Transcripts For CNBC Squawk On The Street 20150512

Well go over to japan and tell you whats going on there. Lets get to our road map here. Youve got mail. Verizon aol, 4. 4 billion. Why is armstrong selling the company he runs and why verizon is buying a content business . Plus as we mentioned, we are seeing red in the premarket. Stock futures are lower as that selloff in bond continues. Another month of weak numbers from the gap. Retailers april sales came in below consensus blaming, what else . Youre thinking weather . No. Strong dollar. Thats what they are going with at the gap. Verizon agreeing to buy aol 50 a share, 4. 4 billion a cash. The dow component says it will help build digital and video platforms to drive future growth. Tim armstrong will continue to lead aol after it becomes a whollyowns verizon subsidiary. The ceo of aol was asked why he did this deal now. When you look at where we are today and where we are going, we made aol as big as it can be in todays landscape. If you look forward five years, youll be in a space where there will be massive global scale networks. There is no better partner for us to go forward within verizon. Its not about selling the company today. Its about setting up for the next five to ten years. Theyve been talking to them for a while. There were rumors some time back. My understanding is having spoken to people this morning, it was going to be a jv but he wanted more scale, conceivably and it back an acquisition. There are times we wouldnt talk about verizon doing a 4 billion acquisition. It would be a name nobody heard of. In this case it is aol with that storied history. Here it is. Focus here. This is what you are going to be watching aol tv on. They do great, absolutely fabulous programmatic ad for video. This is a great way to take on google. I think Tim Armstrong will be very happy. Lowell mcadam will let him do what he wants, which is develop great programming and have a tremendous ad distribution platform. This is a brilliant move by tim. When i spoke with the company friday, i said you guys are in trouble. You cannot afford to stay independent. They wont let you. There is too much opportunity. This is very much like jeff buccus who is a great american. When it was clear, what happen d happened. This is verizon saying weve got a pro in armstrong. He wants to grow scale. We want to grow scale. We watch i dont know how many programs you watch on this. Mobile video platforms and being able to deliver ads, programmatically to wire devices that are being broadband in because thats where we are headed, not necessarily the big thing on the wall but what is everybody looking at in the home . Maybe they are looking at bill simmons. Or looking at ipad or other devices. Right. There are personalities. This is a drop in the ocean for verizon. Frankly. We are talking about a company with more than 200 billion market value. Will Lowell Mcadam continue to be aggressive and do they do more deals . You mean buy yahoo after all this stuff right now yahoo is trading about zero. Yahoo is a strong ad tech player. You wonder. Hes been mcadam, we asked him to come on he hasnt. Is he too nice to be that aggressive. I dont think hes that nice no offense. No, he is. But he is very focused on innovation, silicon valley. Yahoo doesnt want to be sold. Well well see. Fios what he did there. They are getting in litigation, but its aggressive plan. Now this is somewhat aggressive. Verizon aol and talk about the content. It makes all the sense. Programmatic ad buying and being able to effectively deliver for your customers. Its where all this stuff is going. Nobody talks to their rep and says i want to buy. I want to buy i love lucy. I wanted 1. 5 million buy on your website. No more mad men. You send aol a check and suddenly your ad is everywhere you want it to be. Look, jim cramer went on to look at a cruise. He didnt go back. Send him that. Its thing e aeglgorithms of these companies. Ia highs thought to have a strong portfolio in ad tech. Well see where this all goes. Over the top digital platforms. I think we all i watch jimmy fallon on this. I dont watch all fallon. I watch the part i want to watch because i cant stay up. I watch the end of all the nba games that take seven hours, i watch on this. I would love to see a Sports Program on. I watch espn obviously. Aols got programming and the technology to compete against google. They are the only guy. I think this is brilliant. It costs so little. They need armstrong. Talking about so little. 50. Not that huge a premium. What do you make of the price . I dont think anyone else comes in. I know that armstrong doesnt want anybody else to come in. I know the stock is going up because people feel someone else this is going to begin the process. I think its the end of the process. Aol was up substantially after fridays quarter which was a terrific quarter. Aol, i have here in my hand im going to spare the guy his name because its too embarrassing. The sell that was put out by a firm called clsa on aol on friday, yesterday. Saying they are not doing that well. The fact is aol was doing incredibly well. You have this bleed off. He had to deal with the bleedoff of the dialup. There was discussion about i use aol, i have aol. I have it because in the event of nuclear war the thing never seems to go down. I need a backup to go back and forth with my nephew if things go down hes my writer. He said the demographic of aol is so young. In spite of that cohort. Its not just grandma. Im not going to mention james lees name. Upside sorry. Displaced due to mobile. Thats what mcadam wants. He wants mobile. He doesnt want display. Hes a nice man. This is all about wireless. Its all about wireless. And buccus. Great american. Lets move on to others and talk about this from the bond market which has futures down sharply. Europe global bond selloff tenyear note rising to sixmonth high. Yield on the german bund jumped a lot. Also worried about greece despite the 750 million euro loan repayment to the imf. Reuters report they tapped emergency imf reserve. Sixyear low on a bid to cover ratio on the japanese of 10year paper. What do you get when youre loaning them 10year money . Its 4. 37 in japan. Big moves. Five basis point move in japan on 0. 43 . Those are some big moves. This con seasonably comes from a good place which is global growth. Yes. Last night i get up at 3 15 because the bad guys get up at 4 00 so you have to beat them. What i thought was amazing, the german 10year backed up. It was at 0. 4009 at april 17 when you marvelled anyone would be stupid enough to buy that. As the german bund went down our futures fell from minus 6 to minus 0. 14 . We are gripped by anything. Now it would be like trading off the german ten year as pall corp going up two bidders and aol as opposed to partner re our companies are being whip sawed by the german bund. I mean hello. Its the violence of the moves people that have people concerned. Its frightening. And what dislocations will result, if any, and therefore, what con ceivably. Watch oil today. The frackers. Ceivably. Watch oil today. The frackers. Gave this very exciting time because moves are so quick. The companies themselves are continuing to buy each other. It is remarkable how much m a there is. Do you go home and say to your kids sorry, theres a lot of m a . No. I dont do that. I pick my spots. You cant do it all. You pick your spots. You stay well rounded . I try. That means focusing not necessarily on m a. We are going to talk paul later. That is an interesting situation. Well do that as a faber report and get your insights on pall corp. Its also a tough morning for one retailer who is blaming weak sales on the dollar. Well fill you in on that. Spacex. Well have a live interview. I want to go to commercial. Im disrupting you. Im not 51 on the disruption list. Well take another look at futures. Then go to your commercial. Gap reporting sales. Gap falling 15 . Old navy down 6 . For the First Quarter gap says comps were down 4 as the strong dollar weighed on sales. You follow this company through the years. They seem to have great up periods and then get in a rut. They are radically inconsistent. Gaps comparable sales down 12 versus positive 9 . They had no merchandise or the wrong merchandise. They went for consistency. This is the height of inconsistency. Theres not a lot of picnics in the apparel segment. Kohls, there is a revital. There is revival of that mid price which i find interesting. When i go to tgf, i never see you there. Its incredible the price on belts and underwear. I have been in there. Ive gone into that strange store. They have bargains. Tjx and kohls have bargains. Im a fan of target. I know you are. What about the gap here at lets call it 40 going down to 38 today. All over the map. Jeans. What gives me the tell that theyve got it back together again . This is a coin flip situation. Target and kohls keep going up. Dillards are hitting the ball out of the park. I remember when it was not that good. They are much more interesting to shop at than they used to be. Mcdonalds is adding to its turnaround plans. They said the fast food chain plans to pare down its drivethrough menu as a way to speed up orders. Will boost items that cost between 1. 50 and 3 giving customers more mid tier offerings they can choose from. What is not going to get in that line friday night, the one on exit 70 on the lie. The line was so long, i said forget about it. The long was to west hampton. Youve got to get them through. The line was too long. Ive been to that mcdonalds. And theyve got to do a little bathroom cleaning. Every other day we are getting a new announcement. The question is are you going to bring costs down for franchisees . This is about the franchisees getting more involved. He is responding to them it began to seem like a diner. They dont have the ability to make those things. The drives through, he is doing the right things. So far im very impressed. Hes on a listening tour. Hes listening to what the franchise franchisees have to say. Reminded me of other people on a listening tour. Its nice we dont cover politics. Up next its cramers mad dash. Lets give you another look at futures. It does appear we are going to have a down open this morning. At least if you were long the overall market. This caused on the fixed income side. Doug. Youve been staring at that for awhile, huh . Listen, Td Ameritrade has former floor traders to help walk you through that complex trade. So youll be confident enough to do what you want. Ill pull up their number. Blammo. Lets get those guys on the horn. Oooo looks like it is time to upgrade your phone, douglass. For all the confidence you need. Td ameritrade. You got this. How spacex is launching and upping the race to space. Eight minutes to the opening bell. Rackspace failed to sell itself. Some shareholders may be sad that was the case. This is cloud storage. People are going to interpret this as negative. Its an ugly day anyway. I think rackspace could do a boater job. People say listen maybe cloud stores isnt that good amazon. People extrapolate this. Maybe they sell tableau data. Those are stupid. Thats a stupid thing to do but everyone has a right, a First Amendment right to be as stupid as possible. Go to jim cramer on twitter and you can see morons are allowed to be morons. There is a place for mediocrity at the Supreme Court and morons on twitter. Rackspace is not the way to extrapolate, but you will because you dont know better. This is a rackspace specific problem. Yes. Comes down to execution . Terrible execution. The president allowed shell to spend about 150 million to drill in the arctic. I have to tell you, im not going to insult weyerhaeuser. Its a great company. You are dumber than lumber if you think that arctic is going to be drilled. Weyerhaeuser deserves better. This is the most expensive place on earth to drill. Last i looked, oil is at 60. You cannot go up there and drill. You cant afford to drill in the permion. They can buy a company, they can buy a mother fracker. To drill in the arctic thats a fools game. They spend so much money to drill in western canada. Its easier to drill on mars. There are Great Stories how difficult it is once winter sets in you cant move. They have a big winter. They have a 27day summer up there. Russia is a bad place to drill. World dutch drills in places you shouldnt drill with oil at these prices. Arctic is a bet on 150 oil. The 15 billion barrels of the arctic. Good luck. All right. Weve got oil at about a little above 60. Bond prices are going down. Yeah. Yields are going up. Our stock market at least looks poised for a lower oil. German bund is in control. If you had taken that when it was negative rates. Thats why it can go to 1 without a problem. Maybe it should. German american thing we are following is extraordinary. Thats what we are dancing to. Whatever. Got to dance to something. Exactly. A waltz. Weve got the opening bell after this. The pursuit of healthier. It begins from the second were born. After all, healthier doesnt happen all by itself. It needs to be earned. Every day. Using wellness to keep away illness. And believing that a single life can be made better by millions of others. Healthier takes somebody who can power modern health care. By connecting every single part of it. For as the world keeps on searching for healthier. Were here to make healthier happen. Optum. Healthier is here. At chase, we celebrate Small Businesses every day through programs like mission main street grants. Last years grant recipients are achieving amazing things. Carving a name for myself and creating local jobs. Creating more programs for these little bookworms. Bringing a taste of louisiana to the world. At chase, were proud to support our grant recipients and Small Businesses like yours. So you can take the next big step. Youve got yahoo rolling. People need to distinguish he would im telling you something i know and talking general themes. Right. Thats important. You are very quick to not Say Something versus other media outlets. This may not be the last thick to do. Given their size that is something they could do. When you think ad tech you think yahoo has a strong portfolio there. To combine those two here is what we are saying. It would make sense if we could combine those two. That doesnt mean it will happen. It would make sense. Yahoo will be worth very little after the spin. Once they spin the alibaba stake. Now they talked about trying to do something with the yahoo japan stake. What are you left with . You are left with how do you keep the business going on what are you selling . You can hear the applause building here as we get ready to ring the opening bell. You see the realtime exchange at hq getting ready. Enova international, and gmhc with the annual aids walk here in new york. We have a tumultuous bond market. This pullback i thought friday we saw the big reversal that happened rapidly. Now we are reversing fridays reversal. Its the speed of these moves. Its almost as if the bond market was trading like a small cap, like someone is buying up bonds and cornering them and dumping bonds and sending them down. Its happening way too quickly and its too thin. The fed ought to make bonds available. This market acts like there this market is too thin. Its no one positioning bonds. Talking about the deepest market in the world. Thats what im used to i know. I thought i would never say that. It seems everybody is moving it around very easily. No one data point people can grab hold of here. Maybe the bid to grab ratio in japan. This is good news potentially. Europe is moving in the right direction. China yesterday. I saw a spike last night. China is going to rework and there is no need to continue to buy bonds if youre the ecb if their work is being done. They get a shock to the system. If china were to cut by 100 basis points we would see our Interest Rates spike but see earnings go up dramatically. People are so fixated on the bond market. Rates are lower than in my whole life. Its like you have to go back the gi bill when you came back from world war ii to have these rates. Weve become accustomed to it. I remember that. Its four times. My rates are, the 10year is about to go through my last water actually getting a mortgage at. Ive got 3. 25 and 2. 89 . I got 2. 62 . Who gave that you . Wells fargo. I nailed it. I got very lucky. I think the 10year was around 1. 6. Cant beat yours. I got a great rate and got lucky. Yahoo shares are up. Not much else on my screen up. Lets mention hertz. Funny statement came out. Did you see that . It would be undue effort if they got the financials up. Thats a new one. Petrobras report friday. This is a new way to get around the s. E. C. Undue effort and expense to file on time. I dont know what that means. Guys i would love to file theres a lot of undue effort on my part to pay my taxes. Undue effort. Not only that but it would be expensive. You may call the company is in the midst of what . Extensively reviewing prior year results and giving us different results. Alpha. Im not sure what they are delivering at hertz. It pulled the whole industry down. Phil lebeau with how much worse the rental Car Companies are doing. My question is how do we even know . When youve got undue effort to do financials. Last summer meeting a group of people saying they are about to report and ill be surprised. No. This is a new thing. Undue effort. Undue effort. Here we go with the tenyear. I did not think this was going to happen. Its happening so fast. Highest yields since november. Above 2. 3 on the 10year bond. Its tumultuous. Ge they are going to have to make a strong effort with the eu. They already, of course in a sense sa tedtsated the needs of the french government. Im going to Say Something radical. If that deal if ge were to walk away and announced a buyback, instant buyback even in addition to their buyback they are doing a 50 billion buyback. I say add another 14 billion, that stock goes to 28. If they have to keep making concessions, they should tell the europeans, any of. Were walking away and take that additional money and buyback stock. It would change them back to be less of an Energy Company. Nobody wants an Energy Company at 60. I dont think they are going to. Not at all. They are going to make every concession. You think so. Therefore, it will no longer be a good deal . Thats what i think. Ups sure ge disagrees. I think when you make concessions in europe you go down that slippery slope. Mr. Immelts predecessor, jack welch, had the same problem with honeywell. Eventually jack walked away. He had to. It was not an easy road to say the least. Hi jack. Jack watches the show. Weve got biotechs down. Biogen amgen among other bigger losers. Biogen was up big the other day. The alzheimer formulation im waiting for. A lot of people the ms numbers were not that strong. This is a maintenance drug they have. Biotech has been all over the place. I think about all the deals they happen at biotech. If any Company Comes down a lot, theyve been eccentric in nature. Mylan. The Company Chairman has been meeting with lots of Fund Managers and giving them his strong opinion why selling to teva would be a big mistake. We havent heard from teva in a while. There is an expectation still perhaps teva will raise its bid. We will see. Hes been very aggressive in terms of articulating why a sale to teva would be a very bad idea, and why he believes the stock price of mylan, if they were to do the perigo deal there was a lot of chatter on the activist call whether he should spin off his business. There is a free for all in generics. I mentioned the ms franchise. The clock is ticking on teva. They migrated a lot of their Patient Population from 20 milligrams to 40. Mylan bringing them on the 40 milligram dosage and the way its done and patent challenges. Its a big, big percentage of profits. That being said mylan for its part the epipen, do you know how much money they make on the epipen . Enormous amounts. They raised the price dramatically. Over the last five years. 15 increases. It seems constantly. Im getting out my epipen. There is a better thing than epipen. What . I have a better thing in my bag i always carry. What is going to happen if you need it . You cant find it. I know my Blood Pressure dropped 80 50 last year when i was in shock after eating sardines. I would not stop that show. Nick said stop the show. I said we finish the show. I was taking my Blood Pressure during the commercials. It went 90 50. I said im almost done the lightning round. Ill go to the hospital after. Thats why i carry that thing. All youve got to do is go like this. If i can find it. That was not good i couldnt find it. Give me price. This is better than the epipen. Its not the epipen. Its the new one. Bob pisani is on the floor. Thank you very much. All ten sectors of the s p are to the down side. Rising yields is the big issue. Not surprisingly interestrate sensitive sectors under pressure today. You look at reits, utilities, hell come home builders. All are leading the move to the down side. Europe is weak. Traders here have been driven crazy trying to figure out the sources of the rise yields. Spain is under pressure. France across the border under pressure. Is it the german bund driving things or u. S. Fundamentals . Some say rising inflation is obviously an issue. They are having trouble figuring out where the various sources of the influence are. You mentioned eded gap here. April sales down 12 . Its down 3 here. They are blaming it on the easter holiday. Put up the full screen. Gap reported much lower sales for the quarter, down 4 but their Earnings Guidance of 53 to 54 cents is in line with expectations. Top line more than expected. Earnings in line some big happened here. They just have amazing cost controls. They are not going to be reporting earnings until next week. We are going to have to wait till we get a lot of details. It is strange how they reconciled this particular decline. Inventories up 4 . Well likely see promotional activity at gap and banana republic. On the surface, this is not good news for the retailers. We talked about this yesterday. They are all reporting this week. Ralph lauren jc penney. We already know that the numbers may not be as strong as some people hoped. Stocks have been reflecting that. Gap and dillards, kohls all them are down noticeably. Gap is down 8 . Dillards, kohls nordstrom have been weak. All those stocks are trading to the down side. Gap is down 11 this quarter. We were hoping to get to 2120. We now 30 points away from that here. Lowrys pointed out an important point. Here is their comment this morning. The ability to consolidate gains by trading sideways is generally considered a sign of longer term strength. There has not been selling big on down days. I point that out as an indication people are not dumping stocks right now. A couple of things you want to look for here. With rising yields look for the banks. The kre which is the bank etf, Regional Bank etf is at the highest levels since march of 2014 right now. Its down today. Yesterday it was up. People have been buying ever since we saw the yields starting to rise notably at the end of april. And higher yields in developed markets attracts funds from the emerging markets. Stocks are down. Eem, etf topped out at the end of april. Thats when yields started rising here. You can see weve essentially been slowing moving down throughout all the month of may. There are two sectors, one winner and one loser influenced by the rise in yields. Right now the dow down 137 points. Back to you. Thank you very much mr. Pisani. Time to move on to pall corp. You see shares are up sharply. This is a filtration company. Does a lot of products for biotechnology industry filtrating things making them pure. Pall corp is for sale. There are two potential buyers danaher and Thermo Fisher auction being led by Goldman Sachs. Bids are due later this week. It had been a Family Company for many years. No stranger Thermo Fisher and danaher making the bids. No stranger to takeover talk in the past. Their new ceo not a family member. Came from danaher some time ago. What can danaher offer and what can thermo offer . Danaher is in a position to offer all cash if it should choose to do so. 120 a share where the stock is i think its close to that right . Is thought to be a top here. That would be almost 20 times. Talking about multiple ebitda as much as 18 times. Jeffries weighs in on this. They say danaher has the upper hand. They could finance it. They could do all cash as i expect would be the case. They would be accretive. Thermo, which is digesting life tech, remember that deal . Over 13 billion deal. Speaking of people familiar with its Balance Sheet at the very least think it could use as much as 3 billion to 4 billion in equity in a deal. Its not clear it would go all cash. Here is jeffries weighing in on that part of it. Lets say its probable yoi going to probably going to be a higher number in terms of equity. They have to figure out what offers the best value. If you are looking for all cash danaher may be your better buyer. Both companies known for their price discipline in purchases. Thermo electron and danaher. We had mark casper on mad money, ceo of thermo. This is an amazing company. They made a series of acquisitions where they are the goto guy in you are a biotech company. You cant do business without their stuff. Danaher moved aggressively in that area. This would put them in the life science company. Thermo fisher goes up if they get it. I apologize for keep saying thermo electron. Thermo fisher. There are so many different thermos. They are an acquisitive company. They know how to acquire. I think its a very well run company. We dont talk about danaher that on. Talking about 60 billion Market Cap Company built on acquisitions and price discipline in doing them but has done a good job through the years. Yes. Remember it was a Tools Company only. These companies are sophisticated. They know how much to pay. Thats why i say whoever gets it stock will go higher. Mass spectometry. This is what they offer to a celgene or biogen. Well watch that closely as pall corp heads towards that number. Bond market figuring prominently. Lets get an update from Rick Santelli in p chicago. Good morning, david. When it comes to the reasons why Interest Rates are going up remember all the years where the fundamentals didnt quite line up with the equities, but you looked through that. You stay long you get a check when policy changes, you adjust. It doesnt seem like investors seem to have the same outlook when it comes to the fixed income markets. Let me see. Robust growth. Dont think so. Do we see the First Quarter gdp . Do we see what the land of fed looks at for the Second Quarter . Overseas. China. Third rate cut because theyre cooking in greece . We know whats going on in greece. When guns are hot you get into a new part of the range. When guns are hot, margins hot. So every tick higher in yield, somebody is losing money. They are all in the wrong position. How do i know . Rates have been going up. They were in consolidation mode well below 2 . We have this rolling margin call in a very thin market. Does it matter it started in jgbs . Not really. Jgbs sometimes trade by a point, liquidity. Two day of 10s. Clearly yields are moving up. D. C. Last time we had a closing yield up here i dont know. When i look at that chart. The quick readjustment doesnt auger for fundamentals. Argues for margin logistics, and hey, losing control of the marketplace when the well gets a bit poisons. Jgbs 45 basis points but a big move since december. The bund market. Briefly today, gets up to around 74 73 basis points. A couple of weeks ago got up to 78 basis points. We are only at 230 now. What is all the nervousness about . Bunds are hot. France, their tenyear. Flirting with 100 basis points. You think their economy improved that much in such a short period of time . Look at spain getting close to 190. Maybe the most interesting chart is the dollar index. Do we think its about the fed . If we did, this certainly wouldnt be going down it would be going up. Loss of control started in europe. You cant squish a water balloon forever and think its not going to pop out somewhere. It popped out. Rates popped up. David faber, back to you. Thank you, mr. Santelli. She is helping elon musk take space flight to the next level. Spacex is among the cnbc disruptor 50. Mossberg had the apple watch for a month. What he likes and more importantly, what he didnt like. Well be right back. When a moment spontaneously turns romantic why pause to take a pill . And why stop what youre doing to find a bathroom . Cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. Plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. 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Get started at xfinity. Com myaccount stop trading with vertex. This is the fda panel discussing safety. If they get approval this company is going to go up 25 30 points. If they dont, it would be a major failure because the Cystic Fibrosis drug is a horrible disease. Le we are going to see watson doing Interesting Data work data mining, health care. Martin schroeter is the ceo. He will show me around the greatness of watson the strategic part of the business you ask about a lot. Then quirky. A disruptor. You can go and look at quirky products on amazon. Watch out because of programmatic. Youll get everything. More reporting to be done. We are coming right back. David kostin will join us. Ideas come into this world ugly and messy. They are the natural born enemy of the way things are. Yes, ideas are scary and messy and fragile. But under the proper care, they become something beautiful. Good morning and welcome back to squawk on the street. Im simon hobbs with sara eisen and david faber. Interesting day on the markets today. Dow is currently down 139 points clearly all eyes on what is happening in the bond market at the moment. Yields there clearly have been rising. Yesterday was the worst day for the 10year we had in a couple of months. We trade 3 . David kostin chief u. S. Equity strategist from Goldman Sachs is live with us for an interview. Labor secretary thomas perez will give us his first reaction to todays job openings and turnover data. And docusign getting 200 million in new funding that could push its valuation to as much as 3 million. Well talk to the ceo in a few moments. This painting by picasso became the most expensive painting to sell at an auction, final price of 179 million. I was there. It was fun. Christies lead auctioneer will join us live post nine in about a half hour. Looking forward to that. We start with the markets. Dow down 150 points. Markets in selloff mode today. Its becoming more of a bond market story with yields on the march higher around the globe. Joining us on set to discuss, david kostin chief u. S. Equity strategist for Goldman Sachs. Whether its a bubble or just a bull market coming to an end in bonds, the worry is the runup has been tremendous so the unwind could be fierce and ugly. Do you worry about that . From an equity market perspective, equity market trades at high value. Our forecast is tenyear u. S. Treasury yields will be ending the year around 2. 5 . The market trades u. S. Equity market trades around fair value. As earnings move slowly higher markets generally rise in that direction. From a strategy perspective, we look more for cyclicals and lower valuation would be a good strategy at this environment. Remember when everyone was talking about the great rotation that went in the bond market finally when the bull market was finally over in bonds . People pulled their money out and put it into stocks instead. Why does that not seem to be happening . You look at the fund flows. Most owners of bonds own it for a specific reason. The amount of assets that can rotate from bonds to equities is concentrated in a few areas, mutual funds, Pension Funds can reallocate. Dollar flow is more modest than commonly perceived. The biggest source of demand for shares is corporate buybacks. Corporate repurchases remain the key driver of the equity market. We just finished earnings season. The window now reopened. That is a key driver why the market may move slightly higher to the middle of the year. Then there is concern about the fed hike would suggest that multiple will fade a little toward the end of this year to about 16 times. Levels here 2150 for s p 500 mid year then back to 2100 by the end of the year. Basically, we go nowhere. Market moves a little bit higher. Historically speaking when the fed has tightened rates the first time you typically get around 8 pe multiple compression which would take us from 2150 towards 2011 at the end of this year. Then a function whether the economy is improving as the economy improving as we anticipate, then earnings will go a little higher in 2016. Let me take you back to where you started. House view is 10year rates will be 2. 5 by the end of the year. Thats 20 basis points from where we are now. We have seven months to go . We move 13 basis points just yesterday. So the question really for everybody, i know you have the house view but are rates going to spike much higher here . Rates far higher than 2. 5 by the end of the year . Argument from a rate market perspective its a global readjustment begin extremely low rates in europe. So the bond yields in the u. S. Are closer to fair value. We look at relative equities relative to bonds. The market is still pretty expensive. Look at ebitda pricetoearnings, pricetobook value, fundamental measures suggest markets trade around key value. The u. S. Economy is showing signs of improvement, from housing point of view labor market, all those would suggest the economy is Getting Better which would suggest strategically want to be in more cyclicals and lower valuation stocks. You are a great guy giving a great analysis of equity markets. I asked about treasuries and you skipped past it. Is it you dont want to go there . The concern is we spike on treasuries . I appreciate you are an equity strategist. Where bond yields are right now, they reflect reasonable fair value in the market expectation is theyll generally move higher from a perspective. Rather own equities than fixed income. Which equities you like to own. All the major s p groups are getting beat up today. Is technology at the bottom of your list . Yes. The economy was expecting to be growing sharply strongly. That got decelerated from a variety of issues including weather. As that happened the defensives did much better. Defensive stocks trade at almost 19 times forward earnings. 19 times you buy cyclicals at 16 times forward earnings with a better opportunity if the economy improves. Automobiles, airlines would be preferred areas to be in the market. Lower valuation cyclicals is a good place to be. Technology has better growth. Well be looking for that. Always good to check in with you, david. Thank you. David kostin chief u. S. Equity strategist at Goldman Sachs. Breaking news on tesla. Phil lebeau has that. The governor of maryland is signing a bill that will allow the direct sale of automobiles in that say the. The significance of this is that tesla will now be allowed to sell vehicles directly to customers in that state. That means there are now only two states in the country that do not allow the direct sale of automobiles, arizona and texas. Those are the only two states left where tesla cannot do business directly with customers. Maryland governor signing that bill as we speak. Thank you very much. Lets send it over to Rick Santelli santelli. For march, 4. 994,000 in terms of job openings. That is well down from last month. Keep in mind last month at 5. 133 million was the best. Since this number series began. It began in 2000 and basically 2000 is right about the time that we see 5. 2 million plus to comp this to. Since it was below last month, all we have to do is look at january which was 4. 9 million. You can see the comp there. Lets look at some of the internals here. Theres a lot of them. On separations they are hovering around 5 million. Not much of a change. P the quit rate in march about 2 . 1. 8 million layoffs and discharges. Not much change there. Finally, we continue to look at all the separations. This is purported to be A Janet Yellen favorite. Interest rates. They are not paying attention to the data. It seems a lot of phone calls going out saying send more money or liquidate some positions. Its global. Back to you. Thank you. Lets talk about one of the larger deals. Its not that larger deal but one of the bigger deals weve seen given aol getting bought by verizon. The greatest dotcom darling, if you will of its time. The wall garden it created that became the internet the incredible market cap accretion, its ability to get time warner to agree to acquire it. The failure of that marriage. Aol then being spun off in 09 to a Small Company being run by Tim Armstrong. It announced it will be acquired for 54 a share by verizon. Much of the reasoning behind this actually has to do not with content, though they have their stronger brand such as the Huffington Post and the like within aol, but with ad technology. Ad serving. Programmatic ad buying and the like. Something that has come on during the last few years as a significant force in the delivery of ads to mobile devices, in particular video being delivered to mobile as verizon does with its service. That being broader and broader, broadband almost if you will. Its needs to want to become the larger player in those wireless digital platforms. Here is the ceo of aol Tim Armstrong describing verizons ambitions. Theres a larger strategy. Verizon, which has been centered around making the connection from the home to the phone to the car very easy for content and services. I think what youll probably end up with is a much deeper relationship with verizon over time in terms of verizon doing a very good job of serving you better content and better commerce opportunities. Aol will be one piece of that. Theyll bring you the content, but theyll bring you the ad buying that goes along with it and conceivably charge more. Aol, one of the leaders in that area yahoo also. Google and facebook. Google with its doubleclick acquisition of many years ago. I spoke with barry diller friday. He brought up the idea of programmatic content. I do not particularly like sole advertiser support eded content, for obvious reasons. Advertising is in this world where there is so much internet inventory and so much coming on every day and programmatic pricing and all of that to have no Pricing Power because nobody in content, Digital Content has any Pricing Power. The deal for verizon is small given its enormous size. But it does beg the question as to whether it is the first of what will be a larger effort in ad tech if you will and whether there will be other acquisitions behind it. Also then building out this important part of what is the growth area of advertising, if you will. Its no longer about me taking to you lunch and you buying a spot or you buying this. Its put it into the algorithm. Simon was looking at a cruise and maybe well get him to sign up because he didnt come back to the site. And video. Blending the two top stories together. We got that deal a tenyear treasury note yield at 2. 30 . Is there a sense of urgency on these corporations and executives to get the deals done before rates go higher . I dont know. In totality rates are low. If you think rates are going to move higher cost of capital goes up you do perhaps want to get stuff done. That being said if rates are going higher because the economy is performing better perhaps the company you are buying will earn more. I dont know that its the driving force if we were moving up substantially to 7 or 8 . It might be different. Okay. Did you see what glaxo ceo said yesterday . He was suggesting there were stretched m a within pharmaceuticals because of cheap financing. The labor text thomas perez will join us live with his first reaction to the new jobs data and what it says now about the economy. Theres some facts about seaworld wed like you to know. We dont collect killer whales from the wild. And havent for 35 years. With the hightest standard of animal care in the world, our whales are healthy. Theyre thriving. I wouldnt work here if they werent. And Government Research shows they live just as long as whales in the wild. Caring for these whales, we have a great responsibility to get that right. And we take it very seriously. Because we love them. And we know you love them too. The number of job openings declining in march to 4. 99 million. Slightly worse than people expected. Lets get first reaction from the labor department. Joining us in a first on cnbc interview labor secretary thomas perez. Good morning to you. Good morning. Good to see you, sir. What did you make of the data . I look at the data and i look at it relative to not just a month ago, but a year ago. Roughly 5 million openings now. Its about 800,000 more than we had a year ago. I look at the number of people who voluntarily quit. That is a good bellwether of a vibrant economy. We are roughly 2. 7, 2. 8 million now. We look at where we were in the depths of the recession. It was 1. 6 Million People voluntarily quit because people were scared to quit. There were almost 7 job seekers to one job opening and we are now down to 1. 7 which is very much in the right direction. Im not a math major, but i would rather compete with one other person than six other people for a job opening. This and other data points show the economy is moving in the right direction. Our firsttime claims for unemployment are as low as theyve been since when bill clinton was president. Thats a good sign. Consumer confidence is near the best its been in about seven, eight years. Auto sales continue to go at a very good pace. When you add up all these numbers, we clearly have the wind in our back. Mr. Secretary, i dont think anybody would disagree with the idea that the economy is headed in the right direction. The economy is growing. The question is the speed of the growth. Particularly in the wake of the data we had on friday. Obviously, the dust settled on the employment report. Oecd today is suggesting that growth appears to be slowing down. Would you agree with that . S. Well, i would look at last year and then compare it to this year. The First Quarter Growth Numbers last year were not good. Then the Second Quarter, Third Quarter and Fourth Quarter were significantly better. We seem to be on a similar trajectory this year. First quarter Growth Numbers are not what we wanted and i dont know if thats just Winter Weather or other factors. Sorry to interrupt you there, but the difference between last year and the rebound we saw this year is its not just about the weather. Weve also got a significantly stronger u. S. Dollar. Weve got that tremendous decline in oil prices and the havoc thats wreaking in the energy industry. The fear is we wont get that sharp snap back in the economy because these other actors are weighing on us. Time will tell. The drop in oil prices has been in the aggregate for consumers a great thing. When i go to the gas station, im paying less for gas. The average family has literally hundreds of dollars in their pocket that they didnt have a year ago. What do they do with it . They spend it. For people who are working in the industry weve seen undeniable job impacts in the oil sector. For the economy and the aggregate, it is a net plus. Would you rather have lower gas prices or higher gas prices . I would rather have lower gas prices. I think 99100 americans would agree with that. It remains to be seen the impact of that. We are certainly monitoring the dollar issue because that impacts our ability to export as robustly as we have done in the past. That is an issue we will watch. Mr. Secretary, just on the subject of the jobs data itself it said something that the New York Post decided to write about it its obviously getting more profile. However, the criticism in todays newspaper, and it is fairly scathing is that your department could be double triple or quadruple counting. The argument goes if you put a contract out for the Defense Department maybe 20 companies will advertise jobs to fulfill it, but ultimately one company will win. What do you make of that criticism . Every time we seem to have good jobs reports, there is somebody out there, whether its jack welch or somebody else who says the numbers are cooked or the methodology is unsound. I have tremendous faith in the integrity of the process from the bureau of labor statistics. Every time i hear these criticisms, i cant help but laugh. The numbers, they speak for themselves. I think the accuracy and methodological rigor used is absolutely above board. All right. I want to ask you quickly, mr. Secretary, about the impact of the potential trade deal that Trans Pacific partnership that the president has been touting. I was in beaverton talking to nike about how its going to bring jobs back to this country. Have you done any studies quantifying that . Do you know how much of a lift it would be to our labor market if the president can get the trade deal passed . Here what is we know about exportrelated jobs. The president had over the last six years committed to doubling the number of exports and we succeeded. That resulted in Something Like 1. 6, 1. 7 trade related jobs. We know on average trade related jobs pay on average about 15 to 20 more than other jobs. I would rather you look at states Like Washington state, which is the most trade dependent state in the united states. Their Economic Growth has exceeded the national average. They had the highest minimum wage in the country over the last ten years. I would like to have the economy of Washington State throughout the country. We would be doing very well there. I think theres a lot of evidence that suggests that the more exportrelated jobs we have, both in the Service Sector and in the Manufacturing Sector the better wages. The Unfinished Business of this recovery is wage stagnation. I want to do my best to create jobs that pay good wages and traderelated jobs in the aggregate pay very good wages. Good to see you, sir. Thank you for sparing the time. Labor secretary thomas perez from d. C. The dow is down about 144 right now. Lets head over to dom chu. More trouble for lumber liquidators. The company is facing a ton of lawsuits and investigations over these allegations of high levels of formaldehyde in some of its flooring products. Scott cohn reports the insurance carriers are refusing coverage for this situation. Lumber liquidators issued nine carriers over these claim denials. Well watch the next phase unfold. It is a drama. Thank you. Up next docusign doubled its funding. It could put its valuation at the 3 billion mark. The ceo of docusign will join us after the break. At northrop grumman, weve always been at the forefront of advanced electronics. Providing technology to get more detail. Detect hidden threats. See the whole picture. Process critical information and put it in the hands of our defenders. Reaching constantly evolving threats before they reach us. Thats the value of performance. Northrop grumman. Call 1800royal caribbean or your travel agent today. By the time Police Arrive on a crime scene they could have little to go on. A vague description. A single piece of evidence. A partial plate number. With an app from ibm officers can now access over a billion police documents to find hidden connections and identify potential suspects. Ibm analytics helps one hundred thousand officers work smarter every day. Welcome back to squawk on the street. We want to call your attention when one part of the forprofit education segment, the s. E. C. Announced fraud charges against itt education surfs so. The company as well as its chief executive officer and cfo daniel fitzpatrick. The s. E. C. Does allege the National Operator of forprofit colleges and two executives fraudulently concealed from investors the poor performance and looming impact of two student loan impacts the company guaranteed. Esi, Itt Education Services is a very small cap company. Still, its just one more sign the forprofit education industry is under intense scrutiny. Well keep an eye on this. Our next guest is helping users securely sign and manage online documents. They are managing a 233 million round of financing as they push toward worldwide expansion. Keith krach is ceo of docusign. Congratulations, welcome. Thank you so much. What kind of figures are you seeing when it comes to Electronics Signatures that made it to number 13 on our list and now raised 233 million in financing . We are seeing this whole new category of Digital Transaction management as being the first phase in companys Digital Transformation large and small. Now we have over 100,000 companies that have standardized on docusign, 50 million unique users and putting over 50,000 unique users on a day. Is it true we are hearing that its a 3 billion valuation. Can you confirm that for us . We dont focus on the valuation. What we do focus on is our customers and Value Proposition. Our Growth Numbers speak for themselves. The thing driving that valuation is first of all, everybody gets that this is one of the biggest markets in the world. The second thing is the Value Proposition for our customer in terms of quantifiable ror, impacting top and bottom line and reducing the risk in terms of security and compliance and give their customers customers a great experience. Adobe is one of the biggies. What is your edge when it comes to getting these fortune 500 companies an sending 1,300 employees and sales people on the road pitching your service. What we have done is we are building out the docusign global trust network. If 2 you look at these investments we made in bank class security carrier class availability, and inneropability, sales force, google visa samsung, have not only invested in docusign but they are great customers and great go to market and Technology Partners for us. How do you make money here . Is it a license fee . Do you sit within sap structure and sap will give you a fee on behalf of their clients . It is a classic assess model. When you look at senders, those are the models that pay. For signers, its all for free. We have a number of companies resigning sap. Its a classic sas model. Moving forward, what else could you do with technology . Could you, for example, be a way of moving money or credit around . Thats one of the great things about Digital Transaction Management Platform is that we have a gateway to work with all the payment suppliers. Hence, the strategic relationship with Companies Like visa. If you look at what we provide, we could grab documents from anywhere data from anywhere and a powerful work flow engine with multiple levels of authentication. You get that audit trail along the way. That is what we focus on at that point in terms of the transaction. Up to this point, has been totally unautomated. You sold your previous business to sap. How do you think about the future of this company . Is that the goal to sell it off for billions of dollars . Would you tap the Public Market next time around . Give as sense of what youre thinking. Sure. Aribba was around 17 years as a public company. Close to 1 trillion of ecommerce goes through the Ariba Network our business is in the long term for centuries to come and building out that docusign global trust network. Thats one of the reasons why, particularly in the last couple of rounds youve seen the long term institutional public shareholders come in along with the strategic partners. Our sights are set on the long term and building a great company. We have a chance to change the way business is done and change the way people live their lives. Bigger than ariba. Well quote you on that. Thank you for joining us keith. Thank you. Tune into squawk alley for moderna ceo who got the top spot on our list. And Spacex Company and ceo will be live on squawk alley. Markets feeling the pressure as bond yields rise again. Tenyear touching highest levels since november. Art cashin who said watch the ten year will join us after this. With xfinity from comcast you can manage your account anytime, anywhere on any device. Just sign into my account to pay bills manage Service Appointments and find answers to your questions. You can even check your connection status on your phone. Now its easier than ever to manage your account. Get started at xfinity. Com myaccount good morning, im sue herera. Secretary of state joran kerry and Sergey Lavrov took part in a wreathlaying ceremony in russia. They laid the wreaths at a world war ii memorial. After, the two men strolled to their meeting with mr. Kerry stopping to talk to some Russian High School students along the way. Another powerful earthquake hit nepal killing at least 42 people and sending panic through that country. 1,100 were injured. It was a 7. 3 magnitude quake centered near Mount Everest and felt all the way to new delhi, india. French president Francois Hollande met with cuban leader raul castro. Commenting later that castro looked physically deteriorated. You can call him dr. Kanye west after a school awarded him an honorary doctorate. He briefly attended an art school in chicago, quitting to pursue stardom. Taking a look at the major indices off the lows here. Lower across the board as the focus turns to the bond market. We are joined by art cashin director of floor operations at ubs financial services. The eye of the storm shifted from the currency market to the bond market. These moves are unsettled equity investors. No question. We had a selloff now for several days in bonds. Accelerated overnight when the bond auction in japan needed more than a few flea collars. That then accelerated and somewhat intensified the selling in europe. It had the aspects of kind of a general generalized margin call. Looked like people who couldnt get the money out of bonds they might need began selling things like equities and we saw the stock markets weaken. For today, it looks like the mental line in the sand that investors have is 2. 3 in the tenyear. We are below that now. Thats why pressure on equities eased. If you go above that youll start to see further selling pressure in stocks. I think the big question is is this it . Is the big bond bull market over . And in the Financial Times , they said it is just a correction. It says they are far from robust notwithstanding the slow and careful decupling of the u. S. Federal reserve policy and Central Banks will remain ultraloose with the likelihood of further stimulus in the months ahead, particularly europe and china. That is an argument for low Interest Rates to stay low. Maybe not as ridiculously low in negative territory as weve seen. That would suggest its not a huge stumbling block here. I would agree that the economies around the world are less than robust. This is not necessarily a reflection that they believe the fed is going to move any time quickly. This is the bond vigilantes. We can remember what happened in 2008. Sometimes the markets dont follow a rational pattern. I do believe hes right that the economies dont necessarily call for higher rates. Nevertheless we are beginning to see them. That was pretty widespread what we saw in the last 24 hours. He also works for pimco, of course. He is not without. He is funded by pimco. Allianz. Yes. Other thing interesting are these air pockets that keep emerging. No apologies for discussing it again. You have this huge amount of money from qe and ultralow Interest Rates that well skate through the door. There isnt the trade inging volume to handle it. That is absolutely kroekt. The bond market appears far less licked than it normally would. They are having a disproportionate impact. And sovereign debt. Its stuff ordinarily you would think, besides the corex market the next deepest has been the treasury market. Its not showing that liquidity everybody is hoping for. Where does the next move come from . Does it come from whats happening in the german bond market . We are still getting retail earnings. What are you going to be watching . Ill be looking at retail sales. I dont think the economy is that strong. I will begin to look for more indications in the labor market. While everybody thought the payroll number was somewhat goldilocks it might have been partially de partially deceptive and i expect the number to be down wards next time out. Energy as an s p sector almost turned positive. Does that mean anything for equities . I think you have to be careful with oil because the geopolitical tides are moving rapidly. There is a great deal of reporting that the saudi king didnt come because he wanted to send a message. Im sure part of that is true. We think there are other aspects. Some people believe it could be Health Reasons involved. And this wasnt going to be a meeting. It was more of a photo op. Why bother come all the way . The geo politics of whats happening in yemen and all about are playing on the oil. On the oil market. We are coming back here bouncing off the lows with the dow down only 46 points. Maybe the soothing words of art cashin. Sometimes happens. Good to see you as always. Up next on the program, this picasso sit a world record becoming the most expensive painting at auction with a final prays of 180 million. Well talk to the auctioneer that conducted that sale. Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. As american stocks stagnate european stocks could point to more gains in the euro zone. Get that story on trading nation. Cnbc. Com. E announcer ] your love for trading never stops. So open an account with schwab. And when a market move affects, say a Cloud Computing stock youre holding, we can help you decide what to do. With tools that help you see how market activity is affecting your positions. So when the time comes to decide whether to scale in or scale out. You can make your move wherever you are. And start working on your next big idea. The worst performers. Then Alliance Data systems and micron not far behind. Yahoo is up about 1 . Yahoo may be higher on this aol verizon deal. This may put a value on maybe not so given the verizon deal. Aol and verizon shares not just the only focus for investors. Yahoo up today, as well. An interesting deal. Thanks, dom. A moment of real money, high drama in new york last night. Christies. Picassos picture of semi naked cortisa cortisans, with two calling in until one knocked the other out. Christies lead auctioneer joins us. Its extraordinarily robust. Weve got buyers all over the world competing. Last night i took 45 bids in that 11 34. Huge competitions. Bids were going up 1 million. 180 million, what a price. Its interesting. When i arrived and sat in the press pen, the oldtimers said its all fixed. Theyve done the deals before. You can see in the reserves you have. When you see two people by phone going backwards on phone battling it out, then 500,000 you allowed on one of the raises, that would suggest its not fix. Not fixed in any sense. Its a transparent market. We have four five bidders, bidding 100 million. Competing one against the other. I took 45 bids. Its a slow process and measured. When im splitting the bids because they are making an important decision. How far do you want to go it . s the most expensive artwork ever sold. The three most expensive objects ever sold at auction sold at the last coming in by phone may well have been people up in the boxes behind the opaque screens. Talk me through this if you would. There are around 600 people in the room as you witnessed. Behind the scenes around 80 clients in our sky boxes, which are basically an area where they can maintain their privacy. Theyll be bidding on telephones down into the room with our senior directors, many of whom were taking those bids last night. Brett gorvey was taking bids all evening with people in the sky boxes. This is market you have to create every six months you have to persuade people to part with highpriced works of art. You have to create a guarantee system for them. You have to ensure enough people turn up in the room you have to insure that its presented in the right order. What lessons did we learn last night . Its no problem getting the right people in the room. If the art youre selling is high, high caliber, the masterpieces, thats what christies focuses on. The better the art you sell the more people want to come in the market and sell their own works of art. Many decisions were made last night to sell masterpieces that perhaps otherwise wouldnt have come on to the market. When the market is hot, its time to sell and buy. Its the time to buy the very best artworks. When the market is soft nobody wants to sell and if youre in the market buying at that time youre taking a big risk you may not be buying a masterpiece. 75 of the works sold last night came from museum exhibitions, this was the very very best. Here in new york we were selling the very best last night and thats why prices were so strong. How do you determine whether the market is too hot . What do you say to those who say, the art market is in a bubble . How do you figure this out . Well a picasso will always be a picasso. Hes the mozart of the 20th century. And a jack metti is the greatest sculptor of the 21st century. Monet, greatest impressist painter. Qualities that already resonates. These artists will always be great. What theyre worth and how much people are prepared to pay for them is purely about the number of the people in the marketplace. Theres never been so many people in the art market as they are today and they come from all over the world. They come from the middle east they come from asia mainland china. America and europe. You see just before you go unlike sothebys, youre privately owned by a french millionaire, francois pinot. Arguably as businesses go not a hugely profitable operation, terribly glamorous. Are you aware of being part of a large group and being a feeder to push the highnet individuals through the other products and other divisions within that . Francois pinot is first and foremost an art collector, his passion is buying works of art, supporting contemporary artists. He has two great museums in venice, and he really loves the business that were in hes one of the most extraordinary collectors who really understand what is motivates people to get engaged in artwork. So actually christies is is a very separate part of his business. Nice to see you. Good luck for the rest of the week. I love being in new york. Thank you. Yes, so do i. The lead auctioneer from christies. Next time bring a pink diamond, will you . Lets get over to the cme group, with Rick Santelli. Good morning, sarah and my special guest, jim buy ankoianco. You spent a lot of time around trading rooms. Do you think in trading rooms last night over the last couple of weeks in the fixed income markets the discussions are, wow, think growth is doing well. We need to sell our position. Or do you think its more like holy cow, im offsides i got a call from my broker its up another couple of base points i need to sell something. I think the holy is but not the cow that came after it the liquidity in 9 market is poor. If you take a step back if you look at a chart of the 10year u. S. Yield, youre looking at a chart of every 10year yield across the globe, theyre all doing the same thing. So its not just our country did this or John Williams said something yesterday. You dont think the spanish italian, french u. S. All of these economies, japanese in the last week and a half have gained a lot more horsepower . Or gotten synchronized at all. Theres no liquidity in these markets. The big buyer with Central Banks, you drive rates to negative yields and you get no one that wants to buy them and some people come out and say, its time to short them or short them on massive leverage. Because theres no liquidity, everybody runs to the other side. You get an outside move. Okay. What do you think about this statement well i think 10years are moving a bit away from fair value what do you think of that statement . I dont know where what fair value is. How can anybody tell where fair value is the Federal Reserve bought in a welladvertised way. The europeans came in a very not welladvertised and sporadic way. Markets moved a certain way and theyve given it all back and much quicker time. Makes sense. Liquidation is always faster than distribution, isntst not . Its true. Even the distributions in this environment are getting faster too. Do we all remember february 1st not that long ago we were 162 in the 10year note. We ran way down on the other side of the equation as well. Less than a minute. Its all about stocks we all know and weve said it a million times together james, that they only hedge against a really dire fall in equity values is buying treasuries. But, the investor has to make that choice. How does it work in reverse, jim . I dont know how its going to work in reverse until stocks were it take a big loss here. No one is going to sell stocks at 18,000 just because treasury yields are doing what they have done. If you see a 17,000 all of a sudden the investor thinks, wow, i dont want to own stocks then that dynamic of the trap door the automatic adjustment process, they would buy treasuries. Final word on all of this volatility . I think the one thing you got to be careful of is with valuations, as yellen said lets give her some credit. That the market is high valuation, but theres 0 low yields, be careful, because if you yields if were wrong and yields are going to spike much higher exponential moves. Thats going to hurt the stock market. Its got to grab a lot of mass to get where it needs to go. Jim, thank you. Simon and the gang back to you. Speaking of thin environments, lets check whats happening down the alley in the next hour. Good morning, john. You might have heard, a little deal in the markets this morning, verizon taking out aol for 15 a share. Implications for content and ad tech, well look into those, plus the number two, spacex will join us as cnbc rolls out our 50 disrubtor list and one month with an apple watch or stop to find a bathroom . Cialis for daily use, is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in Blood Pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a free 30tablet trial. Building aircraft, the likes of which the world has never seen. This is what we do. Thats the value of performance. Northrop grumman. The network that monitors her health. The secure Cloud Services that store her genetic data the servers and software on a mission to find the perfect match. And the mom who gets to hear her daughters heart beat once again. Were helping organizations transform the way they work so they can transform the lives of the people they serve. Good morning its 11 00 a. M. At aol headquarters in new york city and 11 00 on wall street and quack ail li is live. [ modem noises ] [ static ] youve got mail. All right. Joining us this morning on squawk alley is ed lee, managing editor at