Transcripts For CNBC Squawk On The Street 20150521

Best buy, williamssonoma, earnings surprises to the upside. Omnicare gets taken out by cvs 98 a share. The ceo of Lumber Liquidators resigns. Salesforce up on good oldfashioned earnings. Hear what they told jim about the quarter and competitors. Best buy up sharply after beating the street with its First Quarter results. Its domestic business was stronger than expected, driven by demand for smart phones. Large screen televisions, major appliances. Williamssonoma exceeding forecast in q1, comps up 4. 6. Confident we are executing against the right investment strategy. I sense there is progress but more work to do. This is incredible. They quoted in the release strengthening in our domestic business versus previous outlook. The daytoday inconsistencies, lowes did not see that. Home depot did see that. The categories best buy is doing well in are catries others are faltering in. I wonder whether the culture changed enough that they are simply doing better. They are selling more product. Canada didnt help. I totally understand why this company could be doing well. I spent a lot of time with the ceo of take two yesterday. Whether it be gopro, things to play games, best buy is a place to go. I think its gotten its socalled mojo versus amazon. There are a lot of companies, i think amazon is doing incredibly well because of fulfillment costs, a lot of companies combatted amazon whether it be target nordstrom or best buy. Interesting. That is interesting. We do have electronics. Morgan stanley upping their iphone forecast today. That was remarkable. They are talking about the iphone doing much better. And china which was a gopro story. Exactly. A lot of people feel china is a black hole. Its clearly not for apple. That is people moving up because the cell phone penetration is big. The other thing they talk about is the march. Mark is writing incredible programs for the watch. Its not a joke. There are people talking about the watch, mark said listen everyone is going to be happy two years from now. It was a matter of fact throwout line in a combative Conference Call. This is a whole team talking about how the watch is really going to be something you are going to have your cell phone. It wasnt well neighbor its going to happen. It was this is whats going to happen. Morgan stanley says demand for the watch up 60 since march. When my watch comes from mothers day i ordered expedited, that will be good. It fits the mothers day for next year because boy, i look bad right now. Williamssonoma, Current Quarter guidance does disappoint. Even with the beat. When i go over the quarter, its clear one of the things williamssonoma has done that again is another company that created tremendous ecommerce business. West elm is the driver. Pottery barn was just okay. Port strike must have been mentioned half a dozen time. Their whole inventory was in the wrong spot. They had to ship a lot of stuff by expensive means. I thought the port situation would be put to bed this quarter and they would up side surprise. I would like williamssonoma as part of the housewares trade, best buy, the home goods doing well. The ceo of home depot say they feel they should invest in their home because frankly, you know what . Home prices are going up. There is a nice thesis there involved with household formation. I like the williamssonoma story very much. She told you millennials no. Young parents living with their parents . The most number of people who have ever lived in this cohort of 1834 and there are 4 Million People ready to form household formation. To stop living in their moms basement. They are going to rent though. There has been a seminal shift. We are in the sharing world. Millennials share everything. They dont own cars. Half the people decide to get their home. That was the first home goods number we have seen in a long time. People forget how bad this Great Recession was. We are overbuilding versus the household formation 1. 3 million previous to the Great Recession. We dropped to 800,000. Now we are back to over 1. 2, 1. 3 demand for housing is exceeding the supply. We have a denver piece, but its nationwide. We built so many more homes and the hangover is over. Credit is hard to come by. There are certain cfos that people hang on every word. Thome is one of them. Thee is very mildmannered. Frank blake, the previous ceo, thome is a brilliant cfo. Macys has a brilliant cfo. These are cfos you hang on every word. Youve got to read the release from Lumber Liquidators, announcing that robert lynch unexpectedly resigned as ceo amid the government probe of the safety of the products. They use the word unexpectedly in the release. Typically would you read Something Like that and think he was fired. Unexpectedly makes you think, wait a second maybe he wasnt fired. He said im out of here. You put flooring you have a flooring featured in 60 minutes and sales go down dramatically do you give the guy a raise or decide what we have is a very Solid Campaign when you watch major league baseball. Thats what we have. This is liquidating this company by competition. In a rapid fashion. Now we are talking about a company with market cap below 700 million. It is not widely held. It was up there with ultrasalon. It was one of the keys to the market. Guys ask are you seeing the demise of the competition . These guys never saw them. Now they really dont see it. 60 minutes. Kind of this is like the old food lion reports. This one came back formaldehyde. That is something you dont want in your floors as much as you might have wanted before. They have been fighting back. They are now doing a national search. And tom sullivan who founded it 20 years ago will be the acting ceo. Tom reminds me of when Urban Outfitters got in trouble well they never put formaldehyde in the clothes. Never got to that. I hope not. When we talk about keys to this market m a is a key to this market. This morning we have yet another large deal. Cvs Health Agrees to buy pharmacy been fits provider. Omnicare which runs a lot of longterm senior facilities. And they provide drugs to them. As someone in longterm senior strategy omnicare would be my providers. To that group. Its 98 a share. Excuse me for that. 12. 7 billion. That includes debt. Cvs says the acquisition will expand its ability to care for the growing senior population. Its the power that the buyers have. Cvs caremark enormous power. Walgreens, Alliance Foods and amerisource bergen. They are involved with walgreens. They did a deal a couple of years back. Incredible power. That power translates into the way we all go about getting our drugs. It translates into how they choose between two drugs that treat the same disease and choosing one of them as we saw with the hepc treatments. They are looking at the senior population which is different. They are not working it. They are not getting it via Corporate Health care plan. They are not going into cvs. Medicare part d is paying per diem to a lot of these facilities. That includes pharma. If you can lower that cost, thats pure profit for you. That is the cohort they are going after here at cvs. They can have a customerfacing opportunity with them i guess. We are seeing the power to lower prices and to shift. From the drug companies, by the way. If you are pfizer youve got to be thinking about this all the time. Where do i go to have the value proposition. Is it still oncology . It may be a handful of things. Rare diseases. When merlot the ceo of cvs. A fine merlot. When cvs dropped cigarettes they became cvs health. It is a Health Care Cost container that has a drug store. Rite aid. Walgreens did sell its pbm. Walgreens new management they have to buy pbm. There is going to be a consolidation among the hmos. They didnt need to do it. The more i read into it the more i realized the most underserved cohort are people in assisted living. You own that group. You own the democratic dprask going that way. The omnicare guy, so to speak, the guy makes four trips a day to these centers to deliver drugs. If you can even figure that out and make it more efficient, that would be beneficial, whether through the mail or any other ways cvs has of getting it to you. They are paying 17 years worth of ebitda. They paid a huge amount of money. I wonder whether others didnt want it. Dont know there was an auction. I dont know. I dont know. I didnt ask the question. I should have. Ill get back to you. I think the consolidation is so hot and heavy. When i read this i said why did kesen not want to be in this . 17 times trailing ebitda. That is a huge multiple. The fed is giving away money. Pharamerico trades nine times. They are talking about this being accretive. When you can borrow money, pay all cash everything is accretive. The key is what the synergies are when it comes to their buying power and efficiencies that will drop down. Cradle to grave buying power. This is a demographic play. When i looked at this deal and drilled down more omnicare than i should have earlier, cvs wants to own you when youre born and want to own you till you leave. They do. They want to get access to that huge market. This is a 1953 merlot. When we come back salesforce on track to open to alltime highs. Dan shulman who will take over as paypal ceo as it splits from ebay. Take a look at the premarket. Analyst calls on netflix, nike pfizer, baba. Well get to it when squawk on the street continues. Here at td ameritrade, they love innovating. And apparently, they also love stickers. Whats up with these things, victor . We decided to give ourselves stickers for each feature we release. We read about 10,000 suggestions a week to create features that as traders wed want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. Who reads all those . He does. For all the confidence you need. Td ameritrade. You got this. Sales force higher in the premarket, reporting better than expected quarterly numbers, posting a jump in sales. The company says its become the fastest Software Firm to surpass 6 billion in revenue. He talked about the future on mad money. Dont you find it ironic in afterhours, you are trading within a dollar when oracle and ibm were suppose to be buying you . I would be more excited when we announce with you on this show we are the fastest to 10 billion. Today im saying we are the fastest to 6 billion. That its past. Im all about the future. Took a shot at sap. David letterman retired last night. We are trying to who can replace letterman and make great numbers . Its benioff. Marc benioff said dont talk to me until we get to 10 billion in revenue, most will be taken from competitors. And when we burn sap. A lot of guys bury the best joke. Im going to give it to you. It was his last line in the Conference Call. He says you are going to see 52 sales force demo situations. They should try writing some software. They took cocacola german which is one of the best. In the Conference Call they talked about major accounts they took from sap. This is a war. They made the joke there was someone from walmart, maybe it will be finished the implementation in my lifetime. They pulled that quote. The top ten reasons not to use sap, right here in this document. He could not hide profitability. How could they do the number . Heres the thing you need to know about sales force. 6 billion in unbilled revenues. Its not going to be hard to get to this 7 billion run rate. They cut back the options. They are no longer going to be giving as much to the customers to the people the employee which goes to the stakeholders. I have to tell you, i thought this was a quarter that showed when he gets to 10 billion he can show whatever profitability he wants. This could be an immensely profitable company. I almost said maybe sales force is actually not an expensive stock. It went up because of all the potential suitors. Now it sustained up here because of earnings. Looking at a tenyear chart. It rarely violates the 200 day for long. Very good point. I started recommending it 1,001 ago. Marc i thought was the real deal. This was the quarter where he was the real deal. Can you completely discount the possibility of consolidation and he conceivably i dont want to give voice to a lot of different reports out there. Clearly something. My own reporting indicates there was some overture made some time back. Microsoft fits well. 18 months in taking a 55 billion deal to your board is a lot of risk but it fits well. He wants to get to 17 billion in cloud. Benioff is all cloud, in a couple of years. What it to jumpstart that is to buy this company. Steve ballmer never gave former ballmer was never given the time of day. It would be friendly. Marc took a shot at oracle. Said i worked there 13 years. Its not going to happen. No there was a morning they had a key breakfast. I was invited to breakfast. Maybe he felt if they are going to negotiate 100 price, it was important to have a reporter there . No. I dont think there is a deal. Someone said google. No he doesnt like google. He is not going to surrender. The age of 50 his grandmother is alive at 103. Not doing as well as she was at 95. This guy at 50 does not want to sell as much as he wants to support the Childrens Hospital i visited that hes begin hundreds of millions of dollars to. When the companys at 10 billion, he might be bigger than microsoft. Well get to the opening bell and cramers mad dash. When you do business everywhere, the challenges of keeping everyone working together can quickly become the only thing you think about. Thats where at t can help. With the tools and the network you need to make working as one easier than ever. Virtually anywhere. Leaving you free to focus on what matters most. 40 of the streetlights in detroit, at one point, did not work. You had some blocks and you had major thoroughfares and corridors that were just totally pitch black. Those things had to change. We wanted to restore our lighting system in the city. You can have the greatest dreams in the world, but unless you can finance those dreams, it doesnt happen. At the time that the bankruptcy filing was done, the Public Lighting Authority had a hard time of finding a bank. Citi did not run away from the table like some other bankers did. Citi had the strength to help us go to the credit markets and raise the money. Its a brighter day in detroit. People can see better when theyre out doing their tasks, young people are moving back in town the kids are feeling safer while they walk to school. And folks are making investments and the community is moving forward. 40 of the lights were out, but theyre not out for long. Theyre coming back. Weve got a mad dash on this thursday. Start off with nflx. Netflix defined this moment. Its difficult to define whats driving it. Citi talks about the franchise being underappreciated. The cannes film festival, these guys are making deals for cannes movies to shop to china. Citi says the franchise is up to 733. I think it gets there. I think this stock is on a march to 733. Market cap is too small for the opportunity. Could they expand prices . Obviously, the decision to go into original programming, which people wondered about at the time was brilliant. It was one of those companies at 70 to 90, people thought they shot themselves with the disk. They regrouped and learned their lesson. I dont like parabolic stocks. Thats right. Maybe we dont go back to this level. Amazon . Its had parabolic moments. Morgan stanley raising their price target. You know a that last quarter they broke out the amazon web services. Thats been the key to this whole move which people started saying they can be profitable if they want to. Netflix and amazon are two of the three companies that could raise their price tomorrow. Costco being the third. Thats how i distinguish these companies. Theyre a bargain. It can be a bargain. I bought four movies on amazon yesterday. Four. What the heck . Its free shipping. Free, what the hell . Cost of program for amazon is going up. Its not clear they have as much of a base to monetize as does netflix. The indian opportunity. We should talk about india. The indian opportunity is undervalued here. I want to talk about that hp deal in china and cablevision shares. We have so much more including the opening bell. You are watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell in about 30 seconds or so. A lot going on. Some pmis around the globe. Japan was ahead. China behind. Mixed in europe. Germany down as the dollar rebound might take a bite out of that. Japan people talk about the big comeback. It might be real. Retail sales not bad. Housing starts here in the u. S. Theres the opening bell. The s p at the top of your screen. At the big board, its shopify for small and mediumsized businesses. Well talk with the ceo when the stock opens. At the nasdaq celebrating its ipo, zun. They opened 15 million stock accounts in the last four months. Talk about an overheated parabolic market. You want to stay away from that one. It doesnt mean it cant go higher, it does mean overvaluations are stunning versus the economy. I remember going onto a brokage house that was more akin to an otb where people would watch the races. It seemed people were watching the stock as though it was a horse race. They would go to the teller im selling that one, buying this one. There is that culture to trade rapidly. I know people are drawn to a redhot market like that. Im just urging you to be careful. Transports. Such a rough day for the airlines as southwest said they would start to add capacity. We got the transports now are almost 9 off their highs. Youve got a World Climate conference in europe right now everyone decided coal has to go away. Phil lebeau with a great piece how delta stepped up capacity. When you add capacity its the exact opposite when airlines were going higher. They were one of the great performers last year. I dont like the group. The estimates have to come down. If you buy ahead of estimate cuts, you almost never make money. American and southwest, two of the worst three s ps of the week. Only one worse is Urban Outfitters. Its disturbing because when the ceo of american was on i was doing my best to talk up things. He wouldnt go my way. He said no there is capacity coming on. Revenue per passenger seat miles will go lower. We have to defend our turf. Their Balance Sheets are great and they still make money. They can buy back a lot of stock. Doesnt mean the stock cant go down. Hewlettpackard will report earnings after the bell today. This morning announced a deal in china that is interesting as much for its level of complexity as what it says for being able to do businesses. The deal itself complex. They had a business h3c. They are now putting into that business along with the networking they are putting in their Technology Services business server business storage business in china. Then they are selling 51 of that to a tsinghua. This appears to be a blueprint how youll have to do business in china as a technology provider. Hp china is keeping separately smaller businesses. Printing, personal systems. These key businesses now going to be part of that overall. They are getting 2. 3 billion for the 51 of this company they are creating. They are moving on to try to do Better Business there. There is a belief in order to get what you need from the Chinese Government and the likes, in order to proceed effectively, you need potentially to be chinese controlled, given the road blocks they are putting up in the name of secrecy, espionage, coming from the u. S. Right. I have to tell you there is an intellectual property war now remember the Justice Departments files against companies. Skyworks solutions. Cisco talked about the problems in china calling them political. The only company i know that is killing it in china is starbucks. What did starbucks do . They had meetings with the parents of the people who work at starbucks. Howard schultz adopted the chinese model. There are no state secrets when it comes to coffee. They cannot claim that is in the national interest. Everyone else seems to have a partner. Starbucks figured out the culture. When you get something by hewlettpackard and they give away the largest market what does that say where the future was there . It says in order for them to grow, they have to be 49 owner in the combination as opposed to controlling it outright. Very important. Ahead of the quarter, what does it mean . Well see. Well get the numbers. The splits coming. I think they wanted to separate the announcements. Bernstein takes alibaba to what they call a High Conviction outperform. We are going to see baba these are the highest levels since january. I still think you play it with yahoo. Suntrust saying dont worry about that formulation. They shopify over at china. I was going to shopify this weekend until i realized its not a verb its a noun. No one ever shopified me. Be careful. Rig finally settling part of the spill from deepwater horizon. Now we have this crazy Santa Barbara spill. Be very careful with that group. There are drill ships coming on. Nordic american tanker offshore announced a buy back. People will be critical of equity offers hes done for nat. Leon cooperman spoke about when we were personally delivering alpha. Yes. Im not sure what he delivers there it wasnt alpha. Oh, my god. Silence. That never happens. Im looking long term record. I think our best idea panel is this year is bound to be good. Cant get worse than last year. I did want to touch on cablevision and Time Warner Cable shares after yesterdays entrance into the u. S. Market by the French Company altice. Paying a very large multiple. In a luncheon yesterday, making it clear the Management Team that they are not done. There was an approach made to Time Warner Cable. Cablevision was the big beneficiary of this idea they are going to be an acquisitive. The stock is giving back a bit of that gain but not very much. Altice, 33 million market value. Their stock went up so much yesterday that it basically paid for the sudden link deal a 9 billion deal. They are willing to lever up their Balance Sheets that very few Cable Companies seem to be willing to do. They are talking a big game about what they might do for Time Warner Cable. And how they are going to get the margins up for sudden link to as much as 50 . Ill tell you something, ill believe it when i see it. You put a synergyadjusted ebitda multiple saying what synergy . Its the altice way. Well save cost. They are going to outaticify. I remember another frenchman jeanmarie messier, vivendi. The swedish king i dont know. He did not look good last night. Six goals. Its interesting altice. If youre Time Warner Cable, thank you. As we potentially get a deal done with charter. Youll keep them honest. You have chronicled these. I cannot believe the worth of these companies. Youll see cable the valuations ultimately, what is the endgame . You pay anything for a subscriber . I dont know. You buy Time Warner Cable and you are going to cut costs that much . Its a Customer Service business. Its not so good already. Im curious to see what they have to deliver. Maybe if you eliminate Customer Service you get the margins up. Exactly. That will make everybody very happy. Best buy up almost 5 . Nowhere near the highs at the very open. One of the things weve seen in this market is people get enthuse tuk about certain retailers and sellers come in. Etf selling comes in and knocks thing down. The incredible havehave not. Home depot had a great april. Home depot talking about technology they are using to get more out of each customer. This has been so hit or miss its almost like the chain hit or miss. Keep your eye on emr. Emerson. Various reports which we probably wont go with at the moment. Thats seeing action. A lot of people rumored to saying that nelson peltz is looking for a stake. I dont know emerson. I know emerson the quarter and it was horrendous. I know emerson the orders. It was miserable. I know emerson the Great American company. It would not shock me if someone says im taking a run at emerson because their performance has been so subpar. I look at emerson. The only reason that stock could be going higher may be chatter. Chatter. 40 billion market cap would not be a small deal at all. I know nothing. My Charitable Trust has a tradition, sandly cutler was the ceo there. An opponent of nelson peltz. Homage to david. There is going to be a lot of names that will be rumored and Great American industrial companies. Youll hear eaton and emerson rumored. You cant shoot it down. So Many Companies underperformed. Tyco was another one. You are going to see these stocks go higher. We can pass on saying why or we can give credence to the idea someone might be accumulating a stake. I dont know what to do. I throw it out there. With no knowledge other than the fact someone shares are flat for the year underperforming the s p. Dow is close to the flat line yet again. A split open weve got. A lot of activity down here in front of the post here. Here is shopify. We are waiting for it to open. Prices have been terrific. Remember what happened with this company. 7. 7 million shares. Price talk was 14 to 16. It priced at 17. Indications in front of me 27 to 32. That is quite a move to the up side. They help Small Businesses set up Online Stores for ecommerce. They were founded in 2004 by a canadian entrepreneur who was trying to sell snowboards online and was frustrated and founded shopify. Hell tell us about his interesting experience. They just upped the indications, 25 to 28. Not as great a story at the nass damage because baozun is over there. They held big brands like nike helped them get on the alibaba platform. Showed them how to set up a presence in china. 11 million shares at 12 to 14 was the price talk. If priced below that at 10, one issue out there is very high customer concentration. Renaissance tells me phillips and microsoft were 52 of their 2014 revenue. Its been a great year for chinese internet stocks after a very slow start. A lot of these big names have taken off in the last six, seven, eight weeks. This is this quarter. 58. Com up 47 . Youku, thats up big. Renren is up big. All because these st. Paul names are doing well. The shenzhen up 90 gain for the year. This is the nasdaq of china. Over at best buy, the numbers looked very good. They are up nicely. Not as much. I think the big problem is where the sales are breaking down. They had great numbers in appliances. Great number in Consumer Electronics led by tvs and phones. Entertainment, which is gaming down dramatically. There were declines in tablets and computing. Services down, as well. That is a big issue overall. Airlines, not nearly as much action as we saw yesterday. Modest declines. 25 to 28 on shopify. Lets get to the bond pits and Rick Santelli in chicago. Good morning, carl. There is definitely a slight drift towards lower yields. Open the chart up to early december of last year and even at 2. 20 we are only about 6, 6. 5 basis points from the highest yield in that time period. The oneyear chart of the bund gives you the aggressive breadth of not only how leading into qe pushed rates down but how mario draghi is looking at the rates up even though they have drifted off from some of their higher levels. Want to Pay Attention to that. Its all about Foreign Exchange today. Not necessarily the euro versus the dollar. Think about it. We get april retail sales in the uk and the headline number was 1. 2, much better than expected. Good news was definitely good for the pound. Lets look at the pound versus the dollar. Best levels best close since thanksgiving last year. The pound versus the euro. We have to open it up to around thanksgiving of 2007 so you can see this is significant, very significant to Pay Attention to. If we want to look at the other wild market remember we talked about the flat as a pancake dollar yen . Somethings changed. Lets look at a march of 2015 chart. Thats the last time the dollar yen was some what here. You have to back up the truck to a long macroto see how significant this may be. This one in favor of the dollar back to early 07 to get a comp of how significant this breakout could be. Tomorrow, the weekly close for this one will be very critical. Well talk to you in a few minutes. We are on ipo watch. Shopify says it powers more than 160,000 businesses including tesla and google. Well talk to the ceo indicated right now 25 to 28 after pricing at 17. Also ahead, Roger Mcnamee who does he think is right . Building aircraft, the likes of which the world has never seen. This is what we do. Thats the value of performance. Northrop grumman. 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I would go to the bankers and say look we would like to have an open that would kill the short. The stock is not natural at this point. Be very careful. Why did cramer say be careful . Weve seen it. Maybe this is resorts international. My dad did resorts and national video. Tears, baby. Dow is down 18. Dont go away. Its part adrenaline and part adventure. Its part geek and part chic. Its part relaxation and part exhilaration. Its part sports car and part suv. And the best part . The 2015 gla. Its 100 mercedesbenz. Time for cramer and stop trading. Janet yellen commented maybe the market is overvalued. Last year she talked about smaller biotech stocks overvalued. This would be a good time to trim some of these. Espr barclays came out with a note. This is a parabolic move for a drug company that may have a formulation for anticholesterol. Regeneron is in that. Just be careful. Ms. Yellen this would be a better timed call than when you made it before. I hate to give her stock advice. Whats on mad tonight . If you look at usa today, the lead story is cyber thieves hit care first which is a Blue Cross Blue Shield company with 1. 1 million members. That is a fire eye situation. Not unlike weve seen with other retailers. I believe fire eye is involved in this. I will speak with david dewalt. Weve got to focus fire eye. I think its a fabulous situation. Well see you tonight. There is shopify. Hope i can do shopify between now and then. Priced at 17, currently 28. 35. Well talk about that later on. When we return breaking news philly fed, existing home sales and ceo of shopify. 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. Opinions. Theres no shortage in this world. Who do you trust . Whose analysis is accurate . How do you make sense of it all . A simple unbiased stock score consolidated from the opinions of independent analysts. Is that too much to ask . Nope. Equity summary score powered by starmine, will help you execute your ideas with speed and conviction. And its only on fidelity. Com. Open an account and find more of the expertise you need to be a better investor. Why do we do it . Why do we spend every waking moment, thinking about people . Why are we so committed to keeping you connected . Why combine performance with a conscience . Why innovate for a future without accidents . Why do any of it . Why do all of it . Because if it matters to you its everything to us. The xc60 crossover. From volvo. Lease the well equiped volvo xc60 today. Visit your local volvo showroom for details. Good thursday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen, simon hobbs and david faber at the new york stock exchange. Macrodata from around the world. Claims in line here. Well get nat gas inventories in a half hour. The markets hanging in there. Dows off 15 points. A lot of retail earnings from best buy, williamssonoma and salesforce and shake shack making news today. Lets get to Rick Santelli for more data. Absolutely. We have the current read which happens to be april for leading indicators up 0. 7, much better than we were looking for. Thats the best read since july of last year. Darn close to a year. Now lets go for the philly fed. This is a may data point. 6. 7. We were expecting a little bit better. Last look unrevised at 7. 5. Of course we have existing home sales. For that lets go to diane olick. Down 3. 3 to 5. 04 Million Units up from a revised 5. 21 Million Units in march. Thats a miss. Weve got down 3. 3 . Still up 6. 1 year over year. Realtors saying this setback from the robust march sales is a result of lagging supply not demand. Inventories were up 10 monthtomonth. Still down almost 1 year over year. Weve got a 5. 3 month supply pushing prices ever higher. Median existing home sales price in april 219,400 up 8. 9 year over year. Thats the 38th straight month of annual gains. Its the largest jump in prices since january of 2014. Sales in the northeast monthtomonth down 3. 1 . Midwest up 1. 7 south down 6. 8 . West down 1. 7 . Days on market down to 39. That is the second shortest in the history of the realtors tracking this. 40 of homes going for above asking price. Bidding wars are the norm. First time buyers 30 of the market. They should be at 40 of the market. We are reporting here from denver today. This is the poster child for lack of supply and high demand. Bidding wars all over the place. Well do a deep dive coming up in power lunch. Thank you, diana olick. Shopify opened for trading at post five. The stock up about 55 off the intraday highs. Lets get to bob pisani. Great volume here. 4 million shares already changing hands. Theres only 7. 7 million floated. Very small float for these companies. Huge crowd standing around here. Important thing is the price target was 14 to 16, priced overnight at 17 and opened at 28. Now trading at 26 and change. Founded in 2004 by a canadian entrepreneur who is here. Hell be talking to us in a few minutes. The crowd is still there. We are still waiting for another Ecommerce Company to open on the nasdaq. That is baozun owned by alibaba. They priced below expectations but very good so far this quarter. Back to you. Mcdonalds Shareholder Meeting getting under way in oakland just outside of chicago. Protesters outside the meeting ensuring their voices are heard for a 15 minimum wage for those in the front line. Mcdonalds management is expected to resist calls from big shareholders to make it easier for them to nominate directors to the board. Joining us now is Matrix Asset Advisors chief investment strategist and a mcdonalds shareholder, david katz. Welcome to the program. Nice to be here. Why are you holding mcdonalds stock . With all the shouting and change of the ceo, its down 3 over the last 12 months. Its up nicely this year. We bought it after it was down. If you look at mcdonalds, we think its a reasonable valuation. Has a great global footprint. Its paying a 3. 5 yield and about 16 17 times normalized earnings. We think easterbrook will fix the business. If they fix the business there is up side on the earnings level and financial level. Latest we have from the trade press in the wake of the big franchise meeting is there will be new menu board. Driveins is a large percentage of sales, to build their own meals with lowerpriced items then adding drinks which are more profitable. Is that what you want to see . We do. We think there will be a lot of blocking and tackling. The ceo did fix Great Britain and europe. If you look at the company today versus nine months ago with the last ceo, he thought business wasnt great but was a business as usual attitude. The current ceo is trying to fix things. He is shaking things up. First with operations, then with the menu. We think ultimately he will do more for shareholders on the financial side with more share buybacks, converting companyowned stores to franchises. You are getting paid nicely while you wait. Let me pick up that point. Its 8. 5 billion they are promising to return to shareholders through extra dividends and the stock buybacks and borrowing that money at increased Interest Rates to do it. Some suggest this is a basic criticism, you are not investing for the long term future of what is supposed to be a turnaround story. At the very least because you are getting downgrades on the bonds, you are transferring wealth from bond holders to stock holders. They can afford to do both. They can fix the company operationally and return more money to shareholders. In terms of returning wealth from debt holders to equity holders, the ceo works for the shareholder of the company. Thats right. Rates might be higher they are still exceptionally low. Some would say the ceo works for the customer and the employees. You could return a lot more of that cash in the form of wage increases. A lot of the protesters would agree, and expanding the business investing if different menus, helping to turn around u. S. Sales so they turn positive. Ultimately the ceo has to do right by shareholders. The best way to do right is make sure the customers like the experience, that the employees are happy and make the Customer Experience better. The ultimate mandate for a ceo is to improve shareholder value. Would you side with blackrock and vanguard they should allow proxy access at this meeting . They shouldnt resist these calls . We think it would be good for big shareholders to have a bigger say. We think the board of mcdonalds is being very aggressive. We think there are activists getting involved that will put more pressure on the company. Everything is moving in a better direction. The board is acting right and so is the ceo. I was going to ask about that. Are you encouraged recent net filings show two wellknown activists investors have been buying mcdonalds shares . What would you expect them to do . What moves do you want them to push for . We think the ceo looks at himself as an internal activist and the external activist put more pressure. Fix the operations and return more cash to shareholders. Maybe a big share buyback, selling real estate. There are lots of opportunities out there. Bill ackman did great with the stock. There are rumors he might be involved. Theres been no follow through so we dont know if thats true or not. There are a lot of activists on the smaller side that are involved. They see the type of opportunities we are looking at in the company. In a word are you more tempted to increase your stake or decrease it . We are absolutely increasing our stake. We think the stock can be at 110 to 120 and getting 3. 5 yield. Thank you. Retailers on the move. Best buy and williamssonoma trading higher. Best buy one of the best performers. Courtney reagan spoke to the ceo earlier and joins us with more. Down for the year but up nicely today. That is right. Best buy turning in a Strong Quarter beating expectations with the key metrics profit revenue, comparable sales. I did get off the phone with the ceo. As the company has shrunk its store fleet from 4,000 stores to around 1,600 now, i asked if best buy will be a domestic retailer . He said we see immense opportunities for us here in north america. We never said we wouldnt do anything outside north america. In the beginning phases it has been a shrink to grow focus. Best buy and others commented about relative unexcitement in the consumer electronic innovation space and cycles. When it comes to key growth areas, jolie says large appliances, that category is growing with the housing recovery. So is the connected home space. He continued to say everything is dependent on the network. Best buy plans to sell the hardware informing customers and installing those systems. Retail watchers have been talking about the trend toward consumers buying more services and experiences. Jolie says the trend towards experiences has been going fon a while. He said we call our mission a Human Potential and capture images and experiences like your childs soccer game is one example he gave. He said, i tell people we are in the happiness business. Investors are happy with results. When we come back theres been a firestorm of controversy surrounding the way the government calculates gdp. Steve liesman broke that story last month. The government says hes right. Well talk about that. Also shopify soaring in its nyse debut. Coming off the highs. The ceo will join us first on cnbc a little later on with the dow up ten points. Its part adrenaline and part adventure. Its part geek and part chic. Its part relaxation and part exhilaration. Its part sports car and part suv. And the best part . The 2015 gla. Its 100 mercedesbenz. [ female announcer ] who are we . We are the thinkers. The job jugglers. The up allnighters. And the ones who turn ideas into action. Weve made our passions our lifes work. We strive for the moments where we can say, i did it we are entrepreneurs who started it all. With a signature. Legalzoom has helped start over 1 million businesses, turning dreamers into business owners. And were here to help start yours. Lumber liquidators shares fall after the ceo suddenly resigns. We are in Santa Barbara county covering this Big Oil Spill as it happens which fouled nine miles of california coastline. Robert lynch is the ceo has has been the face of the company through much of this scandal over formaldehyde in their flooring. The company putting out a press release this morning saying he has unexpectedly resigned. Tom sullivan the founder of the company and chairman and initially the face of the company in that 60 minutes report in march will take over as acting ceo. He has not gotten a lot of great marks from investors or observers about his performance early on. We do not know what this is related to other than the fact that a lot of issues have been swirling around this company. Last month the company disclosed that it was expecting criminal charges from the Justice Department relating to its foreign sourcing. There were supposedly discussions going on between the company at high levels presumably robert lynch and the Justice Department about some sort of resolution to that. There is also a special committee of lumber liquidator board of directors dealing with all this. There may have been boardroom intrigue going on. As we reported weeks ago, not only are they dealing with 100 civil lawsuits relating to the formaldehyde issue but its insurers said they will not cover the liability and the company has gone to court in wisconsin to try and get the insurers to pay. A lot of things crumbleing around Lumber Liquidators and now the ceo resigning. Did the fed minutes tell us more than the fed wanted to . Steve liesman joins us with an overlook detail from yesterdays report. There is a contradiction from the april meeting. On the one hand they tell us they are not going to hell us when they are going to raise rates. On the other hand they say specifically its unlikely they will hike rates in june. The next meeting, bingo, you know when they are going to height. The fed has been trying to get away from calendarbased guidance and move towards data dependence. They will always be talking about whether rates will rise at the current meeting and outlook for the next meeting. If the minutes follow as much as the fed doesnt want to tell markets, its i probably unavoidable to give guidance. Another story with important implications for fed policy the Government Agency charged with calculating the nations growth rate has a series of fixes over the next months. Bureau of Economic Analysis said they are aware of issues in domestic product data and developing methods to address what is found. The bea statement comes after cnbc and detailed report in april said gdp report has been meaningful weaker for the past 30 years. Several economists confirmed the findings and barclays estimates if they were to adjust First Quarter correctly, it could be as high as 1. 8 compared to the initially reported 0. 2 . The chief of the beas division that does the gdp report said in the statement that the agency has identified several sources of trouble, including federal Defense Service spending. They are going to make a round of changes completed july 30th. Thats in time to be included in the annual gdp revisions. They are going going back three years to the beginning of 2012. The fed faces the issue of whether to hike or not after a week First Quarter that may or may not have been quite as weak as reported. I have a question. Ive been watching your reporting and thinking about this. The gut reaction is to celebrate the fact that the First Quarter was better than expected. The question i have is does it mean that Second Quarter rebound is not as good as expected . Last year it was considered a spectacular bounceback from what we saw. Should we be thinking perhaps not so much . What implication does that have . Let me tell you what ive been able to figure out. I know the First Quarter is substantially below average. You can see the Second Quarter is substantially above average. Meaningfully above average. What ive been unable to do is track whether or not the q2 bounceback is always related to the q1 weakness. Thats the next bit of data crunching and ill be doing it all weekends. Ive got more time to crunch data. That is the crucial point. If you can establish q1 growth is stronger does that mean you have a major deceleration on q2 . We are at 0. 2 official reporting. Our tracking has us down to minus 0. 7. Its not growth is higher the matter of distribution of growth over the quarters. What is true is the First Quarter is likely to be stronger than reported. The Second Quarter rebound would, by definition not be as strong. Im glad we got the extra day for the weekend for you to do all that work. Ill call you to make sure ives got my numbers right. Yeah. You wont get a reply. Shopify is the latest billion Dollar Tech Company to go public here. Stock trading sharply higher. Off its highs, it is debuting here at the nyse. The ceo is stand buying. Here at td ameritrade, theyre always working. Yup, were constantly making thinkorswim better. Like a custom screener on your desktop, that updates to all your devices. And you can share it with one click. Wow. How do you find the time to do all this . Easy. We combined every birthday and holiday into one celebration. different holidays being shouted back to work, guys i love this times of year. For all the confidence you need. Td ameritrade. You got this. Dont just visit new york. Visit tripadvisor new york. With millions of reviews and the best hotel prices. Book your next trip at tripadvisor. Com today. [ male announcer ] Tora Bora Fallujah argonne khe sanh midway dak to normandy medina ridge the chosin reservoir these are places history will never forget but more important are the faces we will always remember. Public debut with competitors from ebay to a recently volatile etsy. Tobi lutke joins us this morning at post nine. Congratulations to you. Thank you. Nice open. They are calling it a win for canada. Its very gratifying. You are based in ottowa. Youre from germany. Everybody is getting familiar with the model. Tesla comes up as the marquee customer. Youve got many many more. What do you do and how does tesla benefit . Shopify is from my own experience building a snowboard platform. Entrepreneurs come to us to sell their products. Weve got really good. Now Companies Like tesla come to us based on the quality. Revenues growing four times over year on year. To open this as a customer i pay a fee which ranges from . 14 a month. Its designed to get as many people in as possible. 2014 you prosed 3. 8 billion. How much was coming from mobile shopping . Mobile has been exploding. 60 of entire traffic. Of course mobile this transformation is the driver why people adopt shopify. They are ready. Im curious why you chose to go public . Etsy goes 30 to 36 and gets slammed after reporting a bigger loss than expected. Etsy will recover. Its a great company. As us we are all companies which are part of this global brain storm how new Small Businesses will be created in the future. We love the position we are in. It came down the team was ready, company was ready. Everything was ready. Alongside tesla you have google as a customer. What do you do for google . Google came to us to sell zagat restaurant guide books. We have people implement shopify that want to do it in a daiwa took them a couple of months. Quickly it spreads throughout the organization. The way which the industry is operating, its changing. We have the google buy button. Branded websites for retailers. If you look at priceline moving if i look at what go daddy is trying to do you are all moving in on the same operating systems. How does that shake down . Do you get bought by bigger guys like google to operate for free . All the companies that are partners and our absolute core focus we want to allow more businesses to be created. They are very easy to get started and scale to be 100 million companies. We power google buy buttons and other systems released in buy button soon. Our market traditionally, there were a lot of points solutions. Merchants had to reintroduce their products. From shopify we run all that. Is that what you would describe as your competitive advantage versus others competing with you . Yes. We find the last decade has been a lost decade of entrepreneurship. It was really hard with the complexity and the learning curve to start. Now allow people not just to have one single point solution which creates a lot of complexity in imagining all these systems, but run entire operations. 15 minutes, thats all it will take me to get on your platform and learn how to use it . Yes. We are working hard 16 hours a day building the initial platform which we launched in 2006. 15 minutes to build my snowboard store. That is the goal we are aiming for. It can be done. Next time bring your snowboard. Absolutely we had one up there. C. E. Unterberg, towbintobacco toby lute lutke from shopify. Where are the bargains these days . Ke from shopify. Where are the bargains these days . Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Just because im away from my desk doesnt mean im not working. Comcast business understands that. Their wifi isnt just fast near the router. Its fast in the break room. Fast in the conference room. Fast in toms office. Fast in other toms office. Fast in the foyer [pronounced foyyer] or is it foyer [pronounced foyyay] . Fast in the hallway. I feel like ive been here before. Switch now and get the fastest wifi everywhere. Comcast business. Built for business. Welcome back to squawk on the street. Im Jackie Deangelis from the floor of the nymex. Market waiting for the natural gas inventory report from the eia. We have a build 92 billion cubic feet last week. Under expectations here. Prices trading at 2. 95 before this. Now over 3. This is bullish. Competing theories in the marketplace. First is that we are seeing short squeeze in nat gas. Second is that the same way crude is hovering around 60 a barrel nat gas likes to gravitate toward these round numbers around 3. We are heading into the summer, people will use more air conditioning. There will be more demand for nat gas. All that giving us a boost here. Reporting from the nymex, Jackie Deangelis, back to sue herera with your news update. Here is whats happening at this hour. Ahead of a twoday summit european leaders will seek ways to bolser ties with six post communist nations in eastern europe. In berlin Angela Merkel dampened hopes the talks would pave the way for eu membership saying the Eastern Partnership is not a tool for the blochs enlargement policy. Calling for a ceasefire at the ancient heritage site of palmyra in syria. The militant group destroyed ancient monuments in iraq and there are fears it might do the same in palmyra. Deutsche bank shuffles management. After 33 years in late night, David Letterman signed off for the last time. It was a starstudded event with some memorable guests including the final top ten list. Thanks for finally proving men can be funny. Dave ill never have the money i owe you. Oh no. One of many tributes to mr. Letterman. We wish him the best of luck. Thats the cnbc news update this hour. Back to squawk alley. Checking on the markets here from the floor,s dow up about 2 1 2 points. Flat despite a big week for retail earnings and big winners like best buy. Is a continued rally becoming less likely . Jim paulson and weve got Russell Investments chief Market Strategist stephen wood good. To see you both. Not a lot of conviction on buying and selling. You have to be in this market. Do you . I think the path is higher near term. Tell you the truth, i think the window for goldilocks sustained rally is narrow on wall street. It seems to me the United States closing in on full employment if you dont recover economically with margins at maximum levels there is no recourse for earnings. If do you recover economically and bounce you are going to aggravate costs, push Interest Rate pressures. In some sense there is not much room for a sustained rally until we get through this process. Earnings will recover. They would have to. The Second Quarter will firm up. We think it will be a back end loaded year. The fed is very much in play. Our expectations are september theyll achieve liftoff. Its what happens after september. Future path of Interest Rates become s becomes in play. It doesnt mean you want to be out of equities but valuations have been a challenge in the u. S. We upgraded europe last year. That worked out for us. In a globally diversified perspective, there are risk assets. Among them equities. Do you have a perspective on what the flows are here . Who is coming out of the market, who is coming in . One of the benchmark effects has got to be huge massive buybacks coming from companies of their own stock. Still its not lifting the market. Right. I think there is a lot of that going on. The problem is youve i got flows retailwise coming out of equities going to bonds. It defies logic. You dont respect that flow . Hes got a forecast for 3. 25. I think the economy will recover. I think well have a global bounce on the back drop of stimulus for Lower Energy Costs and lower yields. I think it will get too hot in the United States. Well be quickly at 5 Unemployment Rate and see cost push pressures which will lead to margin erosion and lead to concerns about pe multiple contraction and concerns the fed has to move up its window of exit more quickly. I wouldnt be surprised if we rally a little bit higher in the s p. Maybe 2200. What do transports at a sevenmonth low tell you . Is that a worrisome signal . I think when we look at the effects of oil and the dollar, that is front end loaded. Whether thats Energy Sector earnings, debt markets, that has to be recognized right away. Benefits of energy coming down stretch over a long period of time. I dont think you need to dial down risk but it needs to be globally diversified. Fixed income globally. I wonder if we fundmentally dont understand whats happening in the country. The most important thing was that survey from jpmorgan that suggested that 35 people have their incomes moving by 30 month to month and their required expenditures can be moving by single am. People dont have the cash balances to have confidence to move forward, which is why retail sales are doing what they are doing. Why when you ask people, do you believe in the recovery. Sometimes they dont. They are in incredibly uncomfortable positions. We have not factored that into a view on the recovery. When you look the way the economy is in that square shaped recovery the economy is in that 2. 5 to 3 slope. Credit is not replacing income. It might be its a longer, more stable lower number on the economic picture. I think the United States is stuck in slow growth. Has been will be. I think its supply side issues. We have aging demographics. Terrible productivity growth. We can grow at 2 supply side. Zero fiscal policy helping . If they do. They are making a mistake assuming we cant overheat. Overheating is not about growing fast but demand growing faster than weak supply growth. We are at full employment changes the calculus. I havent heard you this negative on the markets in a long time. Jim paulsen, good to see you and stephen wood. Retail outperforming the market easily. Which stocks do you put in your portfolio now . Well talk about that when squawk on the street comes back. Is the Global Economy about to slow down in a major way . Who and why says it coo happen. [ male announcer ] your love for trading never stops. So if you get a trade idea about, say organic food stocks schwab can help. With a trading specialist just a tap away. Whats on your mind lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move wherever you are. And start working on your next big idea. Dow up three points. Energy is working today. Dom chu at hq with more. Oil prices are higher. Thats one factor lifting Energy Stocks to the upside. Its Drilling Companies that are topping todays leaders. Look at noble corp transocean all up by 3 or more. Bp agreeing to settle remaining claims over the 2010 Deepwater Horizon Oil spill in the gulf of mexico. Back to you. Shares of best buy are soaring to the top of the s p 500 after news that the company beat First Quarter profits and sales expectations. What does this company need to do to keep the momentum going . Joining us by phone is senior retail analyst at Piper Jaffray. Overweights the stock. You have a 45 price target. You must be happy with the results you saw this morning. We were very impressed. This was a solid quarter, what i would classify as a tough quarter for Consumer Electronics. We did see the industry back drop slow down coming off a decent holiday. Best buy likes to cite Industry Data down 5. 3 relative q4 down 3. 2 . Sales came in better than expected with 0. 6 . It shows they are clearly taking market share across a broad range of categories here. Judge in what specifically . The Research Group puts it down 5 . Where specifically is it seeing growth . First and foremost share gains in the tv category as people are upgrading to larger screen 4k tvs. Best buy provides best in Class Service to drive share. You are also seeing gains in the mobile phone category in appliances and pcs. I would say its pretty uniformly across the board you are seeing consistent share gains. Courtney reagan spoke with the ceo. He called it the connected home as big potential opportunity for best buy. What does that look like to you . How are they trying to get an edge here . Thats been talked about a number of years. It does seem to be getting some traction even in the Home Improvement space. I dont think that will be a calendar year 2015 or even calendar year 2016 event, but certainly when you look out a couple of years, that is a product category that could ramp up nicely and best buy would be in the sweet spot offering best selection to the customer. To what extent is best buy a reflection of what amazon is doing with its pricing . We had that revelation last time amazon came out with results that retail margins were super slim if not nonexisten. Only recently have they decided to dial up those margins. I imagine they offer a lot of tv sets almost at cost for a couple of years in order to boost the volumes and boost the attention as a loss leader. Is that what happened . Can best buy capitalize on the fact there is more pressure for amazon to generate margin . I think what you are seeing with new management at best buy, theyve gotten closer to their suppliers. Theyve been more strict on uniform pricing across the tv industry so that amazon may be aggressive, but on major brands you are going to see the exact same prices at best buy. If you look at 4k tv youve got 60, 70 inch tvs people arent comfortable having shipped to their home. That puts best buy in more competitive position. This is very good dynamic that will take share from amazon. Probably doesnt hurt amazon the narrative has been written they are starting to emphasize convenience over price, right . S. Thats correct. Convenience is what its all about because the pricing is similar. Best buy gives you that option right now that you could buy it online, pick it up at the store or have it delivered to your home that day or the next day. With amazon you are going to have that bit of delay and discomfort on the timing when a large box will arrive at your house. Lets talk stock strategy. Year over year best buy is up significantly. So far in 2015 its down about 9 . What gets us to your 45 price target . And investors, are they buying the turnaround . Sure. The main reason for the falloff is twofold. Best buy has noted its going to begin making adjustments into the store this year. That is putting pressure on the operating margin the first half of the year. Also we did see a modest slow down in industry sales. Best buy seems to be weathering it. When you look at the back half of the year now, looks more interesting because the investments are going to start to die down and getting some returns on those investments. We still think the product cycles are fairly healthy to get them through tougher comparisons in the back half. We authentic the setup the rest of the year looks attractive. Well see what the Holiday Season looks like. They wouldnt go there on the Conference Call. Thank you, peter keith at Piper Jaffray on best buy. High time we got a santelli exchange, dont you think . Lets cross live to chicago. I agree. Its about that time. Its also about that time to welcome my guest andy brenner. Thanks for taking the time out of your schedule. Rick always a pleasure. I go no farther than maybe the first paragraph of your latest writing. Corporate liquidity down 83 . Treasury liquidity down 75 . Can you tell me where and how you crunch those numbers, andy . Im going to give credit to the wall street journal. Thats an article they had written today. Its just i observe it every day. Its less and less liquidity. Thats one of the biggest problems. Even though we are not seeing it today, per se i really cringe when the fed finally starts to tighten probably this september as to what kind of tantrum we are going to be faced with. The amount of corporates on the Balance Sheets of the dealers has gone from 300 billion to less than 50 billion right now. Thats your 83 down. As well as treasury liquidity. The banks, because of dodd frank and capital rules and so on and so forth are being discouraged to make markets. Now we are being left with whos there to make markets. The hedge funds wont make markets on a given day. I mean i think well thrust the Central Banks of the world into being market makers. I dont think thats what they want to do. We could call it unintented consequences. I like to call it there are no free lunches. If you look at page eight of the minutes yesterday about the second paragraph, it brings this up. It brings it up in the context of all these things have arisen that are going to affect liquidity in the marketplace. At the end of the day, thats the price you pay for using in a crisis for overbearing regulation, for shaking everything up, for letting the pendulum swing way too far after a crisis. These seeds were planted by the very policies that are now trying to be normalized that theyre worried about. Is that not the case . That is absolutely the case no question about it. Regulations i mean trading is not what got us into trouble in 2007. Now you are saying banks cant make markets in liquid products. They cant take positions. They are being second guessed in everything they are doing. Its terrible. Then you add Central Banks giving lead inquiry what they are going to do to a Certain Group of people and youve got all kinds of volatility. People dont want to trade. They dont know what theyll be hit with next. When i was young i used to be a helper on a truck, charlie chips. I used to help load and unload. With Central Banks, draghi they know how to load and unload when it comes to qe but the real issue is all these exercises are going to be left for the the market to sort out. Final comment . No question thats why were looking for a big tantrum, higher rates, wider spreads and its going to be a real fixedincome debacle sometime this year. All right. Andy, we always hope the markets are smooth and the transitions are smooth. Were going to have to wait and see whats in store. Carl, back to you. Rick thank you very much. 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If you want to succeed in business, mistakes are a luxury you cant afford. Thats why i recommend fast reliable comcast Business Internet. They know what businesses need. And theres a nomistake guarantee. If you dont like it, you have thirty days to call and get your money back. With comcast Business Internet you literally cant mook a mistick. I meant to say that. Switch today and get the no mistake guarantee. Comcast business. Built for business. Welcome back to squawk on the street. Shake shack shares up 7. 5 in early trading. They hit a record of 90 the figure in early trading today. The burger chain is considering adding chicken to some of its menu items in some way, shape or form. A subsidiary of the company has filed a trademark for the chicken shack designation. The only detail was that it pertains to chicken sandwiches. The company is mum about plans, except do say it tests new menu items. This makes shake shack much larger than a lot of other wellknown Companies Like jcpenneys and deckers as well. Kb home and sothebys, too. Californias drought has wineries looking for alternative ways to save water. Jane wells is live in napa with more. Call it a drought miracle turning wastewater into wine. Here in napa the greatest winegrowing region entitle country, if not the world. Some vineyards are now using treated wastewater, not poetable, but clean to water their vineyards, including the green island vineyard, beringer. Owners say it doesnt affect the taste and costs half of price of regular water. Were using a good quality water. Its the perception that its been passed through people. This comes from a filter system from ge to clean the water. The city has spent 10 million on the system and plans to upgrade and expand it they have no reservoirs here theyre dependant on the state for snowmelt melting and there hasnt been much to melt. This year we got 25 of what we asked for. Last year we got 5 . The year before we got 30 . So its been a tough time. The recycled water is allowing us to put the right water to the right person. We have cleanedup toilet water watering the grapes no impact on the taste at all . No impact at all. Come back at harvest time and well let you start eating the grapes and see. I cant even taste any difference in the grapes. Go to another vineyard another water source. I got my mumm sparkle inging water with the grapes. Let me tell you that up next is making this Potable Water and theyre already doing it down in Orange County this is pretty potable right now, let me see. That is good. Sara, its a good day when you have champagne before 8 00 a. M. Local. Not to question your taste, jane, but do you think the most sophisticated palates would notice the difference in the water . In most regions, you would know. Excuse me, i need to taste it again. Jane wells, thanks very much. From napa this morning. Lets send it over to jon fortt with a look at whats next on squawk alley. I think janes palate is pretty sophisticated, as are our squawk alley viewers, paypal ceo, is important because the company is getting ready to spin off of ebay. Also the Morgan Stanley note out on apple. Its bullish on the iphone and the watch in contrast to other information out there well dig in and an alibababacked ipo . Didnt do so great this morning. But that hasnt stopped alibaba stock from going higher. All of that and more on squawk alley. [ male announcer ] Tora Bora Fallujah argonne khe sanh midway dak to normandy medina ridge the chosin reservoir these are places history will never forget but more important are the faces we will always remember. Good morning, it is 8 00 a. M. At paypal headquarters in california and its 11 00 a. M. Here at cnbc headquarters on wall street and squawk alley is live