Transcripts For CNBC Squawk Box 20160505

You can see . Morning the nasdaq is indicated higher by about 22 points. Nearing correction territory. Wti trading up about 3 . A pop of 1. 34 to 45. 12. Among the reasons for the surge in prices escalated fighting in libya thats disrupted production there. Some canadian pipelines shut down as the precaution after a wild fire shut down the oil city of forth mcmurray in canada. Weekly jobless claims forecast. James bullard is in Southern California today to speak about the economy and monetary policy. And alibaba and merck reporting results before the opening bell and also news corp, square and gopro after the close. And dont miss an exclusive interview with John Williams. That happens this afternoon at 1 40 p. M. On power lunch. Bullard an here a lot. He comes here a lot. If he wants to Say Something. He could some here and thats it. So many approximate of them the time that the if they really want to Say Something to us. Come here and do it. Else were not going to cover it. Fitbit First Quarter profits fell. Costs nearly tripled and. Expected to fall well short of analysts expectations. Whole foods kept costs under control. Also cut prices in the face of stiff competition in same store sales fell a little more than analysts had forecast. Cutting its full year outlook. Stocks doing okay but kind of had a long fall. And i cant do it. Used to call this yakky. I yas and the media business. Professionals. Professionals. And now they are trying to sell subscription asks things. You have been on it . Ive toyed around with it. Yeah. We actually internally use it here at cnbc sometimes. Here. Yeah. Were a media organization. We are, yeah. Kind of fringe. Filled with professionals. Filled with proflgss, yeah. April same store sales today. First out of the gate is cost ko. The wholesale warehouse april comps were flat. Stock is down about 53 cents. Tribunes publishing board unanimously rejects the takeover offer. Tribune says it will proceed with the Strategic Plan to revive its print business. Craziest thing i ever saw. Sold this stake to this guy two months ago at 8. 40. They thought this was fair. And then they claim this is opportunistic. The more people want you the more you think you are worth. Day also created like 20 Million Dollars out of ebitda out of nothing yesterday. All said its either criminal or fantasy. Theres something amiss over there. It just bugs me. Produced lots of news from some of the worlds best known henl fund managedge fund manage one of our historical sign post os after company in trouble is when numbers of senior people leave over a short period of time. Tesla fits that bill. Elon should just have a battery company. If he could create batteries that powered houses. If that happens its truly transformational. It is very expensive. It is very volumal. So buy it at 200. There is legitimate Public Policy concerns about any consolidation in healthcare given concerns in pharma and pricing. Amazon, think about the longterm secular trends in its favor. First people want to buy more conveniently. That has immediate tail wind into the Retail Business which we think is going to be worth at least 10 billion in ten years. That game is over. People are trying to bottom fish in this game think hag the so stock is cheap but we think it is anything but cheap. I do have a real problem with apple in that steve jobs is the man. And what is their product cycle going forward. I this i apple is going to be diminishing in importance looking forward a generation. Unbelievable. Kate kelly joins us now with more. Clokelly a lot of that was interesting. The tesla thing from chanos was interesting. [inaudible] because of Amazon Web Services the cloud unit. Gundlach. Start preparing for Cloud Services in the u. S. Because President Trump is going run up the debt. Hes conservative. People asking afterwards is he endorsing him . When someone is a master of non consensus thinking looks at the conventional wisdom and says trumps gonna that got me interested. What was his theory behind it on why the conventional wisdom is all wrong on that. He wouldnt landslide [inaudible]. Jeb bush just totally lacked organization and his Campaign Slogan should have been wtf exclamation point. And the said get out of the market completely. [inaudible]. Couple of hieghlights. A couple of huge movers from the morning session. Kratons polymers. A Specialty Chemical Company, up 15 by the close of trading yesterday. Here is what roczen had to say in summary. It is a Specialty Chemical Company that trades as though it is a commodity company. It is our view that the stock is materially undervalued. We looked relative to his peers, relative to the market. And relative to our view of intrinsic value. They were saying look this is a roll up strategy. Were concerned about the unfunded real estate loans and laid out his thesis and by close of day the stock was down 4 which was an improvement from the 13 or so it fell in the initial hour or so after the presentation. Take a listen. At best for this bank they are not going to be able to sustain Earnings Growth and they are very much priced as the growth stock. And at worse we could see real funding pressures and pressure on the Balance Sheet as well. When real estate markets come off this period. If there was an overarching theme i felt a lot of people were talk akd commodity cycle and specifically oil and that drove these ideas. One recommended buying royal dutch shell. He likes their lng business which they got as a result of the deal with bg. David einhorn. Short caterpillar. Not a new idea. How long has he had that . He basically thinks there is further down run. Zach schreiber, he says short the saudi riyal. He thinks they are structurely insolvent to the tune of 5 trillion dollars. Trying to sell a stake in the oil company. Exactly becky. And hes using the valuation as the basis for his math. And jim chanos is short mtn group. Long story short, africa to him is a commodity story. Those economies particularly. And this company is going to suffer as a result. Thats interesting. Because hes been playing commodity related shorts for a long time. Absolutely. Very early with caterpillar. Always interesting to see how he has this theses of the commodity slowdown and looks down the road to find links. And africa has is a place that has to mine and drill commodities and sell them and used to depend on russia and cuba and now moved toe china and china is lowing to slow down which is going to hurt africa and then tellco and the impact there. I right. And people playing straight against china has a tough time with times because a big economy or Big Government controlled economy can do a lot things otherwise so it is always interesting to hear the macro pieces. This the morning there was a fund manager from cmtdy, which is a Commodity Hedge Fund and he said the lows are in in oil and he thid said i this i the collapses of the chinese economy has been put off a few weeks or few months but im sure you will hear its coming in the afternoon. And hes absolutely right. And druckenmiller talked about the theme how the ease in money isnt working and corporate debt is squandered. And the last time 2005, it was on record about the financial crisis and it happened three years later. Hes been on this thing. Sent me some weird message the other day i didnt really understand but he definitely is thinking maybing it is coming to pass. Can the gold is pretty much the only thing he likes. Vale resorts, which actually took a hit because people were confused what it was. I just hit up. Right the its gone from 30 to 140. There is nothing do with shareholders are not let me talk to him another. Im not even addressing you. It has not getten the message yet that the world is ending. Snow and flooding and people are going to be on the wheels going down on the rocks in vail. But that stocks done nothing but go up in the face of snow disappearing in the northern hemisphere. You know why the stocks gonna occupy though right . They made about a million acquisitions in the last five years. They are still in the ski business. They are still in the ski business but the reason the stock is up ultimately is a function of current revenues and current profits. Im just suggesting to you. So those might go away when there is to more snow. Im [inaudible]. Nobody is thinking the snow is going away in 20 years. They predicted it to be gone by now on the east coast. They did. Five years ago. For children growing up you werent going to know what it was take a look at whats going on this morning. The futures. Dow looks it would open up about 60 point huer. The. Lets flip that board around. In europe overnight. While everyones been sleeping. Sort of a mixed picture. Everything is up marginally if not a little better than that. Overnight in asia. Markets in japan and south korea were closed for a Public Holiday but what you can see there is things again marginally up. And lets take a quick look at oil and the 10 year. Wti crude at 44. 77. Up this morning but again down from, what is the high in the past week or two . 46 . 47 . And then the you look at the 10 year right now were looking at 1. 793. And finally gold which mr. Druckenmiller would like everyone to get into immediately, as owe sell off all your stocks. Flip it around. Show everybody gold for one second if we could. Thank you very much. There we have it. 1278. 30. The now and s p on pace to post their second straight week of losses. The nasdaq falling for the ninth time in the last 10 days. Nearing correction levels. Joining us is richard steinberg. Also with us is peter bookvar. We get to see you a lot. So hang on just for a second. Rich, i want to know what you are going to do about all this and whether frankly you agree with mr. Druckenmiller which is basically to sell everything immediately. That is just the i dont think you sell everything immediately at all. Doug cass, a front of mine, says the market has no memory from day to day right now. And that is the market were going to stay in right. Now fear of missing the upside and the downside is going to keep us in a short run andrew. The key will be when investors flip the switch to 2017 earnings. This years earnings have come down from 120 bucks to about 118 in change. Next year earnings appear too high about 135 dollars. So i think we have to see where trends continue but i think were going to grind it out. There are some areas starting to concern us in overvaluation in the dividend space, which we invest in and our analysts are finding it harder to find names that make sense. But i think investors so you would just use their cash on pull backs to showily put money to work and not be in a huge rush. What does that mean in terms of now in terms of the trading range, is that a function of the election . A function of brexit . What is that . And exactly where would you put the money toe . I think that the range will be until earnings start to come through into the Second Quarter. And where we are putting money now is even though you have had some disappointments in the large name, i think liquidity is going to be key going into the election, going into the fed decision so that you have the ability to maneuver. So weve been putting names in the top 25 names in the s p even though theres been some disappointments. Money in dividends. Our value guys are starting to find more names in the bank sector. But that thesis is going to be really driven when the fed starts to flip the switch again and that is going to be a slow road. Peter, your negativity is winning out right now. Well i think were at the end of a cycle. Were at the end of a profit Margin Expansion cycle. We are at the end of a multiple expansion cycle. We are at the end of this modern day monetary extremism cycle. Were at the end of an economic cycle, a credit cycle. And in the context of markets that in my opinion are still very expensive. And i think that is what creates the danger in markets generally speaking. You may be right. The question is when . Well that is obviously in this age of Central Bank Activism and you have been thinking the this for some time. Right. But every time we get a new step of monetary activism it continues to push out what i think will be inevitable. But i think the most noteworthy thing has been the pushback of the ecb and the bank of japan have done. The first sign that markets have gone continue contrato what Central Banks are started to achi achief. When we come back the short sellers in attack mode. Details from the report next and donald trump joins us. We have a lot of ground to cover this morning including his plan to win support from the gop establishment. Squawk box will be right back. Who are you . Im vern, the orange money retirement rabbit from voya. Orange money represents the money you put away for retirement. Over time, your money could multiply. Hello, all of you. Get organized at voya. Com. His tesla motors posting a busted loss. Giving a bullish guidance for production. Moving its target up two years to half a million vehicles annually by 2018. Earlier on cnbc famed short seller jim chanos elaborating on his short position in tesla. One historical sign post of a company in trouble is when numbers of senior people leave over a short period of time. Tesla fits that bill. We have a chart weve got of Senior Executives of leaving tesla is a flood in the past few years. And that is not a good sign. A company that cant forecast deliveries one quarter out and yet everybody is confident what they are going to make in 2020 or 2025. Tesla ceo elon musk addressing the criticism on the Conference Call. Convincing the nay sayers, i think that will be basically never. What i find ironic about is nay sayers is the very same people will transition from saying it was impossible to saying it was obvious. A ha ha ha. Shares initially rose as much as 8 in after hours trading before pairing back gains. Joining us is colin rush, a Senior Research analyst at oppenheimerer and thanks for coming in today. My pleasure. Which side to you come down on . Jim chanos makes some good points. Two production and manufacturing guys leaving at the same time tesla is upping the production time. What do you think . Were cautiously optimistic here. The company set an extremely high bar for them to reach. And elon did note on the Conference Call last night that some of o these production goals were aggressive and they wouldnt meet some of the deadlines they were setting for their own suppliers. And so as we look at this company they have set these extreme goals and gotten most of the way there over time. And thats been fluff to support the stock. We do think they are ramping at a rate that is going to demonstrate significant operating leverage and that is really whats at stake for this company right now. What do you mean specifically. As they ramp sales, they have set up enough infrastructure that they are going to see we see 15 increment operating margins. Because they built the infrastructure ahead of time so they are ready. Absolutely. Going to have to continue to invest but not the same rate to date. Why do you think the two executives left . Is this an issue where they didnt think they could meet that heightened time line. My sense after the call is they need to go into a higher volume manufacturing and needed to bring some additional talent in. Think they have gotten pretty for a and they are going to make some impressive high hires. And they can do that. I its amazing to see the number of consumers who are willing to put money down to reserve one of the model 3s coming out. That is something ive never seen with any auto maker before. And a lot of people say the cars are just amazing. You do think that the profitability is there. You would say cautiously optimistic. But do you tell people to buy it here . Yeah i think the big overhang right now is on capital risk. They have accelerated ramp, they are going to need more capital. They talked about it. The question is when and how much to raise. And once you take the over hang there off the other next question is substantial demand and execution. The folks bullish are going to give them the benefit of the doubt on the production ramp. Do you look at any of the competitors . How far ahead of anybody else are these guys . Who is the next guy behind them . And how far in terms of catching up . And can they . As we look at this, i think the bmw i3 is kind of a disappointment in my view. A glorified hatch back without a great range. So were looking at mercedes and at this point at least two or three years behind on something affordable for folks. What about a latest announcement we just heard with Fiat Chrysler hooking one google too . That sounds like a different sort of collaboration. We havent seen direct clapgs between a slk val guy and a detroit guy. We a. To see those two organizations try and Work Together i think will be an interesting experiment. But seeing success out of it from a product standpoint i guess i want to see the results before i get too scared about anything there. Colin, thanks for coming in. Thank you. It is smie owe righcinco de . Do we have anything planned at all in we have seen on twitter there was a margarita thing. You are the king of margarita. I am. Im like paul mccartney. Doesnt smoke pot anymore. He says if i want do anything i have a margarita and a glass of sha chardonnay. I feel like we did something once on cinco de mayo. Might have gotten in trouble for it wasnt a safe zone. We were talking in relation to something i im treading on thin ice here even mentioning margarita. Can i just tell you. I three things. Ounce lime juice. Two ounces pure agave tequila and then agave nectar. No triple sec no kwan trio. We do frozen. Stop the presses. Likes the frozen. Get me an umbrella. Put nit theit in this there. Makes it better. Do you like getting caught in the rain . Totally. I whats the next line of that . Its spin class on steroids. Figuratively i max is launching a super size it was. 2014. And it said end of snow and a hundred years from now. Thats what it said. But lets just read the article. And thats what it said. It said slowly going away though. Slowly yes. And Bobby Kennedy said well why worry. Bobby kennedy said no kids are going o have sleds anymore by 2011. And 2015 one of the biggest snow season os. A look at yesterdays s p 500 winners and losers we could have had it all falling in the deep im sorry for everything that ive done but when i call youve never seemed to be home at ally bank, no branches equals great rates. Its a fact. Kind of like grandkids equals free tech support. Oh, look at you, so great to see you none of this works. Come on in. charge music you wouldnt hire an organist without hearing them first. Charge so why would you invest without checking brokercheck . Check your broker with brokercheck. Welcome back to squawk box this morning. Time for the executive edge. And were talking fitness this morning. A new way to super size your exercise routine. Good morning. It is always new. It is always new andrew. This is imax. The latest in spinning. Ive already been i think through the himalayas. The idea is you get to watch an imax movie you but got to work for it. This company is now entering the very competitive fitness business and what they are offering is 50 minute classes, set up on the stage just like in the movie theater. Of course the movie goes blank when ive got the gopro on. Charging 34 a class. On sale right now, you can buy a package for 350. Come on give me something here an the screen here to go with. You can pedal through a new york city scape. You can pedal through the hawaiian islands. And i guess the screen is having a problem. This is their first class. Their first launch class. There we go. So were pedaling through the snow. And again they are going there are 350 a month. So it is not exactly cheap. But in the boutique fitness world, you have to keep up. And two years in beta, they believe this is going to be the newest thing. If it works out here in brooklyn, they will very quick they tell me launch it across the country. They do believe this is taking spinning to the new level. I got to say they told us when they were testing this they were concerned people might get nauseous or seasick. In a theater you are in a chair so it is not like you can fall out. But on a bike it is a different situation. I think were climbing the mountains now. And were going to be talking about it. Back to you guys. Thank you dianna. I dont know. Maybe we should do this all together one day. Under the desk for the entire three hours is this. I was thinking do the whole show on bikes. If you have ever run to a live shot. Lost your breath it is a panic situation. You have to talk but you cant. And you make yourself and you can actually phi teal like you are going to pass out. Airlines have raised concerns that staffing level at airport check points are too low and the government is responding. The tsa will add airport staff and bomb sniffing dogs for summer. And ramp up enrollment efforts for pre screening programs. Homeland security secretary jay johnson asked secretary to prove funds to cover officer overtime and meet critical shortterm needs. You have to do it but you think about the actual what are the percentages of really at risk events . That its just so frustrating. You are really just doing that if you dont do any type of profiling at all, if you are going to check the 90yearold lady in the wheelchair and the 4yearold kids and everybody gets equal checking, it is like a six sigma event. Like one in a billion if they check you out first you can go through the faster pre check. Do you think the airlines should have to pay for this. They do. But in a more meaningful way than now. They do and if passengers too. If you look at the fees and were paying for all of this. I think were paying as taxpayers. If you look at the full cost relative to your ticket cost. As a consumer. Ive been amazed if you sit down and break down the taxes and if you look at the prices on the ticket and break down the taxes it is pretty phenomenal. They always pass it along. That is the other thing that put all these things on business you dont really understand that it eventually gets to the person you are not trying to saddle with the expense. You know dont pass it along, bastards. When we come back, choice hotel missing the quarter. The ceo joins us to talk about the quarter and the health of the hospitality business. Stick around squawk box will be right back. 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. Something well show you. Through small things, big things, and spur of the moment things. Welcome back. Choice hotels, one of the largest lomging companies with over 6400 hotels in 40 countries is out with results yesterday. Missing earnings expectations, profit down 9 year over year. The economy metric, was up 1. 2 in line with estimates. Joining us with more is steven joyce, Choice Hotels International President and ceo and thanks for being here. Thanks for having me. At lof people looked at rev par and said those are pretty good. We had one expenses, business development, the tax man hit us a little bit. And some investment we were making in future growth. But it was interesting because last year was such a strong First Quarter. It was double digits. And so this year coming out with that comparison a little tougher. As we get into the year. Were going to have a block buster summer. Gas is down 70 cents a gallon. Our customers view that as a raise. When is the most second and third quarter. The summer months. We do a lot of Business Travel as well. Particularly with the new brands. We opened two in new york and just got written up as the best value in new york. But yeah t summer months are big for us. We represent the 99 and those folks are confident. They like the fact that they have got a job. They feel good about their employer. And they feel like ive got a lot more disposable income because im not playing nearly as much for gasoline. And as a result our bookings plus our surveys of our kurps, they are going to hit the i love a company who can talk about the 99 is feeling great. You hear the turmoil in the election and how people dont think the economy is going well. How do you match it up . I actually think that is what somewhat impacted the First Quarter. I think there is so much discussion of the world is ending in the pursuit of a nomination that i think it causes concern. And the market was volatile as well. I think that is part of it. And look, we knew we were going to have a not a block buster quarter because of how strong last year was. But even i was surprised by there was a little tentativism on folks. Watching the market and watching the debates and going oh is it really as bad as they say. And now they are going wait a minute, my company is doing well. I feel good about my job. Im spending money and im taking my vacation this is summer. Americans think that is a goodgiven right anyway. So were look at what we think is going to be a very positive re of the year. That is great. And i understand every reason you see that. I guess when you hear about that you wonder what could change that environment. And i think travel in the United States will be great. Particularly because a lot of americans dont want to go overseas after paris and after brussels but then you hear things like zika virus and things like dont travel in the u. S. Which i think could be an issue. The government needs to get out in front of it. And i think people need to be made of ware of what the issues are. However were not seeing that yet. But yeah, barring something unforeseen were going to have a great summer and a great year. And if we get that kind of interruption it is usually were spread all over the place because were so big. But it usually is more isolated. People tend to focus on okay ive hard i shouldnt go here. So you have a lot of the discussion the caribbean, which were in. And you have a lot of discussion obviously this brazil. But were not seeing any real impact of that yet. But we, as part of u. S. Travel are encouraging the administration to Push Congress to spend the money to make sure that we are prepared to deal with it in the first place as opposed to waiting till later which is sort of where we are now. But our view is our view is we le l deal with that. We will make sure we know how to keep our guests safe. But at this point we havent seen any real impact at all. Thanks for coming . Thanks for having me. And come back. Will do. Merck reports 89 cent a share. 4 cents ahead of expect ed. Looking for an adjusted forecast for the year. I dont see that yet. They are giving the regular earnings per share the gap w was. Im looking for the oh here it is. For adjusted they see 3. 65 to 3. 77 and 3. 71 number. Some of their best known drugs that you probably heard of like remicade, down 30 . So you figure that had to be, you know, competition from generics or patent expirations along with singulair. Down three percent. Even in that horrific alglery season. Flo nase. Steroid worried im gonna get tested. Im going to blame it on that. Coming up. David katz, investment portfolio manager, his best picks in energy and technology thats next. Market volatility leaving investors searching for values. His ideas and picks, david katz, chief investment officer. We were talking offcamera. Youre seeing movement in your stocks. You need movement to make any money, dont you . A little too Much Movement . This was too much. Two in january went down sharply and rebounded sharply. We think theyre on the mend right now and should move higher over the six to nine months. I was trying to get you to sell. No, i wasnt. I was like, devon. And youre actually making money now, arent you . We are making money. Its been too wild a ride. If you have a 12 to 18month time its fine. Theyve done a horrible job being a public company. They did a second offering that was dilutive at the 15year lows. The assets are worth 50 to 60. We think the stock is going higher. You bought it higher . We think ultimately it will be a lot higher from now. If you dont have it, we think its a very good entry point. You have had similar volatility in the other names . Viacom has been a wild ride as you know. But the news on that has been much better lately. They are did the deal with dish. Theyre selling a minority interest in paramount. The earnings are okay. Its hit about 7 times earnings. Pays a good yield. If you have that, it will be higher over the next six to 12 months. Sorkin, you made a pretty good call on viacom. That was probably a year ago, wasnt it . Yeah, but you wont remind everybody of apple. No. You just did viacom, didnt you i have been because they dont have the short i was short viacom. I dont know if i am anymore, though. Because they didnt have the other things to offset because its very when all the new carriage agreements come up its difficult for them to get a deal. Their content might not be superior to other content. You have been worried about sponge bob. Yes. And nickelodeon. Nick is on the mend now. It wasnt before. We think, from here shocked to come up with something that you had some insight. Thats why i brought it up. Well, thank you. Not in reference with apple. Always the other side. Not in reference to apple. That was actually you may have been right about viacom. Okay. Next time i wont say it. Thank you. Gilliad is a biotech company. Typically youre paying 15 to 25 for biotech companies. You get seven times earnings, great yield. Great management team. Theyve been beaten up. We think its a great stock to buy here. Gilliad got thrown out because of all the, i guess, overexuberance for the whole group, right, and gilliad followed everyone else down . They had eight quarters where theyve beaten expectations significantly. This quarter they missed a little bit. They lowered guidance for the upcoming year. Still earning 12. Great business. Great Balance Sheet. Buying heaps of stock back. Shelter oriented management. People are waiting for them to make an acquisition, theyve been patient with that. Other biotech prices are down now so they can buy a good property. It turned into a drug company. Down from where it was and well over a hundred billion in market cap. Whether its a biotech or a dr drug company, some of them are dull Drug Companies right now seven times earnings. All right, david. Thank you. Coming up, our news maker of the hour, president ial candidate donald trump will join us to talk about winning the hearts and minds of the gop establishment. And others. And a lot more. Back in a moment. You wouldnt take medicine without checking the side effects. Hey honey. Huh. The good news is my hypertension is gone. So why would you invest without checking brokercheck . Check your broker with brokercheck. Todd spaletto, president of the north face, we are working on the prototype to match customers to gear. Watson, lets give it a try. Say its midjune and im backpacking in yosemite. Of our 353 jackets, i can recommend nine. Watson, what if it rains . There is just a 3 chance of rain, so i recommend the breathable stretch fleece fuse form dolomiti jacket. A Perfect Choice watson. No wonder our Customer Loyalty numbers keep climbing. I believe we can do even better. I like the way you think. I believe we can do even better. I have an orcogram we for an owen. E. Thats me. You should hire stacy drew. She wants to change the world with you. She can program jet engines to talk and such. Her biggest weakness is she cares too much. Thank you. My friend really wants a job at ge. Mine too. Im a wise elf from a far off shire. And sanjay patel is who you should hire. Thank you. Seriously though, stacy went to a great school and shes really loyal. You should give her a shot. Sanjays a team player and uh. Trump in charge. The last man standing is taking the reins of the republican party. He joins us live this hour. From taxes, to potential running mates. Nothing off the table. Wildfire in canada. Authorities in alberta declaring a state of emergency as flames rip through the canadian province. More than 80,000 residents fleeing their homes. The blaze impacting oil prices, and we have the details straight ahead. Tesla kicking into high gear, the automaker accelerating production but not everyone is sold on this story. A famed short seller jim chanos making a bold call against tesla. The second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernen along with Rebecca Quick and andrew ross sorkin. Were about 15 minutes away from our interview with donald trump. The likely republican nominee for president will join us to give us his take on the economy, on taxes on veep selection and much more. In the meantime lets check out the futures. Which after a couple of rough sessions are indicated to open higher. Europe was a little better earlier. The s p up 10. The dow jones indicated up about 74. Nasdaq indicated up about 22. Here is whats happening. Dow component merck came in with quarterly profit of 89 cents a share beating the streets expectations by four cents. Rev 30 drop in sales of the Rheumatoid Arthritis drug remicade as well as currency fluctuations. The stock is up to 55. 25. Yahoo last a 15year partnership with at t. It awarded the contract to a tiny company. Yahoo retained sdaat ts email hosting business. The labor departments weekly report on initial jobless claims comes at 8 30 eastern time. Its expected to though 260,000 new claims from last week, which would be up from 270,000 the week before. Got a number of hitting from alibaba. Earnings per share of 302 renminbi. Not dollars. Shy of estimates, which was for 360. Revenue, however, came in above analysts estimates. Like to know the revenue number. Its an increase of about 39 year over year. Whats the actual number . Whats it expressed in. Rnb. Its looking like count the decimal places. 24 billion. Yeah. Thats thats a billion. Okay. That computes is that 3 yeah. 3 billion . No. Its more than that. One key metric one key metric. Gross merchandise volume on china retail sites was up 24 . That stock, as you can kind of in the middle of its range, but it is up almost 4 on this news. Shares of tesla moving higher after the Company Posted its First Quarter results after the bell today. Phil lebeau joins us to take us through those numbers. We wont talk about the earnings as much as the forecast. The earnings roughly in line with expectations. Revenue coming in as expected at 1. 6 billion. Its the Production Forecast thats getting all the attention this morning. Tesla is now forecasting annual production of 500,000 vehicles by 2018. That is two years more aggressive or moving ahead two years the target of 500,000 in annual vehicle production. And this is driven primarily because of the Strong Demand for the model 3. Remember, thats the massmarket 35,000 baseprice electric car that the Company Plans to roll out by the end of 2017. They have almost 400,000 model 3 reservations right now. Production is expected to start or at least the target is for it to start by july of 2017. Oh, and if that 500,000 annual Production Target is not enough to get you thinking, this is elon musk last night talking about one million in annual production coming by 2020. Thats my best guess. Half million in 2018 and sort of roughly 50 ish growth from there, then its probably around a million in 2020. Lets put that projection into perspective. In terms of annual deliveries, tesla right now is targeting annual deliveries this year of between 80,000 and 90,000. Theyll have to really increase deliveries in the second half of this year in order to make the 80,000 target. You are looking at them essentially doing a fivefold increase over the next two years if theyre going to get to 500,000 in production by 2018. Maybe deliveries wont have to be 500,000 but it will have to be well into the 400,000 range. Tesla shares will be under pressure today from the perspective of there is going to be a capital raise. Whether its debt and equity in some fashion. Musk says that remains to be seen. They wont be cash flow positive this year. Those are two factors weighing in on the stock. Notes coming in from the analysts this morning. Even those who were skeptical about the target are increasing price targets. Theyre saying theyre going to raise price targets considerably given the forecast. Thats what the street is keying off right now, phil. The stock is up 4 this morning. Obviously looking at some of the analysts reports and kind of following along with it. Phil, thank you very much. You bet. With the jobs report just a day away investors will be keying in on fedspeak today. St. Louis fed president James Bullard speaking this morning. And this afternoon San Francisco fed president John Williams enjoys the power lunch. Bob dahl, great to see you. Thanks, becky. Well talk about the fed first and maybe earnings. The fed is a key. We just saw a lousy adp report yesterday. Lowest in three years or something. A bad or good report on the jobs report whats the feeling . The adp report suggests not as good of a number as we have seen but it still wont be a bad number. Weve spoiled with the 200,000 per month. My guess for this year as a whole is 175 per month. To me a 150 would not be disa disappointing at all. On an economic respondefront the fed, they talk too much. In my opinion. They need to move rates higher. They want to, and if things are quiet overseas i think they will in june or july and then maybe again in december if the data is good enough. And i hope it is. That would be good news for everybody. Janet yellen has been shockingly dovish. The last time she spoke. Not much change from that with the last statement from the flmc. No question. Part of what she is watching is whats happening around the world. Other Central Banks are doing things to take the currency down. She doesnt want the dollar to resume the big upward move. Its behaving so far and she wants to make sure it stays the case. I agree world events are captivating this fed. Maybe as a necessity. Weve become a much more global place. If thats the case, can we almost take a june rate hike off the table because of the british potential exit from the e. U. And wanting to see how the vote goes first . That could cause them to delay to july or later. My guess is we get to june and its not that big of a deal. My guess is they say the devil we know or the devil we dont like the referendum last year. If the fed raises rates in july how does the market react . Only a quarter, but relatively speaking with other Central Banks at negative Interest Rates, what does that mean . Again, its a whopping one half of one percent from 25 to 50, as you point out. A lot will depend on what happens with currencies. If currency behaves, the market will be fine. What its signalling, becky, is the world is healing and doing a little bit better. Do we eventually drag some of the other Central Banks along with us if we start to raise rates . That would be good news. I think that will take a little more time. The currency markets. The Central Banks have been tied to all of this incredible volatility with the currency fluctuations and everything that happened in january and february, with concerns that our economy would not be Strong Enough to pull out of it. And the gdp read for the First Quarter was pretty lousy. That may be enough to put some pause for the fed. It was if you really believe the 0. 5 . We know the history in recent years. The bounce is coming in the second. I think in the second we get 2. 5. Maybe as much as 3. Dont believe that either. Were stuck at the 1. 5 to 2 where weve been for some times. Talking about earnings. Thats the key. Not a great earnings season thus far. It will go in the history book of the worst. Second quarter looks better. The key is the second half, becky, can we get improvement. Three variables in my point of view. The dollar, does it behave, not go back up. Two, oil, does it not go back down. And three, ill call it the isms and pmis, the manufacturing side of the economy, does it continue to show a little better news . If so, earnings will be okay in the second half. Absent better earnings, hard to think well do anything but flap around and go nowhere. When i brought that earnings up with Warren Buffett he surprised me last week. He said were not record levels so i dont know that i being him, he didnt know if we should expect much improvement from this point. You know, were not going to get a ton of improvement. The easy in earnings improvement the easy money is in the Rearview Mirror. That doesnt mean we cant have a little better topline growth leading to a little better bottomline growth. Its not margins. Margins are rich. Cant go a whole lot higher. I agree with that. Economic market question. We have donald trump coming up. Cant wait. In five minutes. What do you think you want to hear from him . I think we solve a lot of problems if we grow faster. 2. 5 to 3 instead of 1. 5 to 2. Give me a half point from smart techs or half point from Regulatory Reform. The markets would love to hear that from donald trump. Bob dole is not coming on the show today. Got my pen. Bob doll. Bob dole is 92. Bless him. I am glad youre here, bob. Im kidding. Couldnt get bob dole. Bob is with us for the rest of the hour. I have a couple of questions if you have some time. Coming up, president ial candidate donald trump joins us to talk about his economic plan for the country if he were to be elected president. One more corporate headline. Go daddy reporting better than expected First Quarter revenue. Attracting more customers and earning more per user. Also raising the fullyear guidance. Squawk box will be right back. K and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Stocks to watch. Fit bit. First quarter profit fell 70 . Costs tripled but sales surged. The fitness band maker is raising its fullyear outlook. Second quarter earnings forecast well short of expectations. Whole foods reporting better than expected Second Quarter result. Kept costs under control and cut prices in the face of stiff competition. Though samestore sales fell more than forecast. Company is also cutting its fullyear outlook. Iac interactive. First quarter profit falling sharply, though revenue rose 6 . And that beat forecasts. The internet conglomerate run by barry diller continues to seek dealmaking opportunities for the home adviser business, a review site and for vimmio, the streaming service. Nations retailers reporting sales today. Costco says that april comps were flat. Analysts had been looking for a slight increase and the stock is now down by just over 1. 3 . Okay. Coming up, when we return, president ial candidate donald trump is going to join us. Lots to talk to him about. And of course. Jim chanos saying china is the gift that keeps on giving. On the short side we speak to a fund manager who recently set up shop in shanghai and says thats not the case. Dow opens up 62 points higher. Nasdaq up 20 points and the s p 500 up about 8 points. Well be right back in just a moment. Welcome back. Some canadian pipelines shut down as a precaution of a wildfire in the oil city of Fort Mcmurray in alberta. 80,000 people were evacuated and 16,000 structures were destroyed. Firefighters are continuing to battle that blaze. Its actually having an effect on crude, as we have been reporting this morning. Crude oil prices have been up. Up above 45 again. All right. The republican establishment said that he couldnt do it, but he did. Real estate mogul donald trump on his way to securing the 1,237 delegates needed to win the gop nomination on the first ballot at this summers republican convention. Mr. Trump joins us now on the squawk. Newsline. Good morning, mr. Trump. Good morning. How are you, joe . Congrats. They said it couldnt be done and here we are. I know youve been peppered with Vice President selection questions over the past couple of days. Theyre requisite, don. No way around it. Ill start differently. In your heart of hearts, do you think it will be someone from the 16 fallen, from the probably not miss fiorina, i imagine but will it be from the group of people who also ran for president . Well, i would say probably a 40 chance within the group. Ive gotten to be friends with a lot of those people, and i guess perhaps enemies with a couple, but ive gotten to be friends with quite a few, and i would say there is a good 40 chance. Even frenemies with a few im sure. Yeah. That words becomes is it 2016 in 2016 that word gets used more and more. I also saw something, donald, that you said about john kasich which may or may not be what people were expecting. I didnt know you talked to him during all the breaks, during the debates, and had a very Good Relationship with him, because all is fair in love and war, as we know. And the rhetoric that gets thrown back and forth. But you actually made the comment that his your view of him has been rising in recent days as far as possibly selecting him. Well, i have had a Good Relationship with him, and i really get along with him pretty well. I would say probably its unlikely that it will be john. I am not sure that john even wants it. But i think its unlikely that it will be john, but his i do have a good view of him, and i do have a good opinion of him. But i i think its probably unlikely. Just to follow up on that point, though, the New York Times said today in interviews with you you said you would probably choose a governor or congressman. Do you think its important that the person on the ticket with you have some experience as an elected official . I do because i am a business person. I have that covered. I have so many people who have endorsed me including your dear friend carl icahn and many others. I think we have that world covered. But the political world, though i have been in politics all my life in a different sense on the other side, i think having somebody who can get legislation through and help with that would be good. Yeah. Its like a 3d chess game, though. Youre the final arbiter of whats going on. There are some who think you need to bone up on your conservative credentials. Thats why i dont know whether kasich would be the one. Then comes to mind maybe im sure ivanka suggested maybe a woman, and there are some very able and experienced republican women that could help the ticket, even or a latino woman, even, which would help you with women and latinos. So much to think about. You also mentioned you want someone who you have a lot of personal rapport with. I think thats necessary. Always the first reason is if something should happen, somebody that can serve and serve well and be a great president. Thats always you always start with that. After that its really a question of rapport. I think rapport is very important. When president obama picked biden, to be honest, a lot of people said whats he doing but they had a good rapport together and i guess they figured that out during the debates and biden had run and not done so well but they had a good rapport and seemed to get along well. There is something awfully important about that i think, i agree. Mr. Trump, wanted to ask you about immigration policy this morning. A new study or estimate that came out from the American Action forum, a rightleaning policy Institute Based in d. C. Saying that the immigration policy that you have been espousing could cost the federal government between 400 billion and 600 billion. It says it would shrink the labor force by 11 million workers, reduce real gdp by 1. 6 trillion and take 20 years to complete. What do you make of that . Well, i dont think they understand my immigration policy. I want people to come in, and we want people to come in even rapidly, but they have to come in through the system. They have to come in legally. These are the people, theyve never i saw that report. They dont even have it right. They dont have it right. So we want people to come in. We certainly dont want to shrink our economy. I think you folks know me very well for many years. Weve been dealing for many years, usually on other subjects to be honest. Now were in the world of politics and the world of economies. And the big economies. But i am not a shrinker of economies. I am a grower of economies. But we dob wa want people to con legally and through a system. If the veep selection hadnt become front and center i guess our first question here is always about the economy, donald. Yeah. I know you saw that gdp number. Here we are, seven years into a recovery, and with the fed at zero and with every central bank in the world, you know, priming the pump, and we couldnt do any better than. 5 . I saw some things about your first hundred days, some of the steps that you would take. Whats the very first thing you would do to try to jumpstart the economy, to get it above stall speed . Whats most important . Well, joe, one thing i have to do, and i have to say it, and i think it will be tremendous for our country is we have to renegotiate our trade agreements. Theyre disastrous. We didnt use our best and finest. We didnt use the people who are on your show. We used people who are political hacks to make deals with china, to make deals with japan, to make deals with mexico, to make deals with these massive countries that, you know, were frankly, when you discuss business transactions, theyre very small by comparison to what youre talking about with trade agreements. We dont use our finest, our brightest Business People to help us make these deals. And i want to renegotiate trade agreements. I think the trade agreements are a disaster for this country. You mentioned you would immediately roll back stome of the executive orders on immigration. What other executive orders would you roll back . There have been some nlrb, epa, take your pick. One of the things we want to do, joe, is get rid of regulations. We have regulations that are its interesting. More and more i hear it, when i am out making speeches and have these massive crowds as you probably noticed, 25,000 people. And sometimes at the end i will be signing autographs and meeting so many people, thousands and thousands of people, and the Business People, people that are even inclined toward business, they talk about regulation more than they talk about taxes. One thing well do is lower taxes substantially. Were lowering the business tax, lowering the tax on individuals. Were the highest taxed nation in the world. Well be lowering taxes. But joe, more than even taxes they talk about regulations. And it is its terrible. I know from my businesses its terrible but these people are affected even more than i am. Its incredible when i listen to the stories where people cant even open up small businesses. They have to go through all sorts of rules, regulations. 90 of which have no bearing on what they do. So i think i think from the standpoint of your show and the people that watch your show, were lowering taxes very substantially, and were going to be getting rid of a tremendous amount of regulations. And also having to do with energy, its its so difficult for our country. I mean, its so, so difficult. I believe in solar and i believe in all of the new forms that we are coming up with. I use solar. But its about a 30year payback, joe. Its not exactly something that people are going to be rushing out to buy, and they dont have it perfected. The strength is not there yet. Well open up energy and get the miners back to work. Well do a lot of things to spur the economy. Bob doll has a question for you. Hi, bob. Hi, mr. Trump. Allowing you to put an exclamation point on all of that. Seems to me that part of our problem is were not growing fast enough and wed solve a lot of problems if we could grow faster. Jobs. Income inequality, et cetera. Right. Do you think Regulatory Reform can give us half a point of growth and maybe some smart tax reform another half and wed grow 2. 5 to 3 instead of 1. 5 to 2 . I do. Basically gdp was essentially zero, okay. Its been that way. Its been very, very low for years now. And if china ever had that they would go into a massive depression. China, where they go down to 7 , and i watch your show all the time and i am seeing 7 and its like everyone is going crazy. How could this be possible. Other countries the same thing. Here we have almost zero, slightly more than zero but basically i am sure it could even be less, you know, because how are they coming up with these numbers, these massive numbers . How are they doing it . So we have no growth. I think absolutely, doddfrank has to be has to be either eliminated or changed greatly. I will tell you, i have so many friends who are very good Business People, and its impossible for them to do business with the banks. The regulators are running the banks. And youll have bankers that get big salaries and that are very capable and all of that, but theyre not running the banks. The regulators are running the banks. You know that, bob. Its very tough for people to borrow money. Theyre petrified of making a loan to a really Good Business person who is going to pay it back, but there is that chance that maybe the loan wont be good someday, and therefore they dont get the money. So many people are calling me, can i help them with a bank. The banks are, you know i am not even blaming the bankers. I am blaming the fact that the regulations, the regulatory climate is so bad that the banks just arent loaning to businesses. Thats one of the reasons you have gdp there. Thats one of the reasons we have no growth. Mr. Trump, on the tax front, given that you have championed the middle class in so many of your speeches, one of the critiques of the tax plan is that 40 about 40 of the tax cuts end up going to the top 1 under the current plan, at least as i understand it. How do you square that . Thats andrew. I will say this. I am not necessarily a huge fan of that. I am so much more into the middle class, who have just been absolutely forgotten in our country. You know, when you put out a tax plan, you are going to start negotiating. You dont say, okay, this is our tax plan, lots of luck, folks. There will be negotiation back and forth. And i can see that going up, to be honest with you. I know i am talking to your folks but in all fairness we are cutting. During a negotiation i could see that going up. I dont want middle to go up at all. But i could see that going up. And i think that probably will happen, because its a cut for everybody. And, you know, the wealthy have done well. I am not complaining. I will tell you, this has been an unbelievable period of time for me. Its been an unbelievable period of time for other people that i know that are very wealthy. Its, you know, but the middle class people havent had a wage increase. One of the reasons i have 25,000 people showing up to hear me speak at one night and we turn away 15,000 people is because these workers, these incredible workers, these middle class many of them havent had an effective wage increase in 20 years. And some of them are making less money, many of them are making less money now than they made 20 years ago and theyre being taxed at a much higher rate and theyre working much harder. Its supposed to be the opposite. Youre getting older, youre supposed to be working a little bit less maybe. But these are people who work harder, they have two jobs in some cases and theyre making less money than they made 20 years ago. Thats why youre wondering whats going on and why theyre not liking republicans or democrats. I mean, theyre not liking either, to be honest with you. They dont like anybody. They dont like conservatives. They dont like liberals. Theyre people who work very hard. You got a glimpse it was a famous clip where ted cruz went to a group of people who were trump supporters, and they were these were smart people, and i guess you saw the little debate they had on the street. Yeah. These are people that have been, you know, theyve been disenfranchised. Theyre smart. Theyre hardworking, but theyve been disenfranchised. And thats whats going on. You know, mr. Trump, you have hit the economic message very hard and very clearly. Its certainly something that has resonated with the voters. If i think of another candidate who has done the same it with be Bernie Sanders. I listened to Bernie Sanders this morning on npr. He says he is not getting out of the primary race until the last vote is counted. He said the reason for that is because he thinks he is a more potent candidate against you than Hillary Clinton is. Who would you rather run against . Hillary clinton or Bernie Sanders . Well, the system is rigged against him 100 . The system was rigged against me. This wasnt supposed to happen. The problem they had was that i was getting such massive victories, like in indiana, i won in a landslide. That wasnt supposed to happen. I was supposed to lose indiana. Even if you look eight weeks ago and until i went there and started campaigning and, you know, telling people what its all about. And having bobby knight didnt exactly hurt. And lou he was great. Genius katie from the purdue team. We had unbelievable support. Lou was great. But bobby knight came back, and he came into a stadium with me. We had thousands and thousands of people. They went absolutely crazy for him. I mean, he was so great to me. He campaigned with me for days. I mean, he was an amazing guy. But we won in a landslide. And i want to tell you that its its incredible when you see the passion in this country. The people of the country are great. Theyve really had bad leadership. Theyve been misled so badly. The tax policy is wrong and unfair. Its really unfair and were going to straighten it out so everybody benefits. I mean, everybody should benefit. But would you rather run against Bernie Sanders or Hillary Clinton . Well, i would rather run i dont think i want to say. I think that bernie cant make it so its irrelevant because, again, she has got she was given superdelegates which is ridiculous. Given by the bosses. So i wont be running against him. I think he would probably be somewhat easier. I mean, he is a socialist, perhaps slash communist. I think he is probably easier to beat. But i think she is i think shes going to be just fine. I probably i probably would rather run against her. I think it would be a more exciting race. Shell probably raise a billion dollars. I think in recent days you said it would be tough to selffund your campaign. Youre also to get a lot of these things through, mr. Trump, youll need to do all you can, i think, to for republicans to hold the house and to hold the senate to get what you want to do through, through a friendly through a friendly congress. That means a lot of money raising. And youre going to be raising money from a lot of people that i dont know that you maybe havent gotten along with for the first part of this campaign, a lot of the establishment republicans. How is that going to work . Well, joe, you know, its actually sort of a long answer because i really do have great relationships with so many people, especially the Business People. And, you know, of course i went through a very rough primary where i was very harsh on some people, like jeb bush, and you know, you wonder why the bush family wants to sit it out. I was also harsh on his brother. His brother got us into the war on iraq, one of the worst decisions in the history of our country, and i said it loud and clear. Its a horrible decision that was made. When i hear that theyre going to sit it out, i think, thats fine. I dont care if they sit it out. I have tremendous support. Even politically so many people are now coming out in support. Were going to have some people that arent going to want to play the game, and its okay. If they dont want to. I dont think it matters. You know, like, i learned yesterday, a couple people they dont want to endorse me. I say, it doesnt matter. In the primary i blew everyone away and i didnt have huge support. I am watching now hillary fighting bernie. This will go on for a long time. I was supposed to go out into july and everything collapsed on the other side and i ended up winning. Long prior to what it was thought i would. So i am now watching her fight it out. Shes going to win again because the system is rigged and he cannot win. Unless she gets indicted which is a possibility but i think she is being protected by the democrats. I dont think shell be indicted even though she should be. She should be because she is so guilty. Other people, as you know, who did far less, have had their lives destroyed. She did as much as you can possibly do on that front, and she will skate away with it. Its a disgrace, okay. But thats the only thing thats going to stop her, if the system is honest and if the democrats dont protect her. Otherwise she is going to win the she is going to win the nomination over the next month or so because he cant win. It is such a crooked system. And again, she is fighting he is fighting crooked hillary. So whether i want to go against him or her, it doesnt matter. I will say this. She, i think, in a certain way, will be easier to beat because she has got so much baggage. Mr. Trump, just a strategy question for you in terms of how to approach hillary. There is a question Hillary Clinton, this is, a question totally about how you do it, if you get into a debate with her, how mean or nasty you can be, how perhaps president ial you need to act. How do you think about all that . Well, you know, i had the debates, and i never debated professionally before. And a lot of these guys were debate champions and all of that. Thats why theyre politicians. All talk, no action. I had the debates. And every single poll there are seven polls. They polled the debates. Who won the debates. Like drudge, a fantastic guy, by the way. Drudge and Time Magazine and slate. They have only polls. And every single i had 11 debates, and every single debate and every single poll, i won. In other words, every single poll had me winning every single debate. I sort of like debating, i have to be honest. I was on center stage on every debate, meaning i was the number one person. And i mean, for this is since like july. And after the debate started. I was on center stage. I dont mind the debates. I think the debates are a good thing. Hillary is not a bad debater. I watched her. She is not a bad debater, but i think the debates will be positive for me. I sort of wish we had more than three. We have three. There are three scheduled. I think we should perhaps have more than three if you want to know the truth, because there is a lot going on. Getting back to try to figure out this Global Economy now. It seems like were its been something you have talked about a lot. It is more global. And maybe, as its gotten more global, we havent always gotten the best end of the deal. But you have made some comments about janet yellen. Number one, do you think that she is not the right person right now for the job . Would you not reappoint her . Would you ask for her to step down . Is there someone else who you think should be in there . Do you think she should be raising rates now, not raising rates . What is she doing wrong . Well, i have nothing against janet yellen whatsoever. I have i think she has been doing her job. And i have absolutely nothing against her. I dont know her. She is a very capable person. She has people who i know have high regard for her. But she is not a republican. She is not a person that, you know, when her time is up, i would most likely replace here because of the fact that i think it would be appropriate. She is a lowinterestrate person. She has always been a low Interest Rate person. I must be honest. I am a low Interest Rate person. If we raise Interest Rates and if the dollar starts getting too strong, were going to have some major problems. You look at whats happening with our trade. I mean, you look at what china is doing to their currency with devaluations. Theyre killing us on trade. Trade is the single and devaluation. If you want to really take a hard look at whats going on, the devaluation is the single greatest tool that these other countries are using to absolutely kill us, assuming they have capability, manufacturing capability, et cetera. And china is like a grand master. They are the grand master of all grand masters. And if we start raising rates, i have always been a low Interest Rate person. Now, if inflation starts coming in and we dont see any signs of that, but inflation starts coming in, thats a different story. Then you have to go up and you have to slow things down. But right now i am for low Interest Rates, and i think we keep them low, and we have to compete. We have to compete in many ways. But when the dollar started going up recently, that was not you looked at what happened, and were going to lose all our business. Its wonderful. Its a funny thing. I love the concept of a strong dollar. In many respects obviously i like a strong dollar. But when you look at the havoc that a strong dollar causes, and i can tell you i have friends in china. All they do is watch the dollar. They love to see it go up. They love to see that dollar go up. So actually, while there are benefits, it sounds better that have a strong dollar than in actuality it is. I agree with you, mr. Trump. Its a huge dilemma that we face. Tremendous dilemma. The problem becomes, low Interest Rates, part of the real thing weve seen is its been a huge contributor to inequality in society. If you want to look at why the middle class and the people who are less wealthy feel a lot worse off and the rich feel better off its because of the low Interest Rate environment. How do you tackle that inequality in a low Interest Rate environment . Before you get to inequality we have another problem with raising rates. We have 19 trillion of debt, right . Its going up to 21. We have numbers that are beyond belief. Were paying a very low Interest Rate. What happens if that Interest Rate goes two, three, four points up . We dont have a country. I mean, if you look at the numbers, theyre staggering. I mean, we have a very low interest we have tremendous debt. Tremendous. And its at low Interest Rates, fortunately. If those rates went up two points, three points, five points, because you know, you have i was here during the jimmy carter days. Right. When the prime rate went up to, what, 21 or 22 , becky, right . Right. I watched that whole deal. That was not a pleasant deal for a lot of people. As we had our beautiful prime deals. Solid prime deals and all of a sudden were paying 21 interest, right . I have seen what can happen. Its not a good picture. But what do we do with all of the money that we owe everybody when rates go up and now all of a sudden we have to borrow at two points more. One point more even is devastating. Two, three, four, five points more. Its a real dilemma. We have to be very, very careful, and i am the king of debt. I do love debt. I love debt. I love playing with it. Of course, now you are talking about, you know, youre talking about something thats very, very fragile. It has to be handled very, very carefully. Mr. Trump, the lead story in the wall street journal today is about 2017 and what kind of premium increases all of these private insurers are going to need after losing a lot of money in 2016 because of the Affordable Care act. And its kind of i guess its not ironic. But 2017, first year the president is out of office is when the biggest increases are coming. I think people actually said 2017 would be a tough year. Whats the first thing that you can do, without legislation, to in terms of the Affordable Care act and health care in the country . Another first hundred days issue. Would you immediately try to well, if you go back to when this was originally passed, i said whoever this was long before i thought about running for president. I said, 2016 and 2017 and particularly 17 is going to be a total disaster for our country because of the socalled Affordable Care act. Obamacare. And it is a disaster. I have been saying it. I said, whoever is president is going to have a problem because the numbers are going to be staggering for not only for people and not only for insurance companies, for the country. Look at the kind of numbers were talking about for the country. And the fact is you have to repeal and replace obamacare. The country cannot afford it. People cannot afford it. Its good for almost no one. And we have to we have to repeal it, and we have to replace it, and we have to get it we have to get better, frankly, we have to get better than what we have right now because what we have right now is not working. Look at the premiums that people forget the insurance companies, the premiums are going up 25 , 35 , 45 and sometimes more than that. Look at the deductible. The deductibles are going up to numbers that nobody can even believe. You have to almost die to be able to even use it. Its a use its a horrible thing for the country. I hear from the insurance companies, and i certainly know from the people because theyre their numbers are going up so high and so rapidly. It is a total failure. It is a disaster. You talk about debt. You are to some degree the king of debt. You have also renegotiated debt terms over the years. Do you think we need to pay a hundred cents on the dollar or are there ways we can renegotiate that . I have borrowed knowing you can pay back with discounts. I have done very well with debt. Of course, i was swash buckling and it went well for me. Debt was always interesting to me. Now were in a different situation with the country. I would borrow knowing that if the economy crashed you could make a deal. And if the economy was good, it was good. You cant lose. Its like making a deal before you go into a poker game and your odds are so much better. Say it again. Are you suggesting i understand youve done this in business deals, but are you suggesting we would negotiate with the u. S. Credit in such a way . No. I think this. I think there are times for us to refinance. We refinance debt with longer term. Because we owe so much money. Nobody talks about it. Nobody talks about it until the bubble pops. And the bubble could pop. And it could pop. It could be ugly. You have seen it a couple of times but you havent seen it as bad as it could be. I could see longterm renegotiations where we borrow long term at very low rates. Frankly, we do need money to rebuild the infrastructure of our country. There is some precedence in the auto bailout. But lets be clear. Youre not talking about renegotiating sovereign bonds that the u. S. Has already issued . No. I dont want to renegotiate the bonds. I think you can do discounting, depending on where Interest Rates are. You can buy back. Im not talking about with a renegotiation but you can buy back at discounts, do things with discounts. I am not even suggesting that we dont borrow at low rates long term. Part of the problem is when the debt comes due, what happens if the rates are high and we have no budget that can even conceivably take care of this. This is bigger than any line item. Its bigger than anything we can think of, the debt. If Interest Rates go up 1 , 1 , its devastating. If they go up two or three or four percent, thats impossible. Start figuring those numbers and put them onto your Balance Sheet and cost them out. And it would be devastating for our country. People would say where does it even come from. One of the reasons that i like rates staying low. But i would refinance debt. I think we should refinance longerterm debt. And you know, say what you like and we want to save, but we have to rebuild the infrastructure. We have spent 4 trillion in the middle east. And probably more than that. We have nothing for it. Absolutely we didnt keep the oil. As i always said, keep the oil, keep the oil. We didnt keep the oil. We had 4 trillion plus dollars spent in the middle east. Yet our roadways are crumbling. Our Transportation Systems are terrible. Our airports are a disaster. You look at our bridges and our tunnels, theyre unsafe and falling apart. We need infrastructure. And the beautiful part about infrastructure is it puts people to work. Immediately puts people to work. Its got to be done properly and its got to be done on time, on budget, you know, not these deals where youre building a bridge and it costs 15 times what it was supposed to cost. It has to be done properly and tight and good contracts and guarantees from Good Companies that there wont be any cost overruns. We need money for infrastructure. Forget about the money for it. We have to fix our infrastructure. Our country is falling apart, and we have spent all of this money in the middle east. And its horrible. Well build a school. There was a time wed build a school in the middle east. Theyd blow it up. We build another one. They blow it up. They replace it three or four times. If we needed a school in brooklyn or oklahoma or someplace, we dont have the money for it. Its crazy. The way our country has been managed and run is criminal. Mr. Trump, on infrastructure, president obama along with a number of democrats talked a lot about infrastructure, taking advantage of the low Interest Rates that you talked about. Most republicans, at least thus far, at least during the last term, have said no, they dont want to do it. Look, i am an infrastructure person. I know about infrastructure like nobody thats ever run for office in the history of the presidency. If there is a strength with me. Maybe my greatest strength is the economy, jobs and building. I know how to build i know how to build quickly and on budget and all of that. And you know, i look at the way they give out their contracts for these jobs. Its its just i mean, i know people they get a road contract and they end up going out and buying a mansion because theyre going to make a fortune on it. Its ridiculous. There is so much waste, fraud and abuse in our system. I will be able to stop it. Nobody else even knows really what i am talking about, but i will be able to stop it. And i think it will be one of my strengths. I think the military will be my strength. Speaking of the military, when they bid out, they bid out and its so much politics in that. They bid out to companies that are politically connected and they get equipment that they dont even want. They want to get other equipment but that company it might make better equipment but the company isnt politically as astute and therefore they get the equipment that they dont even want. The whole thing is its got to be its got to be redone. And it it can be it could be such a beautiful picture, but we are really behind the eightball. But we do have to rebuild our infrastructure. And one of the things we should be doing and thinking about doing is buying back debt, really buying back debt, doing a great job with it, but we have to fund in some way the infrastructure. You this is an example, i think, mr. Trump. Andrew pointed it out. This is not something thats front and center on a lot of farright conservatives in terms of Interest Rates. Youve never you havent run this entire Campaign Based on currying favor with the establishment, with the base of the republican party. Is this going to be youre not going to tack to the right to try to garner more i dont know more support from that part of the no. Youre just i dont tack right or left. I tack whats right. And thats how i have won. I mean, you know, i have been quite far right on certain things. Certain i hear i am a liberal on trade, right. Right. Thats what i am hearing. I dont know why because all i want to do is have really strong trade deals, already. And frankly, if people are going to be taking advantage of us like china does and like almost every country does i mean, every country, we have a 500 billion a year trade deficit with china. How stupid is that. We have, you know, a massive trade deficit with japan. We have 58 billion deficit with mexico. With mexico i mean, its ridiculous. And they tell me i am somewhat liberal on trade. All i want to do is make deals that are fair deals. This has nothing to do with conservative. I would say im very conservative on trade. I am a freemarket person, but our leaders dont have the capability to negotiate good deals. They negotiate terrible deals. I want to make great deals. We cant be totally free market if we dont have the proper deals. Mmhmm. We have to renegotiate our trade deals. Our trade deals are killing this country. Killing this country. The other thing i think of, watching both the contests on the democratic side and on the republican side, i wonder whether both you and secretary clinton are inoculated to some of the hardest criticism. I mean, in the general election youre not going to all of a sudden Say Something about, you know, whether muslims can come in the country or about women. Its already been done. And its like you have already been vetted almost. Do you think sort of to the same extent with what Bernie Sanders has done to secretary clinton though not with the email issue. People question why did you take that off the table. He made a big mistake on the email issue. Its a big issue. Hes still winning, without talking about that. Do you think you learn more to attack her with from that primary campaign, or do you think you had 17 guys going after you. I bet you they have some sound bites ready to run. Well, sure they do. And you know, its hey, i have had now came out the other day 66,000 would you believe this 66,000 negative ads on me during the course of the. How much money . Over 100 million. Jeb bush and so many they spent tens of millions of dollars on negative ads on me and i beat them in landslides. I hate to say this for your advertising agencies that are listening but its almost and frankly for your different forms of media. Its almost saying like do ads have any impact. Maybe because people know me so well they poopooed had, said forget it, we dont believe it. But even in indiana. I went to indiana, and i was there for a number of nights. All that was on television the only ads you would see are negative ads to trump. I won indiana in a landslide and won every single delegate. I won every district. I won the overall by a tremendous margin. And won every district. Its its like unprecedented. And they spent millions of dollars of ads. I spent 900,000 on ads. They spent 10 million on ads, and other things, and i ended up winning. So joe, whatever it is i mean, i want to do the right thing. I know the right thing in some cases isnt so popular. We have to make better trade deals. You know, i like free market. If we can do free market, thats fine, but we have to make better trade deals, because we cant continue to lose i dont call it a direct loss, but its a loss in a certain way. We cant continue to have trade deficits with china of 500 billion a year. And weve had them for a long time. I mean, 200 billion, 300 billion. It keeps going up. Weve rebuilt china. Dont ever forget it. We have rebuilt when you see trains that go 250 miles an hour, you look at china, where they came from from 20 years ago and look at them now. Somebody funded that. You know who it was . Us. To a lesser extent europe and other, but the money theyve taken out of this country is unbelievable. I dont blame china. I think its gareat. The largest bank in the world is a tenant of mine in a manhattan building. I have very Good Relationships with china. They know im right. I am not blaming china. I wish our people would think the same way. I blame our leadership. Its incompetent. We have incompetent leadership. I have all due i have Great Respect for china, mexico, for japan, for vietnam, which is hot as a pistol right now in terms of what theyre taking from our ku country. I blame our leader shop. I dont blame those countries. We should be doing the same thing. You were talking about market a and advertising earlier. A headline from the rolling stones, the band, say they dont want you using their songs anymore during your speeches on the way in and out. What do you say to mick jagger about that . I have no problem with it. I didnt see that. I have no problem. I like mick jagger. I like their songs. You know, we use so many songs. We have the rights to use them. I always buy the rights. One more thing i want to ask you thats interesting to a lot of people. Have you seen, for your Supreme Court nominee, if you are president , people are pushing ted cruz. Republicans have picked guys in the past you dont know where theyre going to be on a lot of the issues. When a democrat picks a Supreme Court justice, you know that theyre going down whatever the party line is. So i thats one guy, cruz, where i i dont know. I cant imagine him breaking with conservative orthodoxy. Would he be a guy you might think about . He would certainly be liked by certain conservatives. Ted has not been very well liked. One of the reasons i won is he did not have a lot of support with the senators and with all of the people that he worked with. I had more support than he did, and i am an outsider. So ted has not been that well liked. And i actually liked him. I got along great with him until the last month or two when we really went at it because it was the two of us essentially. Right. But ted has not had great support from his fellow senators. Hes had very little support. Jeff sessions of alabama backed me. A fantastic man, by the way. Would he make a good veep . Senator jeff . Yes. I think he would make a good anything, if you want to know the truth. He is an unbelievable person. He is beloved in alabama. He is totally respected by every senator. And actually, i think he is the man that ted cruz respects the most in the United States senate. He talked about him all the time. Then he came out and endorsed me. And i said, wow, that was great. It was amazing. I have heard you intimate that you might go into the convention with some, you know, already with a Team Selected for certain positions. Could you tell us anything for sure at this point about, you know, whether there is Chris Christie as a. G. Or giuliani as Homeland Security . I have had great support from rudy giuliani. I have had great support from Chris Christie, dr. Ben carson. You take somebody like jeff sessions, though i think he is very happy where he is. He is a very important senator. Thats a very good position. Its hard to say leave the senate and do this, right, run an agency. But i have had great support from certain people, and i like that. Rudy giuliani has been fantastic. Newt gingrich has been amazingly supportive. Yeah. He said its the single greatest phenomenon in politics in his lifetime that hes ever seen, you know, whats happened here with this whole situation. And i dont know why. Joe knows me well. Joe, we like to win, right . We sort of expect to win. But you never know. But a lot of people have said that. Its a great phenomenon whats taking place. I dont see it that way, but a lot of people do. Mr. Trump, is there anyone who hasnt been a supporter who you just respect their stance on things . We talk about this in relationship to ceos and board rooms all the time. You want people who push back who arent necessarily yes men. Are you people who covet who you think have expertise in certain areas that youd like to get on board . I would say there are a number of people who were very negative to me who are now calling and saying i would love to come on the team. I said, becky, to one, how do you do that . This guy was so negative. You have no idea. He was on shows and would say the worst things. I was the devil. Now he calls a couple days ago and says, don, i would love to be on your team. I actually asked him. How do you go from saying what you said how do you pivot . I would love to have you, i said. How do you make that pivot . He said no problem. He is a politician. I have to say before i get off, though, you mentioned Supreme Court. Right. The single most important thing, perhaps, i mean, always the economy and jobs and all of that because we have to keep our country going, right, and security, okay, lets say that tops everything. We need our military built up because our military is in its very depleted. Very depleted. Scary thing. But the single most important thing right now, after those two subjects, is Supreme Court. And Supreme Court justices. And i will tell you that, if i dont win, you will have more of the people that have been put on over the last number of years, and we will have a Supreme Court that will change this country to a level like you have never seen. You will have Bernie Sanders types put on the Supreme Court. And this country will be a totally different country. This country will be argentina. This country will be something that is so different. It will be venezuela. You have no idea whats going on in the Supreme Court. When you look at the differences in decisions, when you look at the horrendous decisions being made. And wanting to be made and will be made. Now, the only Thing Holding them back is the fact that, you know, we lost a great justice recently, and but the only who has to be replaced. And you know, this president , whoever this president is, is going to be making perhaps as many as four and maybe even as many as five choices, picks, and if we dont pick the correct Supreme Court justices, this country is going to be forever changed. So when i hear all of these people saying, well, were going to sit it out, im going to put on great conservative, smart, wonderful, respected judges. And i will tell you, if somebody isnt there to do that and to counterbalance whats going on, its so important. And its going to be a country that you wont recognize in ten years. Well, i appreciate all your time today. As you do tack into the general election, i think that, cnbc viewers will probably become more and more important for you to speak with rather than some more other maybe more general audiences in terms of fundraising and everything else. One last thing. I know you have had trouble getting certain conservative groups. Ive been told that the morristown bear school conservative club ive been informed is completely behind you, mr. Trump. Thats good. I have had a lot of support and growth. One club, the club for growth. One of those days was in in the last couple of days. Not steven moore. Mcintosh. It was the gentleman who showed up at mr. Trumps office. Theyre not coming around. I didnt know who they were. The meeting was set up by a friend of mine. He said would you see them. I said who are they. The guy asks me for a Million Dollars. I said what do you do . You can be rich but you dont throw money out of the window. I said write me a letter. He wrote me a letter asking for 1 million. I politely said no. I said no thank you. A couple weeks later they started doing massive negative ads on me. I said maybe i should have paid him the Million Dollars. We were in i will tell you it didnt matter. He told a slightly different story. We had him on the air. He said that you reached out to him saying you were thinking about funding him. That was the story when he was here. I never even heard of these people, okay. Ill send you a copy of his letter asking me for the extortion money. He admitted that he wrote the letter. He claimed it was after you offered to fund him. I am just telling you what he said on the air. He must absolutely be kidding, all right. I guess thats all he can say. Hey, maybe i should have paid the money, i would have gotten positive instead of negative. In the meantime they took hundreds of millions of dollars of negative ads and i still beat them. Trump tuesday. A nice ring to it. You guys have been fantastic. I watch you all the time. Its an honor to do your show. And you know, when youre ready well do another one. Excellent. Its been very interesting. Thank you. Thanks for all your time. Thank you all very much. See you later. Futures right now, take a look. Up roughly 70 last time we saw. Now up 65. The s p up 9. Nasdaq up about 21 points. Moving on. Sohn Investment Conference producing lots of news from some of the worlds bestknown Hedge Fund Managers. Kate kelly joins us now with the highlights. Kate. Hey, joe. A fascinating day yesterday. We talked about some of the picks that saw some aftermarket action in terms of what the market was doing after the presentations were made. One interesting thing, though, was the theme of group think, ideas brought up in the past that a lot of funds piled into and in some cases they didnt work. Valeant pharmaceuticals, which is down 84 in the past 12 months. That was touted by bill ackman who didnt present yesterday but attended. As a great long position a year ago. A lot of hedge funds piled into it. Its been somewhat disastrous. Here is sound from jim chanos who was short it. Valeant was genius at gaming the system. That game is over. And so the ability to hike prices on drugs for toe fungus to 8500 from 800 or, you know, compounds like that is over. And thats what i think people are theyre looking in the Rearview Mirror here not understanding that this was financial engineering. This was not pharmaceutical development. One hedge fund thats sort of an annual presenter at sohn that had a tough 2015 as well as a rough start to the year, Larry Robbins from glenview capital. Larry is prone for being a particularly prescient health c care investor. His whole presentation was about i dont have any actionable ideas for you today but sometimes you have to hang in there. Here is him elaborating on that. We tend to be a longerterm investor. There are periods and unfortunately weve sat through one between kind of august and the middle of february where being an investor was certainly muddied up by the choppiness of the macro factors. We first have to figure out is the basic investment thesis intact. If it is we have to hang on. Robbins is not alone in terms of struggling to perform in 2016. Point 72, the Family Office run by former Hedge Fund Manager steve cohen. Flat an being down 8 . Dan lobes. Flat. Einhorn up 3 . Thats an exception rather than the rule. This will be something to watch going forward. People have come up with some single good ideas, but whether they can produce returns is another matter. Kate. Thank you. We have we should say our guest host for the hour made a lot of news yesterday. He was among the news makers at the sohn conference making a trillion dollar 3 trillion call, from what i understand, on amazon. Joining us right now is mr. Pally h palihapitiya. Most people know by by my first name. Chamath. Youre the founder of the venture fund social capital. Coowner of the golden state warriors. You have to be a happy man. Pretty excited. Lets talk about amazon. 3 trillion. How do you get there . Make the case for us. So, being at sohn, one of the things that struck me is that a lot of people are trying to be right the next month or the next quarter. I understand why that is, the entire system is sort of structured for shortterm profitmaking. I think thats impossible. Its just really hard to not to be able to be that predictable and to have a crystal ball, that short of a time window out. I stepped back and said what are the broad, macro trends that we can basically rely on for five to tenyear periods. Thats what we do when we make private investments. The case for amazon is two things. Firstly, they have done an unbelievable job basically driving massive amounts of consumption. If you are a consumer, not just in the United States but now increasingly all over the world, and especially if you are a prime member, you are buying inordinate numbers of things every day. Raise my hand. That is me. I couldnt believe it. We have to pay sales tax in new jersey for everything you buy online. Pay it when you pay your taxes. I added up my last years amazon bill and was stunned. Youre probably buying tens of hundreds of things. Multiply that by the number of prime users who will exist over the next five to ten years. That is an enormous business. The second part, which is actually not as well understood is what aws is becoming. Aws is now this like very simple infrastructure that everybody uses to build their company. It is literally a utility similar to electricity. And they price it in such a way where you get unbelievable amounts of value at increasingly cheaper and cheaper prices. The margins on that, yeah. The margins they did great this quarter. But people worried that business would be commodtized. To be blunt, i think thats a lot of nontechnical people who dont understand what it is. Two facts worth noting. Over the last ten years since theyve introduced aws theyve cut prices roughly once every two months. At the same time, just last year alone, 700 new features, 40 more than the year before that. So when youre doing those two things at the same time, whats happening is youre disrupting existing incumbents who have no ability to actually offer the same capability at the same price. So the argument that there is no mote on that business given that it could become a commodity utility. Microsoft, google, others, you dont think can compete in a meaningful way . Google cloud is the next most obvious competitor. Theyve done things around Machine Learning specifically. Beyond Machine Learning, which is a small and specific application for only a small subset of companies, the broad based internet. Fortune 500 companies. Fortune 1 00. Aws is a onestop shop that nobody else gives you. Microsoft is interesting but only to the extent you care about the microsoft product stack. Which less and less people care about. On the retail side, the capital intensive nature of what amazon is doing which is so different than alibaba. They dont want to own the shipping component. These guys ultimately might become fedex. Is that a good or bad thing in terms of the use of capital . I think its an incredible thing. Thats the third part of the puzzle thats also not well understood. What jeff has done investors say give us back the money. Were better investors than you mr. And mrs. Ceo. Well allocate the capital. Turns out in his case its not close to true. He is one of the best single investors in the world right now. What he has done is hes taken that money and instead of giving it to us, he has invested in business lines that first drive down the cost for retail. So us as consumers, benefit from cheaper and cheaper prices. Then he exposes those to other people, to third parties, so that they can use them. Thats the brilliance of what amazon is able to do. Its this Virtuous Cycle that allows retail to anoint services at scale and then he turns around and he gives those services to other consumers and businesses to use. Its really fascinating as a company. None of that was obvious even a few years ago. Its taken at least me all this time for the puzzle pieces to come together to see that this is just the beginning of a longterm secular tail wind for this company. Chamath will be with us for the rest of the hour and the rest of the program. When we come back, though, the news makers keep coming this morning. Up next, housing and urban Development Secretary Julian Castro joins us. Here is what donald trump, the presumptive nominee told us about fed chair janet yellen and Interest Rates. When her time is up i would most likely replace her because of the fact that i think it would be appropriate. She is a low Interest Rate person. She has always been a low Interest Rate person. I must be honest, i am a low Interest Rate person. If we raise Interest Rates and if the dollar starts getting too strong, were going to have some very major problems. Whats going on here . Im val, the orange money retirement squirrel from voya. Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . More of a spokes metaphor. Get organized at voya. Com. If we start raising rates, ive always been a low Interest Rate person. Now, if inflation starts coming in and we dont see any signs of that but inflation starts coming in, thats a different story. Then you have to go up and you have to slow things down. But right now i am for low Interest Rates, and i think we keep them low and we have to compete. That was donald trump joining us in the last hour talking about the fed, the economy, and Interest Rates. Rates, of course, are very important to the real estate market. Lets bring in Julian Castro, secretary of u. S. Department of housing and urban development. Mr. Secretary, thanks for being here today. Great to be with you. You heard from donald trump just said about low Interest Rates. Obviously thats been a huge fuel for the housing industry in our country. How do you feel about low rates . What do you think would happen to housing if rates went up significantly . There is no question that the last few years have offered great opportunity with low Interest Rates. And fortunately what were seeing is that more and more folks are being able to purchase a home. Our Housing Market has gotten stronger and stronger. Were glad to see that because after the housing crisis that we experienced, what weve seen is that the Home Ownership rate has dipped to one of its lowest levels in almost five decades. So its a good thing, of course, to have low Interest Rates. The other part of that, though is making sure that there is real opportunity for responsible families to get into a home. We have seen that there sa historic level of people in the United States who want to buy houses right now but we also know that supplies are down and we havent seen the permits coming in that we might have expected at this point. Is that creating a problem . Youre right that we do have a challenge with supply. And the president has spoken in different ways to this. One of those is to ensure that, at fha we are doing everything that we can to work with lenders and borrowers so responsible families can get into a home. Also ensuring local regulation is sensible and done in a way that balances the need to create more supply out there. Do you see this being a massive issue, or do you think that this is something that gets resolved relatively soon . My hope is that it will. And the trend is very good, though. Its been very strong over the last couple of years. Were glad to see that. The Housing Market, where it was just a few years ago and where it is today really is night and day. I think the piece of it that all of us have an interest in working on is to ensure that hardworking americans, folks who are responsible, can own a home. How do we do that without putting u. S. Taxpayer dollars at risk . I ask this because freddy mac swung to a loss this week for the second out of the last three quarters. It wasnt a big enough loss that will require a cash infusion from the taxpayers, but it also means they wont be sending a dividend check to the u. S. Treasury. We can accomplish that by learning the lessons of the housing crisis and keeping in place important safeguards so that we dont slide back, but at the same time ensure that we have a Credit Access that is reasonable. I have said often that, if the story was a decade ago that it was too easy to get a home loan, the challenge for middle class, hardworking, responsible families is that, in the last couple of years its actually been too difficult. And so we need to strike a strong balance between those two things. We can do that. And i am confident that, through good underwriting, through the reforms that have been made, that that will happen. How do you continue to guarantee that when you see things like the u. S. Government trying to sue quicken loans . I was reading yesterday about how quicken loans is fighting this. If you look back before the last collapse, quicken loans had the best record of loans that it was writing, had the best doublechecking of any of the companies that were out there. Theyve said no, theyre not going to pay billions of dollars in what they see as a shakedown fee. If you want to make sure that these companies are still loans, how do you do that when these are some of the exemplary Loan Companies that are now being held up by the u. S. Government . I wont comment on ongoing litigation, but ill say that is looking backward at what happened in the past. The opportunity that we have in front of us, particularly at fha, fha is under h. U. D. Is to ensure that we work with lenders and borrowers to create opportunity for hardworking middle class families out there who are responsible and can get a loan and pay on it responsibly. Fha business over the last couple of years has been stronger than ever. I do think that there will be tremendous opportunity in the future, and were very proud of the work that fha is doing. Secretary castro, this a chamath. I have a question. What responsibility do you think the federal government has to fix some of the Housing Affordability issues and liveability issues of some of, you know, our most important cities like San Francisco and new york . There is a role for the federal government to play. Obviously there is a strong role for local government. I know as a former mayor that a lot of local regulation also impacts the opportunity for Housing Investment and supply. But president obama, in this fiscal year 2017 Budget Proposal has made an unprecedented request which, if granted by congress, and of course thats a big if, could have a profound impact on addressing issues of homelessness and affordability. And that was an 11 billion request over the next 10 years so that we could invest in 550,000 housing choice vouchers and rapid rehousing assistance for families so that by 2020 we could effectively end family homelessness in the United States. On top of that, weve looked at creative ways to incentivize local communities to adopt strong local ordinances that incentivize housing supply. We call that our local housing incentives approach. And the thing is that, you know, this is not something that the federal government alone or local government alone or private industry alone can tackle. Its going to take all of us working together to create more supply and ultimately to get more housing opportunity out there to folks who need it. Secretary castro, your name has been mention the frequently as a potential running mate for secretary Hillary Clinton. I know you wont comment directly on whether youve spoken with her about that or bring that in. But we spoke with donald trump extensively this morning. I just wonder what you think her chances are against donald trump and how that debate and battle would carry out over the next several months. Yeah. You know, ill stick to h. U. D. Business today and let the politics play itself out. All right. Secretary castro, we thank you very much for your time today, sir. Thanks for having me. Okay. Coming up when we return, breaking economic news. Weekly jobless claims. As we head to a break, here is what donald trump told us in the last hour about regulation. Its terrible. I know from my business its terrible, but these people are affected even more than i am. Its incredible, when i listen to the stories where people cant even open up small businesses. They have to go through all sorts of rules, regulations, 90 of which have no bearing on what they do. I think from the standpoint of your show and people who watch your show, we are lowering taxes tremendously and well be getting rid of a tremendous amount of regulation. Seconds away from weekly jobless claims. About 30 seconds. Futures right now indicated up 60 points on the dow. 8 or so on the s p and nasdaq up 21. Tenyear note right now, we used to look at it a lot. 1. 8 . Which is higher than any place in europe, as if our debt isnt as we should be half of what their debt is but were not. Germany is what . Under 30 basis points. Last time i looked. Rick santelli is at the cme with numbers. Initial jobless claims for the current week dropped to excuse me, rallied up 274 this. 274,000. Were up 17,000. Thats a pretty big jump on any given week. To keep it in context, weve had weeks recently where we were below 250. Something that hasnt happened since the early 70s. As important as this is, and im sure people will talk about this jump, i dont know what Strategic Benefits you get at this point if a jumped over 3 or if it was below 2. 25, i would think those thresholds might be something with a little more meat on the bone. We well continue to monitor the kwee equities. The dax has had a rough time like all equity markets do with the currency volatility the way it is, but i am sure the whole world took a sigh of relief with your great interview. Donald trump thinks a strong dollar is a real problem. I guess people who shop at walmart wont get those low prices for very much longer, huh . Back to you. Rick, thank you. Our guest host is the first i want to do the last name. Chamath. Chamath is better. Ill stick to that. Palihapitiya. I got that. I worked on that. Palihapitiya. Got that. Its all we were just off camera talking about a lot of macro stuff, yields and things like that. How much is that how much of it goes when you are thinking about something, how much of it is macro and how much is individual . Now that we invest sort of not just in private markets but public markets, i think about it a little bit. And the biggest problem is like the world is awash in money. When you take that and you take a situation where there is literally no yield available anywhere, we end up in this very difficult situation where assets that i would normally buy, so private company stocks, get massively overinflated. Because there is the perception that yield exists there. That returns exist there. For me, just every model that i have ever used to figure out what a company is worth breaks. And you get new market entrants that you didnt even think existed. The sovereign funds come direct with really big checks. They write really big checks now because they have to, not because the Company Needs it or it justifies it but because they cant write anything under 100 million or 250 million. The few places where you can generate meaningful returns, you have to be even more precise and you have to step across and over a lot of land mines. Its become really difficult. This environment makes it very, very difficult to price risk assets. You are smart. And you probably avoid most of the pitfalls but it sounds like you are describing an environment where less savvy or riskoriented people are totally exposed. You are sounding kind of like druckenmiller. Is it before something thats getting ready to happen . In a world like this, i think you have to be a good picker. You just have to. There is no excuse for fundamental Due Diligence and a deep bottoms up understanding of what you are buying . If only one out of ten things are okay. Nine out of ten will blow up. Joe, youre right. Right now there is so much easy money. So many people with so much money are looking for returns that there is, for everybody like me, who has predictably and frankly compounded extremely well, picking Good Companies, there is a whole bunch of other people that have not, but they still can aggregate large amounts of capital and they put it to work. Theyre going to put it to work in every second, third and fourthyear company. Not the slacks of the world. Then those companies will go bellyup and a lot of that value will evaporate. You think we are in a bubble environment, that this has been fueled by cheap money and excessive i wouldnt call it necessarily a bubble. I think this is a prolonged period of investment insanity. It behooves you, you need to be an unbelievably good picker in a time like this. Can you speak to the political election, given that we just spent a lot of time with mr. Trump this morning and how the valley sees all these issues . Ill tell you my personal story. I escaped a civil war. I grew up in canada. On welfare. Pulled myself up. Went to college. Came to the United States when i was 21 years old. And i think the last five years i probably have been a top ten taxpayer in california. So i mean, i am living out what i think a lot of people would love to live out. Start at the bottom. And try to do something meaningful with ones life. So as a person, you know, whats troubling to me is just like this idea that Bernie Sanders . There are extremes on both sides that, frankly, dont believe that thats possible anymore. Thats a little disconcerting. But you are a you have a lot of money, and you are a target, but you are a positive force for good in society in all ways in terms of paying taxes, in terms of everything you have done, from welfare to the fifth largest taxpayer in california. To be vilified, thats why i cant believe that there is traction. I wonder about what academics are teaching our children for someone to be so popular i think whats really happening i learned this firsthand when i was at facebook. I think people want a better sense of equality. I think what people want to see is that there is a chance for everybody to run the race and to run the race reasonably fairley. I think right now what people feel is an asymmetry. Why didnt you feel it . Nothing held you back. Whats holding back other people . I did, but you know what, i decided to grind. And i decided to not give up. So then is it the governments job to instill the grinding ethic in people or i think that its its our responsibility it can be done, though. I think its our responsibility as citizens now to make sure that the systems that could hold other people back are fixed in a way so that they are more bottoms up. Ill give you an example. My father struggled with diabetes for 30 years. He ultimately died last year because of that disease. I say all the time, if i had not been in canada where we could have access to universal health care, i wouldnt be here because i probably would have had to drop out of college. I would have had to support my two sisters and my mom. But i didnt have to because the government took care of us. That should not be an expectation. In the United States people like myself now can go actually solve and cure that disease. We should allocate capital to do that. When you do that, the next person that could be, me or somebody like me, has an ability to run a fair race. So i think what the time now should be is not about the extremism and the fear mongering. I think what it should be is a realization that there are a lot of really good people of every single persuasion and gender, et cetera, that just want to have a chance to run a fair race. And i think, frankly, when you look at the extremes of either donald trump or Bernie Sanders both in fact in many ways are saying the same thing. There is an inherent distrust of the system. I think thats a fair feeling for a lot of people to have. So a lot of what we do as investors, particularly my firm, social capital, is we are trying to build the more democratic, bottoms up society. Education, financial services, health care. We put three quarters of a billion dollars to work in businesses that if those things work create fundamental equality for a lot of people. As a country we have been trying to do this. We tried with fdr and lbj. We try and try. We try to balance it with the individualism and meritocracy that we have as well. We have seen the system of cradletograve entitlements and what that does to the initiative and the gdp. Everybody is worse off. We try to walk this line. But dont think were not constantly trying to think of a more level playing field. I think the difference right now is that what weve seen as a massive schism between two cohorts of people. A great New York Times article says there is always been a voting class and a donor class. Those two things were roughly the same cohort of people for a long time. Now its as far apart as it could be. The donor class like the kochs and everybody else who is voting for donald trump. That should Say Something to the people in positions of power today is that they want a different way for things to work. And the donor class is probably now completely, you know, dissonant from the people who do the hard work every day. I think we have to look at the emotion for what that is and continue to try. Just because weve tried before and it doesnt work, you have to keep trying. I didnt get a chance to follow up before so im going to go back to what we were talking about. All this money. Its sloshing around. So Companies Look around. They dont want to buy something thats over valued. They have Nothing Better to do than buy their own stock. They may not be making a good decision either. That could be a problem. I have a simple rubric when i look at a company. One, is the ceo a psychopath. Will they survive. Is there a test for that . How can you tell . You see it in their actions. The second is are they innovating, are they spending money. The third is how good are they at allocating capital. A tale of two companies. Look at a company like amazon. An unbelievably maniacal ceo. He is a fantastic capital allocator and all he does is innovate. Then you look at a company like, apple as an example. Its basically the exact opposite. 250 billion rotting on the Balance Sheet for years and years. They spend more on their building than they do an building a new product. That seems insane for a company thats basically innovated for 20 years. A they have a ceo thats unfortunately pretty lack luster. I saw him on mad money. It was like human ambien. Pretty boring. There is nothing vibrant there that makes me want to work as a person thats worked for great leaders and is around a lot of Great Technology leaders, it would be very difficult for me to work for him. But i would work for jeff bezos in a heart beat. When everybody loved apple did you have the same feeling. I would have worked for steve jobs in a heart beat. The first thing for a ceo is find were going to have a headline. Find out whether the ceo youre investing in is a psychopath. Well use that. That molds all the different media, doesnt it . It does. That will be very hit on. When we come back well have much more from our guest host today, chamath palihapitiya. He is also the coowner of the golden state warriors. Well talk sports, Silicon Valley and more. S stay tuned. 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 when we come back, Silicon Valley titan Scott Mcnealy on his newest deal. Thats next right here on squawk box. Realtime Digital Marketing company wayin buying british rival engaged sciences. Scott mcnealy is the cofounder and chairman of wayin, as a former ceo of sun micro, and still single digit, arent you, scott scott . Sort of. You know what. You should start, because i need it reexplained to me every time too. I know there are viewers. Whats wayin and how does it work . We are a Digital Marketing platform company, thats cloud based and we allow people to use social content to enhance their own content when theyre out trying to persuade, engage or motivate customers to do things. Weve added with engaged sciences a whole bunch of new Digital Marketing features like auctions and sweepstakes and coupons and quizzes and other things so that we provide a complete digital platform on the cloud to allow you to automate your Digital Marketing efforts. You have had like 500 Million People have done this, Campaign Entries . We have engaged one in 14 people out there. In the next year we think well have engaged up to 1 in 7. The network in the old days was the computer. Now the databases is the is the gold mine out there and being able to capture geographic, psychographic, attitudinal and intentional kinds of data out there is the holy grail out there, being able to match buyers and sellers, the problem with tv. Sorry, scott. The problem with tv or print ads is you dont know who is watching it, when they are watching it and how theyre impacted. People spend more time in front of a digital screen now worldwide than they do in front of the tv screen. I hate to tell a tv show that, but yet threequarters of the spend on advertising is still in the old traditional print and media as opposed to digital. I think there is a big gap there that well take advantage of as people move to more digital advertising. You get a spreadsheet of who engaged, what they think and their profiles. You did a recent round, and its good to be able to raise money. Our guest host points out that there is a lot of money around and its not necessarily going in places that it would normally go because there is so much. Its good for you, though, to be able to raise for wayin . Whats it valued at given the latest round . Its hard to say. Two private companies that game together. Well let the market decide that down the road. But we raised over 15 million, which is a nice position to be in. We have basically established ourselves as the largest independent fullservice Digital Marketing company out there with lots of cash and it doesnt matter, out in california. I mean, our votes just sort of you, you know, the capitalist vote sort of goes down the drain here. But a lot of people are really if they have a choice between hillary i asked a very well known finance guy out here and i said, who are you going to vote for . He said you know what . We know what hillarys all about, lets give donald a try. We may have to vote him out in four years but lets try something different. People are fed up on both sides of the aisle. I was trying to explain to someone yesterday, the base of the republicans are mad. You look at the 16 most qualified people who ran, the republicans around the country didnt like them and voted them out. Why are republicans mad . Are they mad because the current republicans compromised too much with the president or didnt compromise enough . I think its all directed i think the actual anger is that the republicans couldnt stop obama from doing as much as he already did. I think that is what the anger is, which makes me think the ground swell is about too much government and too much redistribution. Yeah, i think thats accurate. I think there was one really focused capitalist in the group and one small government person in the group and neither of them, you know, got past 1 or 2 . That would be the libertarian perspective and the exceo perspective. The only person i gave money to was carly. The worst ceo is a thousand times better than a politician. I believe the Economic System what makes a country great and driving more and more to the monopolistic government is exactly the wrong thing to go do and were hurdling towards a monopoly is the word in capitalism. If somethings too big to fail, break it up. And if its too important, dont let the government do it. Its in the much different here, scott, in terms of wasted vote. Well see this time, though, because trumps from new york. Thank you and good luck. When we come back, a final thought from our guest host today. He made early investments and well get his call on the next big thing. Not just because were doers. Because at sheraton, were changing. Big things. Small things. Spur of the moment things. Changes youll notice. Wherever you are in the world. Changes youll notice. Whoa. Whats going on here . Oh hey allison. Im val, the orange money retirement squirrel from voya. Val from voya . Yeah, val from voya. Quick question, what are voya retirement squirrels doing in my house . Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . No, im more like a metaphor. Okay, a spokesmetaphor. No, im. Youre a spokesmetaphor. Yeah. Ok. See how voya can help you get organized at voya. Com. Welcome back, everybody. Our guest today is chamath palihapitiya. Your skill set is identifying the next big thing in technology and finding it before a lot of other people do. What do you see right now . What is catching your attention . I think theres probably two things i would put out there, one more short term and one thats further away but frankly, too important to ignore. And all this automation and Machine Learning and a. I. Thats going into just making your life much easier, whether its how you interact with the amazon echo or whether its what slack is doing with all of the bots within the slack messaging platform, you can use computer al gore rhythms to learn. Its not clear to me what the big winner in that space looks like but the trail of bread crumbs in that direction is really exciting. I talked with a few technologists over the weekend about it and one of the preva prevailing thoughts they had is weve been trying to look at the wrong way, maybe we want it for what it was and dont gussie it up, remember, this is a computer were talking to. Youre exactly right. Certain technologists want to believe this is the panacea to something very much bigger. For example, when you use the parking feature in your car and it can park your car for you, thats a. I. And Machine Learning. Nobody wants to say that because they want some crazy convoluted system that also then thinks for you and is your best friend and a woman that looks just like a woman. Its kind of ridiculous. But these expert systems, which is better language to you joe, you may not want to hear this, the bigger thing is we have crossed the rubicon on climate. 04, even though its been 20 times higher in the past . We will not be able to take all the carbon thats in the air. Its. 04 up from. 03 . Its been 20 times greater during an ice age. In fairness, we have weather patterns we cant predict. Weve always had weather patterns we cant predict. The amount of displacement, the water level rising, we are at the beginning of something we have to at least legitimately talk about. And you think its caused by a. 0. 1 of carbon whether its solar panels, battery thats all assuming co2 is the control knob for Global Warming and climate. I think the question to maybe ask is what happens if we dont and it turns out to be right . I dont think thats the question. What happens if we build a really great clean infrastructure and it turns out everybody wants a clean infrastructure. Everybody wants clean water, clean air, they dont want particulate pollution. Whether co 2 i agree. Focus on the fact that we want to live in an environment thats predictable, where you dont have copd, asthma, you dont have lead in the water. Weve had 4 billion years of unpredictable weather and thats going to continue. No one is going to harness the weather, chamath. A reader is asking antitrust issues on amazon, do you think theyll ever be won . No. Its great having you here. Psychopath. Make sure you join us tomorrow. Squawk on the street is next. Good thursday morning. Welcome to squawk on the street. Stocks coming off their worst two days and three months. Europes holding in, some marks there closed for the holidays. Claims did pop a bit but the big story is oil moving hire on the wildfires in canada