what do you do with it . At the end of the day the to be is trading at seven times ebitda. Life cycle expansion maybe carriers walk away from the price in terms. If you are looking at lower margins because you are pushing further into the emerging markets and that is where you are getting growth too. Yeah but for that is where a lot of growth is coming from. One of the things i talk about in this preview note is both emerging markets and mature markets you are going past that strong influctuatiection point. Now the turn within a given country drives growth stronger than the actual new incremental users, for apple. Because apple benefits when the market is mature. Take a look at the mac. If for past 10 years its been year over year growing despite the fact that pc has only been flat, down, up maybe 2 or 3 but apples macs have been growing. New ones hopefully later this year. Which im excited to by myself. Secondly, how big is this a piece of the business now . Music, apple peay all of that . Its about 15 of revenue. Ay . Its about 15 of revenue. I think it gives you an indication as to what is the stickiness of the apple eco system and gives a good way of gauging the eco system, how much is it actually growing. The fact they broke it out, this most recent quarter, said that you have a billion users. We extrapolate that actually made 20 year over year in terms of users. And that even if we get this negative 10 year over year growth in new iphone users it is still going to grow 20 year over year in this quarter. Proudly one of those users. Thank you. Thaw. When we return the fed gathering for a two day policy meeting. And that means it is time for the cnbc fed survey. Which members of the are getting more dovish . Welcome back, everybody. The results from the cnbc fed survey are in. Tapping into the minds of the nations Top Economists for the timing on the next rate height. Steve leishman joins us to break it down. A great way to put it, becky. 100 agreement, no hike in april. Greater agreement. 94 are saying that the next move will be a hike. In january we were worried about recession and all this stuff. Right now that seems to have end and now people are saying 94 saying the next move by the hed will be a hike. Versus a versus a cut. Thats the only thing we can agree on . We think were headed higher . Yes. Theyre calling this a later and looser fed. Well take a look at whats happened to the expectations. The next hike, not seen now until august 2016. Thats the average. There is a median around june right there, but thats two months later on average than it was in the march survey. How about when the fed will allow the Balance Sheet to decline. March 2017, a month later. The terminal rate, when will the fed stop hiking in this quoteunquote hiking cycle. Thats now the Fourth Quarter of 2018. The fed is convinced that the markets the 48 respondents to this survey that it will be very gradual in hiking rates. Look at whats happened to the trajectory for the funds rate. The red line is the fed. The blue line is the necnbc sury average. Theyre closer than they were after the fed came down for 2016 looking for a 0. 8 funds rate in 2016. 1. 4 in 2017. A halfpoint gap there. Watch what happens as we go on. Almost a full percentage point difference in two happens in 2018 and 0. 6 difference on what the longrun rate is. Here is some of the exciting commentary we got. Fomcs job for april is to talk up the possibility, not the probability. Of future rate hikes without causing the dollar to rise too quickly. I dont envoy them. Another, chair yellen is dovish and continues to punch above her weight on the fomc. Mark zandi, an the hawkish side. Any risks to the Economic Outlook are fadesing. The fed must soon resume normaling Monetary Policy or risk an overheating economy. I think were at a point where the global risks have ebbed a bit. We were in full panic mode. But that was january. Forget that now were at a place where i think were starting to maybe stand up and look around and say, you know what, you have this Unemployment Rate thats still 5 . Growth has been weak. If that clears in the First Quarter we can Start Talking about another rate hike soon. So you said a later and loogsloog looser fed. Yeah. Say that about me and i might slap you. I wouldnt say that about you, becky. I dont know you that well. Yes, you do. You have known me 15 years. I have known you 15 years. 20 with all this, is there just a chance that this is really like make me chase, just not just yet. That this is is we think its going to raise but when we look at the given circumstances, there is no way so well push it down the road and nothing happens this year . I think the fed will go at least one more time, perhaps twice. But what is interesting here is that i think the fed has taken the issue off the boil. As i reported yesterday, if they go in june, that 180day gap would be the largest gap going back to at least 1989 that theyve waited between hikes. Thank you, steve. Back next hour. Yes. Huge information on what wall street wants and thinks will happen in the president ial election. Excellent. Thats a very good tease. Coming up also in the next hour. Squawk box your home for earning home and news. John moeller joins us. And the ceo of eli lilly talking about the changes for his company. Youre watching cnbc. First in business worldwide. Eope still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Earnings and focus, Procter Gamble and eli lilly. The reaction from both companies straight ahead. A man who knows his way around the Corner Office and the board room joins us for the hour. Fred hassen. He oversaw the mega merger with merck and joins us to talk inversions politics and the state of the industry. Is facebook trying to be more like snapchat . A look at cool knew features available on your wall soon as the second hour of squawk box begins right now. Rain drops keep falling on my head. Just like the guy whose feet are too big for his head live from the beating heart of business, new york city, this is squawk box. Welcome back to squawk box, everybody. This is cnbc, first in business worldwide. I im Rebecca Quick along with Andrew Ross Sorkin. Brian sullivan joins us in a bit. Futures slightly higher after a down day yesterday. The markets closed off the lows of the session down modestly yesterday. This morning the dow futures indicated up by about 25 points. S p futures up four points above fair value and nasdaq right now is up by close to 7 points. The nasdaq was down for three sessions in a row yesterday, the first time thats happened since early february. Lets look at wti oil prices. Wti down by about 2. 5 yesterday. This morning its rebounding slightly up by close to 1 . Back above 43 a barrel. Early this morning it was below that. Wti for june contract sitting at 43. 05. Brit at 44. 93. Whats making headlines at this hour this morning. Busy day tore economfor economi. March report on durable goods at 8 30 eastern time. Expected to rebound from a february decline. Case schiller report on home prices at 9 00. The Conference Board Consumer Confidence index at 10 00. Earnings from apple due after the closing bell. Results also due out this afternoon from twitter and ebay. Federal reserve policy makers in a twoday meeting. Fed watchers are not expecting, as weve been talking about all morning, the central bank to raise Interest Rates this time around or frankly anytime soon. Well, maybe a little soon. Couple months out. Fda Advisory Committee voted against center of an experimental treatment for duchene muscular dystrophy that disappointed hundreds of Patient Advocates who hoped for that medicine. It was an emotionally charged day yesterday at this Panel Hearing of outside advisers to the fda. More than 50 Patient Advocates testified publicly at the hearing and ultimately the decision at least on the vote was no. They were basically voting on whether the data were there to support approval of this drug. Lets look at duchene muscular dystrophy. Patients lose the ability to walk by their teens and its often fatal by age 30. A lot of children there in wheelchairs. The parents and kids testifying to the committee. The vote was 7 to 6 against approval on an accelerated basis, essentially whether there was enough data to accelerate the drug to market. We talked about the ceo directly after the hearing ended. Listen to what he said. What was really important for the fda is there was a lot of input from the patients about things that couldnt be captured in a Clinical Trial and some of the things they experienced. I think hopefully that will be used in the overall consideration. In one point that is, you know, that Everyone Needs to know, thepeople who approve the drug are the fda. What dr. Kaye is pointing out this was an outside panel of advisers to the fda making the recommendations. Most analysts are bearish on the prospects and expect the stock to open up this morning down 8 to 10. A rough road ahead for sarepta. Folks still hopeful that the fda could grant a conditional approval. Weve seen this in the past where the panel doesnt necessarily go along with the advisory. Is this a situation where people think that might be the play because of the emotions involved . Or is it too hard to guess at this point . Dr. Janet woodcock made comments encouraging the panel to think about accelerated approval. They argue that, even though they clearly care immensely about this, they want it to be approved based on the science, which they think is there. But this is the argument going on right now. This was the situation that there was not a placebo control factor that went into it . The trial supporting the application of the drug was in just 12 boys. And there wasnt a placebo arm. The Patient Community argued thats not ethical, this is a rare, devastating disease. You cant get boys into the trial who would potentially be taken saline. But the fda says its needed to tell in the drug works. At least the panel says thats needed. Thank you very much. We should tell you about earnings just hitting. Dow component Procter Gamble out with earnings on adjusted basis of 86 cents a share. Thats four cents better than the street had been anticipating. They were looking for 82 cents. Company says revenue came in in line with expectations. 15. 76 billion. Street looking for 15. 8 billion. They did make comments about the krurn currency impact. Less of a headwind but accounted for a 5 headwind in negative currency impacts on the company. The company said that sales would have been flat with a yearago period if currency had been neutral in this whole situation. They say the First Quarter grooming segment. Organic sales fell 1 but the beauty segment organic sales up 1 . Well get more details when we sit down with cfo jon moeller in a few minutes. Bp posting results this morning. Quarterly profits dropping 80 but that topped expectations. The company now says that it could cut Capital Spending even further. However, the ceo, bob dudley, expects crude prices to start to recover towards the end of the year as producers stop work on fields and demand remains strong. Dupont reporting better than expected Quarterly Results, the dow component raising its fullyear guidance as it sees lower currency impact than expected. Last month u. S. Regulators said they needed more time to review materials related to the merger. Fred hassen is here, the partner and managing director at pinkus. Former ceo which merged with merck in 2009. Also a cnbc contributor. Thrilled to have you this morning. I want to talk politics, inversions and the pharm industry. I want to start with valeant because you know joseph poppa. You worked with him at pharma sia. Very well. You taught a class at yale. Yes. In fact, weve done that for a few years. So i assume youre a fan. I am a fan of joe. He did a great job. He launched celebrex, which is a blockbuster. He is a very smart guy and a good exec. Can he be valeants lee iacocca . He can if he gets the space and time to do it. It seems there is a lot of pressure on the company. People looking for quick results. Its not easy when things are not totally known and totally understood. It takes time just to understand what the issues are. Do you think mr. Poppa has even had time to try to get his arms around that . Is he taking a flyer on this . Jim cramer said yesterday its good for valeant that they got an experienced ceo and that says something. But that was not a huge sign of success from him. That its a good first step to actually get somebody with experience. Its difficult to find people who have done restructuring who are ready to come take a job that quicklquickly. Its very hard. Back to the original question. Do you think he knows whats going on there, or is he going on a leap of faith . I think he has to go in there and find out about the information. Hes taken this job before they signed off on the k. Yeah. Which means hes ultimately going to have to sign off on the k. We dont know what his deal is. Sometimes the incoming ceo insists that the previous ceo signs the k. If hes not signing the k, the stock is not going to take that very well. Hes supposed to be coming in to instill a semblance of confidence, right . This is an issue that i think is being debated in there. Hes probably going to have conversations with the cfo as well. He is going to have to learn a lot about the thing that hes taking on here. Let me ask you this. This is the critique on joe p papa. Shareholders would say got an email from a shareholder this morning saying he fended off an offer by telling everyone perrigo was worth more alone. He gets a big bonus for fending off the offer. Makes a forecast in february thats reduced in april. He then makes a terrible acquisition in omega and has to write that down. Hes destroyed all this value and, after all of that, he up and leaves and says, actually, im going over to valeant now for what will likely be a big package. What do you make of that critique . Im not here to defend joe, but i really think that, if you look at the way that whole thing went, that merger apparently did not occur in a consensual manner. To my knowledge the best deals occur when the ceos get together and work. Right. As opposed to sending notes to each other and having it go out there. So the whole thing didnt go off to a good start. But i really think he is a stronger brand guy than a generic guy, and i think hes going to find his base here a lot better than he did running a generic company. We all hope so. Moving to politics or at least to inversions. What is it about the pharmaceutical industry and inversio inversions . Why is it so much more attractive to a pharmaceutical industry to pursue these types of deals . Because i think its a global industry. A lot of the innovation comes out of europe and japan. A lot of those companies have lower tax rates than the u. S. Companies do. And the shareholders, in fact, ask ceos to look at inversions, if they dont, the ceos are not doing their jobs. They are trying to get the lowest tax rate possible. Some of the european competitors like the Swiss Companies do have a lower tax rate. Institutional investors routinely ask ceos, what are you doing about reducing tax rates . Weve been talking about Corporate Tax reform for quite some time. What does the rate have to be . We talk about it. Its almost an abstracts. Everybody says they want Corporate Tax reform. You gets into the details and every company has a different number, and a different loophole and a different situation in which they need to protect. So, i dont know what the magic number is, but anything in the low 20s, maybe 22 , anything down there is going to reduce the pressure to do something about a very high tax rate. And as we know, the u. S. Is an outlier. Highest tax rate in the world. Ireland is 12. 5 . You say to yourself, assuming you cant get yourself to 12. 5 , whats the spread have to be to make it attractive . Some Companies May say i have to go abroad because i can still do better. There will always be those companies and they might still find ways to do that. But the pressure starts to lift off. In my opinion the best deals occur based on operational factors and not based on taxes. Because taxes only occur when you are making money out of a good deal. So really, ceos have to start focusing on operational factors. I think a low 20s number is going to reduce the heat. Also, if you are at your 12 rate in ireland, it doesnt mean that your weighted average tax rate will be 20 . Breaking news at shares of ser epto. The fda Advisory Committee voting against accepting experimental the experimental treatment for its muscular dystrophy treatment it had been talking about. Look at whats happening to the shares. Now down over 50 this morning. Its a drop of 7. 64, a decline of 51 . Again, the full fda could go against the panels recommendation on this and could decide to go ahead and accept the drug. Others have said, look, this is a situation where they could come back with additional therapies. Part of the problem was that there was not a control in this experiment. It was 12 boys using this experimental drug on. Very emotionally charged because the boys who are using it have very few other options. The parents are vocal about this, not wanting a control because they dont think its ethical to give any of the children a saline placebo drug. The impact on wall street has been swift. A decline of about 50 . What do you think of this . I think we keep talking about modernizing the fda. I think one element of modernizing is to really deal with very special diseases of this type. And singlearm trials are the way to go. Its also certain kinds of cancers. And really, what needs a more modern approach to look at these things. If the patient are benefiting let the patient and the doctor make that decision as opposed to the regulators holding the drug off. This is only a situation with very certain types of diseases, youre saying. Absolutely. The gold standards are still the doubleblind placebo controlled trials but there are instances where the singlearm trials really do matter and they should be looked at in a very objective manner. Some of the leading academics still tend to look at things the way things looked 40 years ago. Times have changed. We just need to look at singlearm trials a lot better. Is there a country where you look at the Regulatory Framework for drug approval and you say, thats the gold standard. If the u. S. Were to follow somebody else or even to take two Different Countries and say, if you could merge the way they both approach it, wed be much better off in terms of the type of innovation we could create in this country . Who does that. I ask out of complete ignorance. Im curious. Thats a very good question. When it comes to regulatory science the u. S. Is preeminent. I dont think any other country comes close. Europeans have combined to create a european office. They are pretty good in many instances, but the fda in the last five years has had a bit of a renaissance and are clearly in the lead. About 70 of the new products that come out in the world are coming out of the fda. The shares have been as high as 60 in the last four years. Fred, thank you. Youll be sticking around and well continue the conversation. Procter gamble Quarterly Results hitting the wires moments ago. The Company Beat Expectations on the earnings per share, coming in line with the revenue. The cfo will join us to talk about the numbers after the break. Well talk about the consumer and the global economy. Stick around. Squawk box will be right back. The first stock index musiwas createdoughout over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. Welcome back, everybody. Procter gamble posting Quarterly Results. 86 cents a share. Four cents better than the street anticipated. The Consumer Products giant saw revenue come in slightly below streets forecast. I probably would call it flat. Came in 15. 76 billion versus the 15. 8 the street was expecting. Jon moeller joins us. The cfo of Procter Gamble. Thanks for joining us today. Thank you. One of the takeaways from this is that absent currency headwinds the sales would have been flat with the yearago period. People thinking the dollar is not as much of a problem as it used to be but its still a headwind, correct if. The dollar is a significant headwind. Even though there have been easing recently. About 200 million after tax impacts since the being of december. It continues to be part of our reality. Thats whats informing our choices in terms of Productivity Program we have in place to minimize the pricing we need to take to offset the currency. The price increases, thats always a tricky play whether theyll stick or not. Seems like some of the price increases are sticking . Yeah. In many parts of the world they are. Its a very fluid situation. So thats something we look at every day, every week. Again, the other big item we have that helps us in this situation is the cost saving program. You saw it come through in the quarter. Looking at the margins, quarter gross margin up 270. Core operating margin up 380. Thats net of the effects headwind and net of 130basis point increase in advertising spend. Its giving us the ability to continue investing in markets, to continue to serve consumers and hopefully to reaccelerate topline growth. Back to the price increases, though. Where are you able to put in price increases . Where do they stick . Which markets . For example, in latin america weve taken several rounds of price increases in a country like brazil. Sales were up for us in brazil 14 on the quarter. So theyre holding up nicely in markets like that. Where devaluation has been significant, a market like russia, for example where its approaching 80 , 90 . Were generally able to get pricing through. We complement that with mix improvement and with a strong costsavings program. Fred. John. Congratulations on improving the margins. But if you look at the stock price of p g versus the s p 500 over the last five years, it hasnt kept up. In the end its the revenue, the top line, that drives the margins at the bottom, as you know. P g did a great job buying lots of assets for many years and then went into a cycle of selling off many of the acquisitions that had been made. Going forward, m a will clearly be important for p g. How do we know that this time around this cycle of acquisitions will stay with the company and not be unwound down the road . As we look at divestitures and acquisitions were looking through a much tighter screens in terms of assets that leverage our core capabilities as a company. Where we have the assets, where were able to identify and buy the assets, we can sustainably create value over long periods of time. When we have assets that require a different set of capabilities its more difficult for us to create value. Thats really been the selection process, that is Historical Performance thats gotten us to the portfolio that were going to center on now. Ten categories down from 16 or 17. Ten categories where were global leaders. Ten categories that have historically grown faster and been more profitable that the balance of the company and that benefit from our technologiperhoutechnology powerhouses. In terms of the screen, though, if i were to have asked you that question five or ten years ago when you were making these acquisitions, i would imagine you would have thought it was a relatively tight screen then, no . Always room for improvement. So to the extent that there is a lesson, a specific lesson from those deals, what was it . I think its keep this very narrow screen in terms of assets that we can really perform with. There are plenty of them out there. Look, were in great product categories that are growing 3 to 4 globally. There are other categories out there that fit that profile. As long as we stick with that, i think well be just fine. Jon, let me ask you about the volume. Thats always something the street tends to key off of too. Looking across beauty volume down 5 . Grooming volume down 6 . Health care down 3 . Baby, feminine, family care down 2 . Fabric and home care came in flat. On an organic basis you were looking at growth in that area but it was organic volume growth in the areas i mentioned before. Is that a reflection of the price increases . Does that concern you at all . You mentioned grooming with a negative volume. We have a very Large Business in russia. Because of devaluation it put us in a negative gross margin position. We need to adjust for that through the combination of things i talked about earlier. That does impact volume in the short term. Typically we see the Volume Impact for nine to 12 months. Weve been in this situation many times before. And it reverts. But its definitely something we need to continue to stay attuned to. The point that was made by your guest earlier is absolutely right. We need to get this top line growing. Thats what the Cost Savings Program should enable us to do, reinvest in the topline growth. Jon, thank you. We appreciate it. I hope to contribute with the razors and blades. Hope to see you soon. Still to come, the ceo of drug giant eli lilly joins us at the bottom of the hour. Up next. Nike cofounder has a message for entrepreneurs. Just do it. That story coming up in just a element mo. I want a new drug, one that wont make me sick left me sleeping in my bed, i was dreaming but i should have been with you instead wake me up before you go, go, dont leave me hanging on like a yoyo wake me up before you go go, i dont want to miss welcome back to squawk box. First in business worldwide. I am Rebecca Quick along with Andrew Ross Sorkin. Were waiting for Brian Sullivan. Overslept a little. Thats okay. Hell be here soon. Stories front and center. Shares of sarepta plunging in premarket trading. Check out the shares. Theyve been down by over 50 this morning. This all comes after an fda panel recommended against approval of the drug to treat a form of miss clar distrough. The panel said the drug had not proven effective. We are an hour away from the latest reading on durable goods orders. Economists looking for a 1. 7 increase for march. Check out shares of spirit airlines. The Budget Airline earning 23 cents a share for the latest quarter. Helped by higher Profit Margins. That stock up 3. 6 . Phil knight thinks the nation is losing its entrepreneurial edge. He says students are smarter and more competent than in his day when it comes to starting a business but theyre also far more pessimistic. If an interview he says that, yes, the economy and wages are part of the problem but along with Business Cycles there are emotional cycles. He says hes also looking at the cycle bouncing back. Today on skwoik squawk on the has an interview with him. He is planning to step down. Eli lilly reporting firstQuarter Results. Missing estimates by two cents with adjusted quarterly profit of 83 cents a share. Revenue above forecast. Just about every company that comes on the show these days has a terrible top line and maybe an okay bottom line. This is the opposite. In the good category. Drug maker raising the fullyear outlook. John lechleiter joins us. President , chairman and ceo of eli lilly. Am i right . Can we disregard the other number and say, good for you . Andrew, as you know, we dont manage for the quarter. Were pleased, as you note, that we got good topline growth. 5 . If you take currency out which, again, hurt us this quarter. 8 topline growth. Mo most of that is coming from new product launches. Weve had six new product launches starting in 2014. Two drugs currently under regulatory review. Seven more in the latestage pipeline. As we said several years ago, we hoped at that time lily would be a new product story. I think thats proving out and were pleased with the First Quarter. John, i noticed cialis. You have to be happy. Increased revenue by 31 . What happened . There could have been some quarter on quarter comparisons. There is price from the u. S. As cialis nears the end of its life cycle. Its still an outstanding product for us. As you point out, it was a significant contributor this quarter. Fred hassan is here. So, john, congratulations on a very good top line. Question on cialis is you have the once a day product being advertised on television. Is that getting a lot of use for bph or is it primarily for ed . For both, fred. As you look at the prescription trends the onceaday version has overtaken the episodic use version, reflecting the broadened indications into enlarged prostate which we got several years ago. Sales of humilog have fallen 7 . Some of the new diabetes drugs are trying to cross the line. Are they going to make it, if you know what i mean . We have a very complete diabetes drug portfolio now which includes two oral medicines. True lisity has launched very well, the lilly diabetes drug. With respect to humelog this quarter, the decline reflects a catchup on some invoices, essentially, from earlier quarters that we have to true up based on the way these come in and the particular accounts where these drugs are placed. So the underlying growth for hu humilog, it continues to grow and the prescription trend lane in the u. S. Tends to look very good. Very quickly. Congratulations on the very good product for diabetes thats now has Outcomes Data. Very good cardiovascular Outcomes Data. Why does that product not do a lot better with the very special Outcomes Data that you have . Fred, we think, with the endocrinologists, sort of the Specialty Group that treats many people with diabetes, we have seen good new to brand prescription growth. Obviously, while we have the Outcomes Data we cannot promote that until the fda gives us approval. We completed the filing last year and hope to get word back this year that would enable us to really promote and share that information more broadly with physicians. John, i know you raised your profit forecast for the full year based on a tax advantage that you had for the First Quarter. You raised it to 3. 60 a share. Street was at 3. 54. Did they anticipate the tax advantage or were they ahead of it because they expect better numbers just on operations . I dont think they would have anticipated have onetime tax event that we just reported this morning. Thats the reason why we raised the bottom line, becky. We also changed the line item guidance including revenue, gross margin and a few other line items to more closely reflect Current Exchange rates which are a little different than what we had built into our plan earlier this year. Many Currency Exchange will be a bigger headwind than anticipated but you like the numbers anyway because of the tax gain . Actually we think currency will be a little less headwind on the top line so we raised our top line. Having said that, we are getting hurt by currency this quarter on a nongaap basis. Our earnings per share down 5 . If you would have taken currency out, earnings per share would have been up 5 . Currency is still a headwind but our guidance adjustment today at the top line at least shows its going to be a little less of a headwind than we had anticipated for the year. So, john, very quickly on industry matters in this election cycle, unfortunately both sides of the aisle are talking about price negotiations with medicare, which is really, as you know, a form of price control. Whats the industry doing to get the message out . Because if there is uncertainty on pricing, obviously r d money will dry up. Absolutely true, fred. I think we are working hard to get the message out. I think that this is a tough issue because it doesnt yield itself to a sound bite. I think it was interesting the other day, ims, which as you know provides a lot of information on the industry, came out and said that branded prescription medicine, which is pretty much our core business, rose the Net Effective prices increased 2. 8 in 2015. And the government has already said they expect the prices of medicine to pretty much track with the price increases and price growth in Overall Health care for the decade or so ahead. A, we have to get the facts on the table. But b, i think we need to tell a more compelling story about whats possible from our laboratories. I think most people recognize its not medicines that are expensive. Its chronic disease thats expensive. We need cures for alzheimers, we need better treatments for diabetes. While we have made a lot of progress against cancer, there is much more progress to make. Thats whats possible today like never before. I think its important that we not only defend ourselves on the price side but that we make it clear whats possible and what can happen that will ultimately improve the health and wellbeing of the american people. Because i think thats what everyone really wants. John, we appreciate it. Great to see you this morning. Thank you. In the meantime, earnings parade continues. Investors gearing up for what could be the most important report of the earnings season. Apple reporting after the bell. Don chu joins us with the numbers. Good morning, becky. The reason why everyone keys on apple is because, according to howard silver blatt, he says 5 of all operating profits in the s p 500 this quarter will be driven by apple. So apple accounts for 5 of all profits in the s p 500 this quarter. If you take a look at some of the issues why were thinking about apple so much these days, the reason why is because iphone sales could be forecast to show the first decline ever on a year over year basis. As for the stock and how it moves, we asked our Data Patterns to look over the past eight quarters, two years worth of Quarterly Earnings reports. On average, twothirds of the time trades positively. Up a quarter of one percent the day after the earnings are released. Over the last five years worth of earnings reports, it becomes more of a flat trade here for apple. Only about half the time its higher. Now, as for what to look for in terms of earnings per share and the revenues. According to a wall street Analyst Consensus analysts youre looking for 1. 97 per share. Our data partners use crowd sourcing and poll around for investors and insiders and watchers. They think earnings per share will come in slightly better and revenues as well. Things to keep an eye on earnings per share, the revenues and iphone sales. When we return author of the new book common stocks and common sense will be here. Ceo of green haven associates will join us to talk markets. Back in a moment. Rise and shine thanks for waking up with cnbc. I im Brian Sullivan. It is go time. Get up, get moving and make your best move today. Good morning, everybody. That was brian. We did an alarm clock app on cnbc. Brian oversleeping this morning. Thats why we played it. Andrew and i have both done it. Its not your normal schedule. You just came back from the middle east. Coming in here is not easy. When this happened to me cameras were outside in the parking lot playing the song call me maybe. Thank goodness the producer called. 100 my fault. I set the alarm on my iphone for 3 40 p. M. Not 3 40 a. M. So kids, thats one to grow on. A. M. p. M. Difference. The show is fantastic. I listened while sitting in traffic on the way . Tim cook should know this. I have the same problem. A. M. And p. M. . You can mess it up. Thank you for being kind. It happens. Happens to the best of us. Earnings season kicking into high gear. Markets have been great unpredictable. Investors searching for safety. Here to tell us where to hide and about a new book thats really awesome. I suggest you read it. Ed wachenheim. He has been at the head of Value Investor green haven as a ceo running between 5. 5 and 9 billion. Enjoyed an average annual return in excess of 18 . He has a new book called common stocks and common sense. Its out today. Well talk about places to hide in a moment. I want to start with the book. The thing about this book i have read a lot of investor books. This is not even that really. This is about the emotional sort of quotient in terms of how you think about investing, because investing is as much sort of an intellectual exercise as an emotional one. Explain what you mean. First of all, i enjoy the business. So when you invest and you find an idea, its exciting. There is emotion to it. When you decide to buy a stock after analysis, there is emotion to it. I am buying a stock. I want to get the stock. I want to get it at a good price. When the stock goes up there is emotion to it. Unfortunately when the stock goes down there is emotion to it. Its not a passive business. The analogy might be baseball. If i am at the bat and i hit a home run, im excited and the team is excited, especially if it wins the game. Over the years friends and clients ask me what do i do for a living. And the response is, i come to the office every day, how do i spend my time . I look for ideas. I research companies. I analyze companies and i buy stocks. And i do that with a passion because, if you dont have a passion, im not going to be successful. You talk about being able to hold on to stakes in companies when they are very low and when most people emotionally would not be willing to hang on. And also being willing to sell when otherwise you would want to keep going. Right. I think i am a contrarian. Thats very important in this business. Because you want to buy low, and you want to sell high. So when you are buying low, thats when the news is negative. Right. Thats when youve got to buy. When you sell, the stock is up, and the news is positive. Its interesting, ed. You said you were passionate about stocks. Should we with passionate about stocks, or should we be passionate about companies . Well, i am judged based on how all my stocks do. So i have to be passionate about stocks. Underlying that, of course, is how well the company does. If the companies dont do well i study companies, i dont study stocks, to the answer. But the report card is the stocks and how well they do over a long period of time. At the beginning of the segment we said youd help us find places to hide in this crazy market today. The Financial Services companies are out of favor. Goldman sachs. The stock closed last night at 165. With the earnings that we project, the book value in a um can of years, middle of 2018, about 180. To buy Goldman Sachs, materially under what the book value will be two years from now, to me as a Value Investor. Its a drill and flow. Why are you not convinced that theyre going to continue to struggle given whats going on with the Regulatory Environment and given whats happening in the economy at large . Right. The economy really shouldnt be a problem for them. The Regulatory Environment in terms of the Capital Requirements could be a potential problem, but for a Strong Company i think there is a Silver Lining. And the Silver Lining is that, in Market Making where Goldman Sachs has most of its capital invested, the company last year earned a 7 aftertax return. That is pretty low for a company that is probably the best along with maybe citigroup and jpmorgan in marking make. If Goldman Sachs earned a 7 return, a lot of weaker competitors earned even lower. With the high Capital Requirements and lower returns for competitors bein, many competitors are dropping out. So theyll pick up market share and wider spreads. You like whirlpool. Why . Its a company, of course, that sells appliances. The appliance market has been down since the recession. The average age of appliances is old. Appliance sales should be strong. Whirlpool made an acquisition of about 350 million of synergy savings. Whirlpool is benefiting from lower raw material cost. Did you buy in january . I dont remember if we bought some in january. Weve enoed the stock would have been a good time to buy. We bought the stock several years ago when the stock was in the 70s. So we dont have a complaint. Ed, thank you for coming in. Total pleasure. Coming up, more from our guest host, fred hassan. Its primary day, the battle for delegates getting tighter and tighter. Well hear from delegates supporting both candidates coming up. Check out your futures. Indicated a higher open. I am benedict arnold, the infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound go to ziprecruiter. Com and post your job . I wont. To over 100 of the webs leading job boards with a single click, then simply select the best candidates from one easytoreview list. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer2 shoshow me more like this. E. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Welcome back, everyone. Fred hassan is our guest host. Partner and managing director of Warburg Pincus and former ceo of scheringplough. We appreciate what you bring to the table. Its pretty unique. It is a primary today in five states. This election cycle has been very heavily charged when it comes to drug pricing. We know a lot of things that have happened to this point. How do you think this plays out in this election cycle and Election Year . I think there has been a big change in the last five years. Employers have been passing drug costs on to employees more in the last five years than ever before. About half the population now are in highdeductible plans where they face the early costs very quickly, out of their own pockets. This creates a lot of Price Sensitivity to drugs. If you look at the overall reimbursement, hospital costs are reimbursed 95 . But drug costs are only reimbursed 80 . So there is definitely more Price Sensitivity for consumers. And it is a subject that does play up a lot in election cycles. There are valid reasons for this. Its not playing out in this election cycle if it werent for some bad actors. We are talking about Martin Shkreli and players like valeant who have gotten into markets where theyve cornered a drug, know they can jack it up and no one can come in and compete with them. Theres valid situations from bad actors that play into this. Some of these instances also occurred because commercial drug plans were not watching what they were paying for. They were letting the smaller products get increased dramatically, and they were only focusing on the highvolume products. I think the big sign thats occurred now for the the big signal, is that, if i am a commercial drug plan, i should be watching out for the smaller ones that are also going up like crazy. And i think there has been a big change in the last year. You are going to see a totally different picture going forward. The other thing thats changed quite a bit is the fda has become more sensitive to these shortages. Fred, thank you. This was a great hour. Thank you for helping us through it. Thank you very much. I really appreciated our two hours together, fred. When we return decision 2016. Five key primaries today. They could be make or break for many of the president ial hopefuls. Well be joined by a trump supporter and a cruz supporter to discuss the race for the white house and why their candidate is the right person for the job. How was your commut . Good. Yours . Good. Xerox real time analytics make transit systems run more smoothly. And morning chitchat. Less interesting. Transportation can work better. With xerox. Thank you for calling. Well be with you shortly. Yeah right. Xerox Predictive Analytics help companies provide a better and faster customer experience. Hello mr. Kent. Can i rebook your flight . Im here Customer Care can work better. With xerox. Wait im here mr. Kent . Earnings alert. A flood of quarterly reports. A host of household names including apple after the bell, the results, the Market Reaction straight ahead. Plus, the race for the white house. Five States Holding primaries today. Could this be a deciding blow, or is this fight going all the way to the Convention Floor . Delegates for donald trump and ted cruz debate live here on squawk box. Move over, oprah. There is a new book club in town. An nfl superstar goes long with his recommendations. Could this be a lucky bet for the Publishing Industry . The final hour of squawk box kicks off right now. Live from the most powerful city in the world. New york. This is squawk box. Welcome back to squawk box, everybody. This is cnbc, first in business worldwide. Im Rebecca Quick along with Andrew Ross Sorkin and Brian Sullivan. Joe is out today. Were 30 minutes away from breaking economic news. March durable goods due at 8 30 eastern. The headline number is expected to raise by 1. 7 , that would be a big turnaround from the 3 decline the previous month. The futures. This morning things have been slightly higher. Things have picked up a little bit from where we were earlier. Dow up about 45 points above fair value. S p up by 6. Nasdaq up by 11. After a down day for the markets yesterday but a day where the markets ended off their worst levels of the morning. In the early trading in europe, relatively flat. Theyve been here all morning long. The dax and cac flat. Ftse up. 4 . Italy up 1. 8. Spain ibex up 1. 4 . P g saw negative impact. Core operating profit marge ings 300 basis points higher compared to a year earlier p gs ceo joined us in the last hour. If you look at the margins, core gross up 270 basis points. Core operating margin up 300 basis points, thats net of the effects head wind. Its giving us the ability to continue investing in markets, to continue to serve consumers and hopefully to reaccelerate topline growth lil. Eli lilly missed by two cents but revenue above forecast. It was helped by selling more product at higher prices though the results were negatively impacted by currency fluctuations. Eli lillys ceo joined us also. We have good topline growth. 5 . If you take currency out which hurt us this quarter, 8 topline growth. Most coming from new product launches. We had six new product launches starting in 2014. Were pleased with the First Quarter. 3m beating the street. Saw increased Profit Margins during the quiet, thouarter, th negative impact from currency fluctuations. Dupont beating the street and raising outlook for the full year. The Company Planning for its mergen with dow chemical. Bp reporting better than expected profit for the latest quarter as well. The oil giant cutting the fullyear spending and said further cuts were possible. Coach. Helped by improved operational efficiencies. Company is says its on track to return to positive north american comparable sales during the current quarter. Hershey earnings coming in also better than expected . Noticing a trend . Revenue was slightly below street projections. Hersheys saw a negative impact from currency fluctuations just like p g. Hershey did increase annual savings from productivity gains. This could be the big stock sorry of the stay. Sarepta therapeutics getting a negative recommendation from the fda panel. Saying the drug hasnt been proven effective. The full fda is not required to follow the panels recommendations, in other words, the fda could still approve the drug. Still, investors are taking it out on sarepta. That stock is down 45 this morning. A stock you just heard recommended a few minutes ago. Whirlpool missing the mark. Currency fluctuations the primary negative. But the company upbeat, though, on other factors during the quarter. Whirlpool announced a 1 billion Share Buyback program. Fed kicking off its twoday meeting today. No policy changes expected but investors looking for hints about whether the fed might raise rates in june. Cnbcs exclusive fed survey is out. Steve liesman teased us in the last hour. Hes joining us with data on which candidate wall street wants to see in the white house, steve. There is a difference between who they think will be in the white house and who they want to see in the white house. Fascinating results from the 48 respondents including economists, Fund Managers and strategists. Here is the number. 80 believe Hillary Clinton, the democratic frontrunner, will win the president ial election in november. 13 say donald trump, and 7 the third choice, dont know, zeroes, goose eggs, nothing for sanders, kasich and cruz. No belief on wall street that either one of those three will win the white house. That is different from who they think should win the white house. We asked them who has the best policies for the economy and the stock market. Once again, the ohio governor, john kasich, wins the contest. 48 say he has the best economic policies. 50 say he has the best policies for the market. Hillary clinton start of just barely in the second spot here. Ted cruz in the third spot. Interestingly, support for donald trump, who was sort of in the low doubledigits in our march survey, now down to just 4 on both. So support for donald trump eroding on wall street, at least among our survey respondents. Then sanders with a big zero right there. The effect of the president ial campaign on the economy seen as being negative. Let me get to one other thing first. The best president ial election outcome for the economy, interesting, support for republicans this is sort of generally tends to be when we ask these questions during campaigns, tends to be more republican, but now you can see thats dropped by 10 when we asked what the best outcome is for the election. Just 30 say republicans. Its eroded as well for democrats, 9 saying a democratic victory. The big one here, i think wall street is exasperated and confused. 37 saying they dont know anymore what the best outcome is. I dont know if we have the other slider. The effect of the president ial campaign. 61 say this campaign is having a negative effect on the economy. 30 37 say no effect and 2 saying positive. John roberts writes, with the current tenor of the president ial campaign and many of the policies being floated by the candidates can in no way be considered positive for the equity markets. Art hogan says the economy is doing better than we get to hear about in the election cycle. The sky is falling rhetoric will cease as soon as the election cycle is over. You guys can read about this on cnbc. Com. There are two pieces, one on the results of what we think will happen with the fed this week and then on the campaign as well. Becky, if you could just tell brian to go like this, he has a little sleep in his eyes still. Aw did you brush your teeth, man . I thanked becky and andrew for being so supportive in my time of need thats not me, brian. Just go like this, brian. Like this. I deserve it. Hey, when i have been late, i get hammered too. I tell you something, when the phone rings at 5 30 and youre supposed to be in the studio at 5 30, the heart goes like this. Weve all about there. No need for coffee today. 100 beats a minute heart rate coming into the city. All traffic laws were violated, though, on the way into work. Nypd, are you listening . Five States Holding primaries today. Connecticut, delaware, maryland, pennsylvania and rhode island. Now that john kasich and ted cruz joined forces some saying an open convention is looking more likely than ever. A supporter is delegate for ted cruz and the former head of north dakotas rnc and donald trump. He is an unbound delegate. Steve liesman was talking about a survey of economists on wall street. As far as theyre concerned neither of your candidates either will win or should win. S shannel . I think as time goes on theyll see that ted cruzs policies are the right ones for the country and the economy. He needs to continue introducing himself to people after he wins the primary. Gary, your thoughts . First of all, there is a big difference between wall street and main street. That shows a disconnect wall street has with the people across america. The people are behind donald trump. Well see a rally behind him as soon as he wins the convention in cleveland. He is in the lead and expected to be the frontrunner in the five primaries happening today. But gary, he can have the people on his side and not necessarily walk away with the majority of the delegates, especially if you look at a big state like pennsylvania. I think Something Like 17 of the delegates there will be bound by the popular vote but another 54 delegates are unbound and can do whatever they want. What do you think about that . I will give ted cruz credit for doing a great job on the ground game, but he has played some shenanigans as hes been working to get delegates who are actually going to be representing that particular state when Donald Trumps run. I think its getting bad play across the country. So i think whats going to happen is the Trump Campaign im glad is responding and getting a great team in place. I am confident hell have 1,237 going into cleveland. Its an act of desperation is what were seeing from ted cruz and john kasich. They know theyre down to the last straw. After today youll see the momentum from new york that is building. While everybody is excited about a contested convention, i am getting more convinced there will not be a contest and first vote required beyond one. Chanel, whats the game plan for ted cruz . Does he have to win and take home a lot of delegates in california . I think he has a good strategy to prevent donald trump from getting to 1,237. I think thats part of whats going on with teaming up with kasich. I think john kasich has to make the case that he is not simply a spoiler and that he is not simply taking votes from ted cruz and so thats part of the narrative and why he is doing that. But i think ted cruz is well poised to win indiana, to do very well in california, to make this a convention thats decided on the second or the third ballot, and i think that we are going to see it go to a second or a third ballot and ted cruz is going to do very well and become our nominee. Chanel, i understand the rationale for how you get there. I understand that these are the rules, these are the rules that have been in place for decades and decades but the rules have not been tested in any real way in recent memory. A lot of voters out there in the republican primary who didnt understand that getting into this. Seems like donald trump himself may not have understood how some of this game is played. I wonder what happens if you win the nomination on a second or third ballot but you havent come anywhere close in the popular vote, for all of these primaries that have been held. How does that impact the strength of your candidate in a National Election going up against a democrat. I think it cuts both ways. I think large numbers of voters have also voted against donald trump, so we would see that regardless of which of the candidates was our nominee. But i think Republican Voters know that Hillary Clinton would be a disaster for the supreme court, for our economy, Foreign Policy and theyre ready to rally behind our eventual nominee. Gary, just thinking through how all of this works, obviously the rules are presenting a bit of a problem for mr. Trump. He didnt think that these were going to be issues but now has to confront them. Momentum could change as early as tomorrow morning depending on what happens in the five primaries but how does he go about the game at this point . What i am encouraged is theyre starting to engage the delegates. Its coming down to about 300 to 400 delegates that are unbound because you have the pennsylvania 54 today from those congressional districts. They arent declared who theyre for. The candidates want, but many voters dont know which candidate theyre supporting. You have 112 members like myself from north dakota thats unbound. Many have not declared. 168 rnc members, and many have not declared. 300 plus people may be unbound. If donald trump is 50 to 100 short going into it, hell get his fair share of them and thats why hell win in the first ballot . Hes 250 short . Then its a bigger challenge but people want to elect a winner. I think Donald Trumps numbers have gotten stronger. I saw yesterday he is within striking distance of hillary. He hasnt even started on her yet. The battle has been tough in the republican trenches but the Trump Campaign is very much engaged. They are very much engaged in the delegate process across the country, which has been different. There will be pushback but we have a short window to get into cleveland. No question america will rally behind a strong candidate for running this country. We just saw barack obama traveling to europe. He continues to show weakness. America wants strength and they want someone with passion, and energy and donald trump will do that. My sense is that it will come together after california. Its going to be apparent. And then youll be down to 50 to 100 people. I think theyll be working hard to convince and it will be obvious that donald trump. I predict a first ballot win for trump in cleveland. Gary and chanel, thank you both for showing up today. Great to see you. On deck. Twitter gearing up to report results. That stock down twothirds over the past 12 months. 66 declines. Well preview. As we head to break, you no he whats not down . U. S. Equity futures. You are watching squawk box. Always on time and first in business worldwide. The eclass has 11 intelligent driverassist systems. It recognizes pedestrians and alerts you. Warns you about incoming crosstraffic. Cameras and radar detect dangers you dont. And it can even stop by itself. So in this crash test, one things missing a crash. The 2016 eclass. Now receive up to a 3,000 spring bonus on the e350 sport sedan. Steve, other than making im here atme move stuff,rade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. All right. All you twitter heads. Twitter getting set to report its First Quarter results after the bell today. The stock has been what wiallop. Down 66 over 12 militanonths. Joining us Senior Research analyst on twitter. A disappointing stock for most people over the past year. What do you want to hear twitter say tonight . I think the most important thing is how they articulate the story going forward, how they articulate the differentiation versus competitors. How theyre developing new ad products. How theyre really the number four player in Digital Advertising globally outside of china. I think they have done a poor job in general on that front. As relates to the users story and Revenue Growth story, i mean, it will be what it will be. The biggest problem has been, in my view, the story focusing on users from the time of the ipo was always a mistake. I hope they shift away from that story. We talk a lot about the twitter story. What about the platform itself, brian . Is there a chance to the current structure of twitter, the way its built is simply not going to resonate with most people . I never thought it would. A complete restructure and restrategization. If they want a product that appeals to everyone, it should be a different product. That would be my observation. Twitter, as it is, has never been for everyone. Its never been a ubiquitous product. Its possible they can figure out how to thread that needle and figure out what a product would be to keep the characteristics of twitter as we know it and at the same time be broadly appealing. I have always been skeptical of that. I say this as someone who is optimistic about twitter as an advertising platform and optimistic about its longterm durability. Impact on society, politics, news, et cetera. That doesnt mean that it can ever be facebook. I think the biggest mistake i ever vestewas people anticipati that it could be. Facebook, instagram and snapchat have arguably gott mos of the buzz over the past 12 months. Instagram and snapchat have come into their own of late. Is there room for four big social media platforms, brian . You should flip it around on snapchat. Theyre a long way from being at the maturity that twitter is. Instagram got there suddenly by being part of the facebook organization. You are talking about one enterprise in facebook which is obviously a stellar property, stellar organization, et cetera. The thing twitter has done is monetizing and turning the platform into a successful advertising product, that is not easy to do. I think twitter has done that incredibly well. Take the nfl deal, for example. I dont think people that investors, press or other fully appreciate the importance of Something Like that. Its a lot like amplify when they announced that. It gives them an excuse to have the conversation at a much higher level with much greater r reg larity. Tensecond answer. Whats the most important number tonight for investors . The one number . Revenue growth. Brian, thank you very much. Appreciate it. When we return, is tiger getting back in the game . Fans are excited. Well tell you why. Move over, oprah, there is a new book club in town. Well tell you how the colts quarterback is planning to change up the reading game. Squawk box will be back after a very quick break. Well tell you wh. Big announcement in televised musicals. Actress and Singer Jennifer Hudson and tony award winner tony harstein the stars of hairspray live. Shell play maybelle and hell play Edna Turnblatt the role he created and won a tony for in the stage version. It will air december 7th at 8 00 p. M. Eastern from los angeles. Theyve had a number of successful Live Performances on nbc. In sports news. Tiger woods has officially registered to enter the 2016 u. S. Open. Threetime open champion has not provided a date and time for his return to championship golf but has done what is required to play at the open in june. Woods hit the links for the first time yesterday since a tie for tenth in the wyndham championship last august. He has been rehabbing and recuperating from multiple back surgeries. For the first time ever, the founder of nike telling his story. Phil knight, who is preparing to step down as chairman this year, has never openly talked about the past or how he with a group of runner and accountant buddies formed blue ribbon sports which ultimately grew to become nike. At age 77 one of the most influential entrepreneurs in american history, ready to share his story. His new memoir being published today. Hell sit down for a rare interview today on squawk on the street. 10 30 eastern time. I am absolutely going to be watching this. I am fascinated by him. He speaks so infrequently. When you get a chance to hear him. He wrote his own book. Andrew luck turning a new page, the Indianapolis Colts quarterback announcing the creation of his own Online Book Club with two categories. One for veterans readers and one for rookies. Guest athletes will take over while he is on the field. By the way, his first book picks are maniac mcghee by jerry sp spenli and boys in the boat. The best book i have read in five years. Great book. Coming up, breaking Economic Data just minutes away. I know you have been waiting for durable goods. The wait is almost over. Your durable goods numbers and Market Reaction when squawk box returns. Welcome back to squawk box were looking at preliminary read on march durable goods, up. 8 . Pretty much exactly half of the expectations. Lets go through the internals. Extransportation down. 2, expecting up. 5 . If we look at a good proxy for business spending it would be capital goods orders, nondefense, exaircraft. A goose egg. Unchanged. Looking for somewhere between up. 5 and up. 7. When it comes to last month, we know it wasnt a good month. Were there revisions . Subtle revision of headline from down 3 to down 3. 1. Bigger revision on capital goods exaircraft. Proxy for business investing down 2. 5 last time, down 2. 7. This is preliminary and things can change but not the direction we want to be moving. Interest rates are moving to the up side though they have backed up a basis point or two on this data. You want to watch europe. Their meeting was last week but boons, two weeks, three trading sessions ago closed at 8 basis points. Today trading at 28, 29 basis points. The yen. We want to watch closely with the bank of japan coming up. Sully, you know what, you did a lot of traveling last week. No problem on the tardiness this morning. I cant believe how many people were talking about it. Get a life out there, folks back to you. But somebody did have a great van halen quote. I dont feel tardy. Rick, thank you very much. Is that from hot for teacher . It is. Steve reaction to the data. My action is muted, brian, we were hoping for a much better rebound. This was half of what was expected. A precipitous falloff in february. Good in january. Bad falloff in february. Some data has said the isms turn around. This is the part of the lackluster doldrums of the economy. The idea that we have got good employment numbers, decent employment numbers but the investment side of the economy is relatively muted. We have declines here in we expected them in motor vehicles, down 3 . But things like electrical and appliances down 3 after a 3. 5 decline in february. Given whats happening with housing which has been pretty good except for yesterdays number, you would have expected a little bit better there. Trying to think what else. Bottom line, the nondefense company goods, exaircraft unchanged. Shipments number down half a gdp point. Certainly not going to help it. The key here, can we get the investment side of the economy going here and how to get profits and cash on the sidelines of the Companies Invested into the economy. Steve, thank you for that. We should tell you we have a quick news update. Information coming out between gwyneth and tribune publishing. Yesterday now hearing from the ceos of both companies. A war of words, i must say. Tribune publishing which has said thus far talk to the hand or at least we dont want to talk to you says ginettes offer theyre reviewing the bid but blaming their behavior has been erratic and unrely able. The ceo saying theyve been playing games that ginette rather, tribune was surprised by ginettes hostile approach and claims there was a dinner scheduled between the two and they canceled the dinner and this was in bad faith, effectively or implies so. Gannett says let us know where and when youd like to meet we can provide your shareholders with the best available price were eager to get a transaction with the tribune. I can tell you exactly. One side tribune says there was a dinner and you canceled the dinner and that represents a problem. However, the dinner had nothing to do with the negotiations. The dinner had been scheduled by some effectively lowerlevel employees prior to gannett making after offer to tribune. Once the offer went in they canceled the dinner because it nothing to do with it. The people going to the dinner didnt know anything about the offer. Right. Now, of course, tribune turns around and says, well, you canceled the dinner. Its like a little bit of a high School Situation here. But everybody is lying to each other. There are a lot of i would put on the tribune side more there are a lot of bad deals that are done. Yes. If you go back and somebody writes a book, maybe yourself, andrew, about the best deals of all nitime. How could you not putting Knight Ritter selling to mcklatchy as one of the best deals of all time. It was a 71 stock. Its now a dollar stock. Went from 71 to one. Knight ritters sale. You wonder if there is any last best buyer for tribune if its not gannett. Well see over the next couple weeks how tribune is about selling itself. Adding a couple market voices to our broader conversation about the Federal Reserve. Joining us now brian belski, chief investment strategist. John, starting with you. Do you expect an Interest Rate increase from the Federal Reserve when they get their decision tomorrow at 2 00 p. M. . No. We dont expect an Interest Rate increase. More importantly, we would highlight that there has been a big pivot ott the Federal Reserve. Last year it was focused on rate hikes. Everything they said and did seemed to be engineered for the rate hike. That actually came in december. In contrast, this year the fed is focused on Risk Management, being cautious. Thats a big and important pivot. And tomorrow we expect more of the Risk Management framework. In particular, we dont expect anything in the statement tomorrow to suggest an urgency to hike rates. Theyre not in a hurry. Theyre still cautious and gradual. John, then, so its widely believed that they will not raise rates again until they have a press conference at a meeting. This is not a press conference meeting, but june 15th is. Do you think june 15th could be the scene of another rate increase . So what i would say is i dont think the press conference is essential. What i do think is that they need to have some compelling reason to raise rates right now. I think, in their current stance of being gradual in the Risk Management that i mentioned there needs to be some change in the landscape, some reason for them to hike rates. You dont see it in growth. Well see growth on thursday, probably below 1 for the First Quarter. Youre not seeing it in the inflation landscape. Inflation dynamics have not really changed. Wages still under pressure. Inflation expectations are still too low. Its not a press conference they need. Instead they need a compelling reason to do so and i dont think thats there in the current landscape. Brian belski, lets see if Brian Sullivan gets his wish that the fed be hikes in june. It seems like the street is sort of chill with the fed right now. It was very excited and concerned in january that there were going to be four rate hikes. If they do it in june, its six months. There is no sense at all that the fed that john is really right, that the fed is no longer hell bent on raising rates and even a june rate hike is not something the street could be expected to get up in arms about. I think chill is probably a pretty good word to explain it. I think the key thing is that the fed needs to rebuild credibility. Especially how they managed the increase in the Fourth Quarter last year and then how they became, we think, now overcorrected itself to become too dovish. I think the statement we see that will be coming out is actually i think there is a good chance they could be starting to signal that things are Getting Better without saying that. Again, its not what we do, its what we say. We believe the statement that well see could potentially lead us to a situation where they raise rates in june because things are getting a little bit better with respect to the economy. Remember, the economy is a long, drudging thing. This has been the slowest recovery in the history of recoveries, it will take some time. We think, if they raise rates, june is probably the best date to do it, but i think at the end of the day, 2015 and 2016 is about the transition away from quantitative easing and focusing on the fed and back into fundamental investing and the sooner we get on that road, the better. This is this weird thing, john. I dont want to get too in the weeds. The market is pricing in more inflation than anytime in a while. If you look at the difference between shorter dated bonds and treasury inflated protected securities, the gap has grown. I know it seems deep into the weeds. Were under 5 unemployment. Inflation expectations are ratcheting up. Why are you so sanguine about the possibly for a hike . I dont think thats in the weeds at all. Its a firstorder issue, i think the fed is very focused on that. In some sense Inflation Expectations has the best mirror to show the fed whether they are too tight. Inflation expectations have moved up, true, but theyre still slow on a historical basis. In the median term its still below the feds target. The market is telling the fed clearly, i think, the policy is too tight to meet the feds objectives. Well see if thats right but the markets send a very clear signal. I think youre right to focus on that but the signal i take away is that Inflation Expectations are too low right now and thats a concern for the fed rather than going the other way. I think there are two things people are forgetting. Number one, that we are entering into a less negative situation with respect to 2016 versus 2015. Earnings will be better based on a comparisons and the commodity basis is bottoming out and i think a lot of people are forgetting that. Were still in this under promise over deliver snare knce with respect to earnings. The fed has more to chew on on a positive side. I was going to say, john said it well at the beginning. It boils down to this. The fed is in a showme world. Its not preemptively moving to ado head off theoretic improvement. Its not going to ged aheget ahs thing. Its going to wait to see before it acts. Thank you both. Apple set to post Quarterly Results offer the bell. With slumping iphone sales is apple at risk of going bad. Well talk to an analyst next. Hows it going watson . Welcome to the bank. Hello tom mccabe. Executive from dbs bank. I am keeping busy assisting your relationship managers. How so . I can read over a thousand Research Reports every day, to help you keep abreast of market movements and to help your relationship managers give better advice. Thats great. Todays fast moving markets make it hard to keep up. But together we can stay one step ahead. We make a great team, watson. Welcome back to squawk box. Apple set to report second Quarter Results right after the bell. For the first time in the iphone era the Company Expected to report a year over year decline in growth. Steven millanovich. Managing director of ubs and it hard ware analyst. You still love this company. Love apple. Its a great value. At the very late stages of an iphone 6cycle. Sales are trough. Operating profits are trough. Year over year change in iphone units growth will trough. You sort of tell everyone not to worry. Look, there is volatility at the end of a cycle. The iphone 7, everyone knows and will wait for that. The big upgrade came with the 6 versus 6s. People will wait for the iphone 7. So a little volatility. At 9 times ex cash, who cares. Where do you stand . I like the stock as well. Pretty clear the supply chain has been weak. A chance that apple guides weaker for the june quarter. We think there will be growth in the iphone 7cycle. This is the toughest comparison. Should be the bottom. Can i ask about the 7. I will probably run out and get the 7 because thats who i am. There are a lot of people, i imagine, who upgraded to the 6 because the screen as so much bigger than before. It was a major sea change. If its still the same screen size, what to say there are people who will say, ill keep it three or four years. What does that do . People who upgraded to the 6 which was the push in the upgrade cycle, will upgrade to the 7 . But why . I downgraded from a 6 to a 5. If its the same screen, why . The screen size was huge just youll have newer features. This will that a dualcamera system. For many people thats a big deal. They added four speakers to the ipad pro and the acoustics are night and day versus the air two. It will be thinner than the 6s and other change of software that we dont know about. Some of this is just, look, i have had a phone for two years, i want something thats latest and greatest and here it is and i want it. Thats what its about. Do you buy that, steve . In part. I think its true some people are on a twoyear upgrade cycle but unfortunately most people are hanging onto their phones longer. You still have about a third of the base on the fourinch phone. They introduced the se to get them moving. Our view is the 7cycle will be a more normal cycle. That will be enough to get you some growth year over year. Apple is dealing with the fact that people are holding on longer. You used to have to buy a new computer or pc every two years because the software could not keep up with the lousing processing speed. Now its five years, maybe ten years because the software hasnt advanced. When you look at the phone software i wonder whats to keep people from saying, you know what, it still works after five years. Maybe i am not as fast as i could be but is that enough to go out and spend three or four hundred bucks. Apple is the worst performing stock in the Dow Jones Industrial average. Down 18 in 12 months. There is not a lot of optimism around apple right now. Its trading 11 times earnings. Pretty cheap when you consider that apple reports gaap earnings. None of the tech stocks do. Apple is pretty cheap. The battery will not last five years. The battery goes typically after two years, if youre lucky, three years. Thats a reason to upgrade. Is planned obsolescence a good strategy . Particularly with the oled in 2017 there will be significant improvements. People do want a new phone. They will upgrade. And recall that remember that apple is gaining share. And theyre still doing well in china. So offsetting this increased lengthening of the upgrade psyching, theyre still gaining share against android. Do you believe they have to come out with new product besides the phone . Yes. There is a debate on the street is it a hardware or product company. We think its a platform company. They monetize through hardware. I think they need Virtual Reality a car or something else. A car could be four years away. What do you see on the horizon that gives you hope beyond the phone . Is there something out there that you say, i think something is coming. Wearables is still a baby. You can look at apple watch and say it disappointed, massive expectations. Its early market. Its the number one smart watch in the world. Virtual reality. Augmented reality. Thats going to open up new opportunities over the next few years. Weve not heard about apple making big inroads in that space yet. They havent. Theyre working on it. Thats on the horizon for sure, okay. The other areas obviously apple car is probably a four to fiveyear horizon. Thats something big. I also think robotics. We were just in china recently, i think there is an interest around robotics. What about the cloud opportunity . Not the email product but Amazon Web Services multibillion basis. Microsofts azure. Does apple have an interest on the enterprise, the corporate side of the market . Enterprise is 25 billion in revenue in fiscal 15. Theyre not in the conversation about Cloud Storage on the enterprise side. Well see where they go. Theyve partnered with Companies Like box, ibm. Recently hired an executive from box. Theyre interested. Some have suggested they should buy box. Or drop box. If they can offer a solution in the cloud for enterprise customers, i think thats very interesting. And you can sell the devices around it. Maybe they wont offer out and offer an aws, but i think a service like that that meets the requirements of enterprise could be very interesting. Okay. Brian and steve, thank you. Well see what the big numbers are later today. Thanks. Also quick programming note, tomorrow Silicon Valley going to washington and chairman John Chambers will join us live discussing policy issues facing the tech industry. Thats coming up. Coming up, jim cramer will join us from the new york stock exchange. What is on jims radar . Youre going to find out, but only if you stay tuned to cnbc. Welcome back to squawk box this morning. Making headlines is sandy weill and his wife joan because they are donating 185 million to the University San Francisco money used to support the Weill Institute. It is one of the largest ever for Brain Research in america. It also brings their total giving to more than 1 billion. Sandy and joan weill will appear on closing bell today at 3 00 eastern time. Lets get down to the new york stock exchange. Jim cramer joins us right now with more. Jim, we have a couple big earnings reports out today. What did you think of proctor and gamble . They beat on the bottom line, but there were questions about volume and organic growth. You have to look at the different line items, they cant get the hair and grooming right. Which is incredible. They keep trying, plus one organic sale, operating cash sale pretty good, Gross Margins up 250, that was very good. I think youve got diapers, a price war, beauty plus one, thats not bad. But in the end it depends on whether were in one of those see changes where we like growth over value, because this company is not doing what i want to see which is actually having some sort of breakup or some way to get out of the divisions that arent doing well. Did better than kimberly. Yeah, they are pairing back on their product line some. Is it enough . They got a ga zillion product lines. Disney has more than proctor and it doesnt matter, they can cut all they want. The problem is the dogs wont eat it. They got to get real growth there. I looked at unilever, thought they did a much better job. What did you think of eli lily. Jnj has the best top line. If youre jnj, yeah, were really crushing them. If youre lily, youre saying jnj is crushing us. What can i say . The stock is up very big from 70 where they kind of gave you some new data points on alzheimers that were a little disappointing. But lilys neither here or there. Its all about jnj. We had fred haas on with us earlier talking about the mood in general with these pharmaceutical companies when youre looking at an election season particularly one targeting whether medicare should actually be able to negotiate with the Drug Companies to be able to do that. It was not part of the 2010 agreement with obamacare, but it is a pretty hot topic right now. Yeah. It would destroy Profit Margins. It would wipe them out and youd want to sell all the drugs and try to explain how is it possible this incredible biotech rally in this period. I love fred, but im not taking this off the table. I think this is etched in stone were not going to have negotiations. For some reason its just not the way we do things in this country whether no, he was advocating the same that it shouldnt be happening. Theres no profit margin if you dont. But i do think this is a market thats trying to figure out why biotechs going up and regular pharmas not. And i think biotech got oversold. I think its a value market. I still continue to see the cyclicals. Ingersoll ran best number out here, 3m a little questionable, but i think in the end people feel great about it. I still want to circle back to some of these deep cyclicals. Im not giving up on caterpillar, theyre seeing a turn. Apple, these guys were like two apple bulls are like every other bull in apple. You have one foot out the door. I went to a bullfight in mexico, geez, that thing didnt stand a chance. It was just bad. You could tell something was brewing. Jim, well see you in just a minute. Thank you. Coming up, stocks on the move. Were back with that in just a moment. Thank you for calling. Well be with you shortly. Yeah right. Xerox Predictive Analytics help companies provide a better and faster customer experience. Hello mr. Kent. Can i rebook your flight . Im here Customer Care can work better. With xerox. Wait im here mr. Kent . gasp shark diving xerox personalized employee portals help Companies Make benefits simple and accessible. From anywhere. Hula dancing . Cliff jumping Human Resources can work better. With xerox. We leave you this, sarepta not a full decision but Panel Decision as a no. Brian, thanks for being here the last couple days. Sure, just flew by. See ya. Make sure you join us tomorrow. Right now time for squawk on the street. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with david faber, jim cramer at the new york stock exchange. This mornings guest nike founder phil knight. Meanwhi meanwhile, future steady 50 s p earnings today with apple and twitter tonight. Oil is up and k shiller up 5 and 3 in february. Proctor, 3m and dupont. What you need to know from those