Transcripts For CNBC Squawk On The Street 20160408

Yellen, bernanke, volcker and greenspan speaking at an event last night. Hank paulson coming out swinging against actions his former agencies took on former tax inversions. Shares of gas down big after reporting march was a challenging month for the retailer. Well look in on the state of retail. Just days after the Treasury Department announced new rules which had the effect of breaking apparent the giant deal under which pfizer was acquiring allergan, hank paulson was on squawk box and said Companies Need to pay their fair share when it comes to taxes but also criticized the Treasury Department. Were a nation of laws and rules. You cant change the rules you shouldnt be changing the rules after the facts and changing them and changing them and changing them again. That is something that ian reed, the ceo of pfizer said in an oped yesterday and something that brent saunders, the ceo of allergan said on this set a few days back. Theres been across of criticism at treasurys move and seems to have been aimed at the filer allergfiler ai e pfizer allergan deal. Treasurys point is were snugging up the existing rules to match the spirit of what we intended all along. The partners in that merger accounted for this possibility, that they were going to basically have this rule unattractive on a tax basis. I dont think anyone thinks this is the way do business. A oneoff basis. Definitely like an excoach criticizing the team he just left. Ft going with the number that says the numbers are torpedoed. We can also talk about the antitrust actions, where its the treasury and inversions, you add those up its a big number. May have the effect of chilling some deals. Overall in talking to a lot of bankers this week, things seem to be moving fairly well when it comes to m a, not that well see big headlines any time soon. There is a pace of business being done. It doesnt have a Chilling Effect broadly speaking. This idea of changing rules is one weve heard time and again. It can have a Chilling Effect. Though dave cote didnt think much of it when he was on. I dont think bankers and ceos mind when the rules are set. They also cant have that in their mind that, lets not enter the terms of this deal because we dont want to provoke some action. The journal saying that the Obama Administration is proposing a wrath of new legislation on business across a number of different areas. The volume of deals that have been quacked, i do think it says something about the character of this m a cycle and the character of corporate actions these days. A lot of the deals are defensive. A lot of them kind of really about consolidating advantage within an industry, whether its staples, office depot, it was all about cutting costs, so those are the natural deals. Theyre not the big deals where one plus one equals three. The market tended to frown on those over time. Absolutely. The reach for growth is something your Investor Base didnt fully understand. You can make the case its the rational way to do it, but also very much in sync with were buying back stock, protecting the profit margin and focusing on dividends. Were not doing these bold,ies kibold,ies riskier things. The larger deals now are derivatives of older deals that didnt work out in the past. True. Which is one criticism hammered on m a. Getting word that twitter is making changes to the board. Naming pepsis cfo, Hugh Johnston and martha lane fox to the board immediately. Peter curry and peter chernon not considered for reelection. Twitter discussed about the makeup of its board. At a rare fed event last night, janet yellen was dispelling worries that the u. S. Was heading back into recession. Yellen said the u. S. Is back on track for further rate hikes and that december was not a mistake. Theres accommodation in the Monetary Policy that we have, but we think a gradual path of rate increases will be appropriate and will adjust depending on how our views of the economy evolve. I think we remain on a reasonable path. I dont think this december was a mistake. New york fed president bill dudley speaking this morning saying the path to rate hikes should be gradual. Thats what he believes is appropriate. Yellen saying u. S. Near full employment, but still some slack. Greenspan saying i dont believe a recession is what our problem is now. They were pretty much in unison about that, not feeling on the edge of recession. Its useful to remember to have her say december was not a mistake in response to a question reminds us of this weird place were at. People were in december saying the market rebelled against us. It was the wrong thing to do. At the same time shes answering for why shes pushing out rate hikes now. We have equal numbers of people believing the fed is going too fast or too slow. Yeah. Whats gotten your attention in the markets over the last week . Sara eisen is excited about that move in the yen. Is that something people should be keeping an eye on . I think the yen is on everybodys dashboard. Dont want it to get too strong, which is the traditional risk aversion measure out there. Overnight the yen backed off a bit. Oil bounced. Oil and the yen are the two things that can give way for what did for a bit of a bounce in stocks. The s p 500 got here three weeks ago, right . Three weeks ago we had that rally, pause. Weve been knocking around, up, down, up, down around 2050 in the s p, it makes sense to do that. I do think you have to watch the yen. I dont know exactly what how far that gets you. Besides everyone saying you dont want that yen to get too strong. Its not a japanese export story. Its more of a reflection of how capital is flowing in and out. And people dont like to see the rapid, steep moves in massive Asset Classes like dollar yen. On a day where we got the 4x reserve numbers out of china. For more on the markets, where investors should be focusing their money, the head of sales and trading at cowan company, and chief u. S. Equity strategist at citi. Happy friday. Thanks for having us. David, michelman shael menti rally we had. What has really changed since s p near 1800 and a vix near 30. A massive Short Covering rally predicated on fears. The fed coming out giving this dovish expectation. You had the oil, the commodity basically reality significantly on recovery because of talks about a freeze. A lot of recovery that forced the stocks to levels where we feel were fairly priced. Q1 earnings could be better than the fears instilled in the market. Even if theyre better, were probably at that level where things feel like the market is getting to the level where it cant go much higher. It was a repositioning rally that caused this. I dont see a lot more upside. Pick up on the earnings outlook and how the market might die guest that you have another expectation in decline for the top line earnings, on the other hand, a majority of Companies Come out and beat. The question is has the market figured that out already . How do you read that. I agree with that. We had a significant spike in trends, seen significant reduction in earnings estimates, started the year at 0 growth in earnings, now theyre in the 8 , 9 , energy down 4 , 5 . People will be focused more on the guidance. Well hear a lot of cringe worthy, cautiously optimistic commentary. The only thing i would disagree with david when he was talking before, yes, there was a repositioning, but it was function of fears early in the year that were thoroughly unfounded. Our valuation gets you about 90 problemibility of markets being higher. Sentiment about 97 probability of markets going up the next year. I dont play with these things saying how i feel about the market. Im much more focused on what we can statistically derive and get from client base. My gut instinct doesnt tell me much when im looking at millions of investors. David, tobias mentions earnings expectations. They have come down. The dollar headwinds are lighter. Short interest is high. Thats leading some to believe new highs can be made this summer. Why not . Lets look at energy in general. Can you make if youre a fundamental investor now and looking at the energy sector, the equity, you can make the argument that these levels are justified . Pretty much across the board. I dont know that people are truly comfortable with that yet. I believe that in general that will keep a certain amount of people out of the cycle of buying or adding to positions at these levels. If you look at the tape and say whats the one sector that stands out thats been beaten down, where the fundamentals support a more positive outlook, i would look at biotech, large cap biotech, because you looked at very depressed stocks. A lot of these larger names got so beaten down. You look at the earnings projecti projections, the multiples just suggest that theyre at washed out levels. I think that will be the relative value sort of trade. I think youll see that continue to move higher. I cant imagine adding to certain sector heres that have moved up so significantly because of repositioning when the fundamentals dont support the argument. Industrials which has outperformed this year, people trying to figure out if too much bad news is priced in there, what do you think on this point . I havent covered those stocks for 15 years, i would say generally speak cyclicals trade at high multiples, thats when youre supposed to buy it people say they dont want to own capital goods or energy because the multiples are high. Thats exactly when youre supposed to buy. You dont buy stocks beaten up and cheap on multiples. Investors are wondering globally if that growth is intact. Risk premiums going up, multiples compressed. Dont fight that market, youre going to lose. Well learn more when these financials start rolling in next week. Guys, good weekend. When we come back, shares plummeting this morning on gap companys march sales. No good. Well talk about that. Another look at the premarket. Dow down 3 to 4. The nikkei put two wins together. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of the at t network, a network that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Gap shares lower this morning after march samestore sales declined. Both the namesake brand and banana fell, but Old Navy Sales down 6 , a year after gaining 14 for the period. Guys, stocks had an amazing run within two months as a lot of retail did. It did. It sort of was stalking that 30 a share range. It always seems like theres one of those three chain thats been kind of a problem. People are worried about. Now you have the weakness across the board. I look at all these mall retailers, they all trade in the same zone, whether its macys five times cash flow. Looks cheap, they seem like there should be an ability to have a cushion there if you bought them. Though its been a value trap story more than anything. One thing about gap, the sell sign has walked away. 14 saying buy it. Twice as many saying sell it. I was thinking back to an analyst the other day who said we question the durability of the gap brand period because of that. I do. So many mallbased retailers you have to question because many people think theres been a seminal change in the way people go about buying things. Were only at the beginning of it walking the mall is not one of the ways you do it. All of a sudden you have thousands of stores, and the market seems to be telling management you dont have enough sense of urgency about resizing the retail footprint. Comes on a week where pacific sun filed for chapter 11. Today, ulta will be added to the s p as of the close next week. I think on the 15th. As tenant healthcare comes out. Riding a high. We were talking about jims thesis before the show, you always want to be selfie ready, whether thats the case or not, its not easy to prove but makes sense. Its also the kind of thing that youre not trying to sell somebody another pair of jeans. Which is what gap is trying to do. People dont feel the need to top off their closet as much as they used to. Is there a limit to how many lipsticks and moisturizers that you can buy . Not for me. Bring it on. We can go through a lot of makeup. Thats true. More every day. When we come back, art cashin will count us down to the opening bell. One more look at premarket as we wrap up this session. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. I have an orcogram we for an owen. E. Thats me. You should hire stacy drew. She wants to change the world with you. She can program jet engines to talk and such. Her biggest weakness is she cares too much. Thank you. My friend really wants a job at ge. Mine too. Im a wise elf from a far off shire. And sanjay patel is who you should hire. Thank you. Seriously though, stacy went to a great school and shes really loyal. You should give her a shot. Sanjays a team player and uh. Just a few minutes before the bell. Lets bring in art cashin, director of floor operations at ubs. Happy friday to you. Happy friday to you. One question is while why oil is catching this dip. Is it about the projections that stockpiles declined this year . Partly about that and theyre trying one more time for the rumor that they might be able to get a production freeze going. That combined to swoop in and pick up the shorts one more time. So between that and the fed speak last night, whats the larger dynamic at play . I think its pretty much oil. Fed speak last night was relatively benign. They readjusted the idea that they were almost in unison, that the economy is coming along, albeit slowly, but they went out of their way to say it was not a bubble economy. Today crude is the big story. If its up 2 as we talk, that should be enough to keep a bid under them. Art, two days ago it looked like this oneday grab for risk, you had biotech flying, it looked like everyone was happy about growth again. Yesterday a riskoff tone, yen rallying, treasury yields below 1. 7. Whats driving the daytoday mood . Several things. Yesterday the big factor was the yen, and would it force mr. Corroda and others to take a drastic step. They thought they would take the Interest Rate farce more negative, thats why the financials and banks led to the down side. There is less concern today. Theyre out jawboning, they got the yen back a bit and were able to get the japanese market up a touch. I feel like this week there were a number of downgrades on valuations on big names. Im curious on your thoughts about where we stand on the multiple and your expectations for earnings. I think they moved the estimates down drastically several quarters in a row so we have an extremely low bar to meet. Youll have earnings and revenues down year over year in many circumstances. You may begin to see some pressure on the multiples come in. On china, 4x reserves growing for the first time in five. Baltic dry, highest since september. Feeling better about them . It makes you feel better that trade is going. Until you stop and listen to any of the candidates for president. The antitrade seems to be the one unifying theme. Well have to wait and see how all that plays out. Its nice to see what looks to be the first start of china pulling its game together. April talked about as a strong month. We just figured all these seasonal things out too far in advance . Doesnt ness sarsly seem to be adhering to script. Some of it did, the first day of april is the best. I think well start worrying in about a week or two that were heading for sell in may, go away. When you talk about seasonals, thats the far larger incentive to look for. Sure. Art, see you later. Thank you. The opening bell just about 4 4 1 2 minutes away. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. Investors taking stock of the fed speak last night. Decent macro out of germany at least on the import export basis. The nice little array of corporate news, whether its comps out of gap, well get banks next week. Morgan stanley upping jack in the box. Bed bath beyond reported after the close last night. A beat on lower expectations, but initiating a dividend. Always been nothing but a big buy of their own stock. Watching an upgrade of cvs today a new buy rating out of rbc. Kind of the same story, this is the Media Company more insulated from cord cutting and maybe the value play because of some visible tailwinds for a little while. Thats what cbs and management will tell you. They did it at their Analyst Meeting a couple weeks back. The first theyve had in a while. Showtime is more into it, some people have paid for it. I heard you talking about billions earlier this morning. Its true. Im almost up to date. Its good. Theyve done wonders with that show. Theres the opening bell. At the big board, cca industries, manufacturer of helicopter and beauty aids. At the nasdaq, good deeds day, inviting people around the world to do a good deed on april 10th. Very nice. You mentioned some of these Board Changes at twitter. Peter curry and peter chernon not going for reelection, instead pepsi ceo hugh johnson and martha lane fox will join the board effectively. Takes you back to a note bob peck did in september, number of tweets per board member. At the time the knock was some of these had barely tweeted at all. Hugh johnson has not tweeted. Zero tweets. His son, Patrick Johnston writes congratulations to my dad on being named twitters board of directors. Give him a follow follow, myfirsttweet. If you just read the basics of the resume, its probably a bit encouraging, not just cfo but of a huge company. A big Branded Products company, to know something about advertising. A lot of those things fit together. Also its a lot to expect the cfo of a fortune 50 company to necessarily be that active on twitter. Good point. It takes weeks to figure out how do it. That may be the problem. Could be. The onboarding issue. The scaffolding as was said during the ipo. Under armour, if youre looking at under armer, 2 for 1 stock split takes effect. Earlier in the day that made people shake their heads. Reminder on that. Linkedin getting some attention, job postings online are peaking. Its an interesting cyclical take on what linkedin is. I remember linkedin, when you still had lots of underemployment out there. The case was linkedin is only about people looking for jobs. Counter cyclical play. When the employment and the economy is bad, they do well. Then the case became, no, no this is a much more versatile, broader social media platform. Since that bad report bad, that was an implosion that we have rarely seen in a company that size. Since then, eight downgrades. People are kind of being forced by the market to rethink what the business can be. Wanted to mention ual. In part just because of the calendar. Ual has yet to set their annual needing. The deadline is not far away from having to file a proxy. I mention that because you may remember para and altimeter getting together, nominating si there was going to be a settlement between ual and these shareholders, who nominated the six directors, it would have to come soon. Well see if we get something. Mr. Munoz just having taken they came a week before he took the chair back after his health issues. They had yet to put up a white paper. They put up a website, but yet a white paper. Weve been waiting for that certainly speculation that theyre getting closer to a settlement. If theyre not, theyll have to go full steam ahead. That deadline is approaching. They put up their directors. Its not too far away. Is there any sense, david, of how the exiting shareholders of ual are feeling about this . Do they feel these guys are speaking for them or just lets wait and see . Listen, the parr guys have significant experience in the airline industry. People criticized the lack of Airline Experience on the board, but the board changed dramatically before they came. They said that was in part because of the pressure they were putting on the board. They do have more experience on the board. Theyve been picketed by the pilots wednesday. Guys are carrying signs outside in front of your office, maybe that also sort of sends a message. Without a doubt. The unions have not been in support of parr and altimeter. Well see where things end up. Judging from the calendar, you may see activity there. Virtually every s p 500 leader, the top 20, without exception, are oil related or commodity related. Chesapeake, murphy, transocean, apache and anadarko at the top. Moodys today takes a crack at the worst case hole that banks are in on oil. 9 billion is their figure reported. The banks need to set aside more cash but it could be managed with one more quarters earning s earnings. Thats what people came to believe, this is not a major credit problem for the banking system. Actually whats interesting about the banks today, it looks like theyll be popping 1 because the tenyear treasury yield is giving up some compression it has. Its up 30 basis points above 172. The yield curve is driving what those banks are. On the Energy Credit side, the high yield market is more, i guess, discerning about penal e penalizing issuers who dont have a shot and getting stronger for the rest of the people. David, you ready for next week . Jpmorgan, morgan, wells, b of a. I guess im ready. Well see. You look at the market cap losses this year, and theyre stunning. The likes of Morgan Stanley lost a quarter of its value. If there was ever consolidation to be had in the banking sector, you look at Morgan Stanley and you wonder. Isnt there a big block that the japanese own . Correct. In terms of whats out there, not that big. 167 billion of market cap losses. I tabulated the top six. In your spare time . Yeah. What is the market cap loss in banks . You know why i did it . Basically we didnt have to break up the banks. The market is shrinking the Bank Footprint because of what else is going on in the world. Well, on a week where everyone has been writing about the effect on boutique m a and the fees they will have lost as a result of whats happened. When you lose a deal like pfizer allergan, the fees paid out were enormous. Maker hughes, halliburton, any of these other transactions which may be stopped because of changes in regulations or challenges on antitrust. For the boutiques, they can come to rely on the fees more. Theyve done very well a number of the boutiques. They seem to be the gotoo place. That bottle that theyre providing independent advice aside from giving financing, the big guys say theyre relying on one fee more than we ever would be and therefore they wont give you unbiased advice. So you hear from both sides. We got a number of them publicly, whether its evercore or guggenheim. Yes. Green hill. Thank you. Thats what i was thinking of. Chevron, one of the top dow performers along with amex. Lets get to bob pisani. Energy is dominating. Discussions on whats going on in oil is dominating the trading desk. We have some interesting action going on right here in our backyard. Energy, you dont see you get my attention when a sector is up more than 1. 5 . Thats an unusual move. I look at statistics, you often see energy, materials, industrials up a half point, three quarter the of a point. When youre up 1. 5 , thats well outside the normal trading patterns. Materials also strong today and industrials. The big discussions this morning are whats going on in crude. We had a couple moves up on the overnight session in crude, about an hour and a half ago a lot of people speculating on what might be going on. There was a leak reported in the keystone pipeline, that may be a factor here in some of this. You get oldfashioned Short Covering. The broader tends are important. The dollar has been weaker. We had a lot of supply constraints. Weve been talking about that recount. We report on it every friday. It was 362 last week. We had 1600 rigs in october of 2014. The rig count that been decimated. The backlog of oil supply has been slowly declining. Demand relatively stable. Everybody likes to dismiss opec as a toothless tiger, its gotten attention about discussing the possibility of a production freeze. The meeting is april 17th. Thats close now. Were talking ten days away for that meeting. Theres possible movers for oil. You can see what this is doing to the big oil companies. These are hard to move on more than a 1 basis on a day. So chevron up 1. 5 . Thats significant. You get more moves if you go out to the exploration and production names, murphy, continental resources, devon, anadarko, apache, some of these are high beta names in general. 4 moves, thats bit outside the norm on a strong day. So you also look at some of the drillers, transocean, ensco, noble, not quite as big as the move on exploration and production. The emphases is on the e p spaces with oil moving to the upside. Talking about earnings, going into earnings next week. The one thing i would emphasize is Everybody Knows earnings will be crummy down 9 . The risk is to the upside, i think. The bar is set low. The weak dollar has been going on for more than a month. And you may have companies commenting that the dollar trend may be a bit more favorable. So, i think you should be careful, everybody should be careful about saying were down four quarters in a row on earnings there for the stock market will have a terrible time of it. We dont know that. We may be very surprised in some cases by what well hear from some of these companies. Just remember, we have not necessarily a correlation between poor earnings and the stock market. There should be, and i dont think its a good sign that were down four quarters in a row. It doesnt necessarily translate into a decline in the stock market. Very eager to hear the comment tear. The dow up 110 points. Guys, back to you. Thank you very much, bob pisani. Lets head to the bond pits, Rick Santelli joins us from the cme group in chicago. Happy friday, rick. Yes. Never met a friday i didnt like. Everybody is talking about not only the nostalgic side but the factual potential side of the exfed chair persons getting together. Down here, when traders were talking about that, i found it interesting. One trader said the mantra is theyll ease or do qe before they raise again. To hear december wasnt a mistake, maybe when im behind closed doors thats more of a, hey, normalization is a necessary routinement we will never know. But i find it interesting that the nonmistake issue was underscored. Looking at a twoday of tenyear, yes, yields are moving up a bit. But its a down yield week. The maturity down the most is the 30year bond. Down a half dozen basis points now. One week chart of bunds, fascinating. We continue to knock on the door, get close to the alltime low yield will it happen . We have a bit of time before the next set of meetings. The ecb, fed, and probably thats the target for the type of activity well see, trying to guess if theres going to be more liquidity, forget the fact that many of us are still handicapping why we need more liquidity at this point. We talk about the yen a lot. But the pound versus the dollar is fascinating. Wow. Look at a one week of the pound versus the dollar. 142. 25, now 141. Eightyear chart might spell it out better. These are extremes in many currency markets, especially on the macro. We do have to get to the yen. Not many weeks when you can look at a yen when it started out close to 112 and ended up testing 108. The yen actually is lower today against the dollar. Carl, back to you. Rick, talk to you soon. You heard art cashin earlier saying the main story today is the price of oil. Jackie deangelis is at tthere. More than a 5 move on oil in the session so far. When it seems like prices were settling down and traders were getting more comfortable with the prices in oil, volatility returned. That says uncertainty is there in the marketplace. Todays move is based on more positive of a read on the data in the United States and out of germany. But also buy the dip mentality. Technicals have been driving this trade, especially in times of uncertainty. Still in the same range outlined, 37 plus or minus five. Thats where we stay. This afternoon rig counts come out. Everyone will be watching those. They probably will decline again. The rigs have been decimated here in the United States. Finally were starting to see some evidence of it in terms of production. Were just a hair over that 9 million barrel a day mark. Next week potentially we could tick under that. That would be key for crude oil production. We peaked last june. For the week, were on track for a 7 gain. Back to you. Jackie deangelis, thank you very much. The Financial Sector taking it on the chin. The sector still down 8 for the year. Well get numbers from jpmorgan, b of a, wells and citi. Well look at those banks ahead of earnings after a break. Every year, the amount of data your enterprise uses goes up. Smart devices are up. Cloud is up. Analytics is up. Seems like everything is up except your budget. Introducing comcast Business Enterprise solutions. With a different kind of network that delivers the bandwidth you need without the high cost. Because you cant build the business of tomorrow on the network of yesterday. Every Auto Insurance policy has a number. Usiness of tomorrow but not every Insurance Company understands the life behind it. Those who have served our nation have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. Democratic president ial candidate Bernie Sanders has been pushing to break up the big banks. He had more to say about big banks on morning joe this morning. After theyre broken up, thats their decision to reconfigure how to do it. Its not the governments business. Go from there. This is how big you can be. With us now is jason goldberg, barklclays senior analyst. Does this talk from sanders and others have an impact at all . We dont think so. You know, i think theres a lot of value to being big. Theres a need for big banks. Big banks make big loans, big banks serve the community. If you look at the financial crisis since then, theres been drastic improvements to the regulatory construct and the capital and liquidities. Theres a lot less risk today than several years ago. Of course many of us read jamie dimons letter to that effect. As we head into earnings season next week, these stocks have been the worst performer thus far this year, at least the group has. The big caps particularly. Are we set up for bad news being perceived as not so bad . The quarter will be challenging. Between weak Capital Markets environment, energy loans and a more challenging rate backdrop, the tenyear falling, its challenging. We have seen earnings estimates coming down going into the quarter, fullyear estimates come down in the quarter. We think a lot of this bad news will be priced in. If you take the view the u. S. Economy will continue to grow and the fed will continue to hike rates this group is attractive. You mentioned valuations looking good relative to history. I guess the market is obviously struggling with the idea of what the right price to book valuation is to put on this group. Given that we had a credit cycle, the peak returns for the big banks not that great. How do you feel investors are viewing valuations now . We dont expect the group to get back to two times plus tangible book that the group traded at precrisis. We do think overtime, as banks continue to adapt to the new regulatory environment, continued to adjust their Business Models and benefit from higher Interest Rates, you will see r. O. E. S trend higher. At the same time, tangible book is growing and is expected to do so. Jason, finally, jamie dimon made this point yesterday, these stocks, other than maybe wells fargo, none have outpaced the s p for a long time. Is that ever going to change . Eventually. Theres been a ton of regulations in the industry. A ton of increase and capital liquidity requirements. Were at the point in the cycle where we think were done getting new rules, new regulations. Once banks figure out the game theyre playing, theyll be able to adapt more fully. Were certainly closer to the end of that process today than a couple years ago. Once thats known, once we get to a more normalized environment, these Business Models will put up good returns again. All right. That day may come. Im not sure ill be here to see it jason, thank you. When we come back, ceo pay falling in 2015. The biggest declines since the financial crisis. Well get that report after a break. Came in. Shes about to arrive. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Diversity isnt just important for your financial portfolio. Its also important for your life. Celebrating, welcoming, and surrounding yourself with people of all kinds is an investment in both you and your community, and were all the richer for it. Great time for a shiny floor wax, no . Is an investment in both you and your community, not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Ceo pay falling in 2015 according to a new report. Mary thompson has more on that. Good morning. Top executives pay decline 3. 8 from 2014 according to a revufr review of the proxies. Before anyone thinks this reflects the markets flat performance or the single digit declines in profits and revenue, the report says the lower pay reflects a drop in the value of the ceos pensions. This follows a big 2014 gain linked to an adjustment for longer life spans. This is why median pay for executives fell to 10. 8 million, the largest decline of 3. 8 since the financial crisis. The 10. 8 number is the second highest since 2007. The stock component of their pay rose 7 . A number that will change depending on the value of the stock when its cashed in and whether or not the firm hits certain metrics. Cash component rose 2 . So whoer ewho earned the most . The top names on the list, some familiar ones. Starting with philippe dauman, he got a 20 boost, earning 54. 2 million. Even though his total shareholder return tumbled 42 . Oracles larry elslison almost the highest paid, extending that to mark hurd and safra katz. Both getting 53. 2 million. And bob iger who are the ceos among the group of 300 paid the least . Googles larry page and whole foods john mackie. Both of them taking oe ining ho. If only it were just a buck. Wholesale trade data on the other side of this break. Dont go away. The allnew audi a4, with available virtual cockpit. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Parts a and b and want more coverage, guess what . You could apply for a Medicare Supplement Insurance Plan whenever you want. No enrollment window. No waiting to apply. That means now may be a great time to shop for an aarp Medicare Supplement Insurance Plan, insured by unitedhealthcare Insurance Company. Medicare doesnt cover everything. And like all standardized Medicare Supplement Insurance Plans, these help cover some of what medicare doesnt pay. So dont wait. Call now to request your free decision guide. It could help you find the aarp Medicare Supplement plan that works for you. These types of plans have no networks, so you get to choose any doctor who accepts medicare patients. Rates are competitive, and theyre the only plans of their kind endorsed by aarp. Remember these plans let you apply all year round. So call today. Because nows the perfect time to learn more. Go long. Whats going on here . Im val, the orange money retirement squirrel from voya. Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . More of a spokes metaphor. Get organized at voya. Com. Technology moves faster than ever. The allnew audi a4, with apple carplay integration. Good friday morning, welcome back to squawk on the street, im Carl Quintanilla with simon hobbs, sara eisen and david faber. Markets got a bid and it owes it almost to oil, up almost 2. Highest since march 23rd for brent. Breaking news on wholesale trade. Lets get to Rick Santelli. On the inventory side, this is a february number, we are down 0. 5, thats more than double the 0. 2 were looking for. Last month up 0. 3, moves down to 0. 2. Last time we were on minus 0. 5, looks to be around may of 2013. To the wholesalers on the sales side, the sales were down 0. 2 . We were looking for up 0. 2 . The january number lost some horsepower from originally released at minus 1. 3 to down 1. 4. On the sales side, lets consider this when youre down that much, down 1. 9, you have to go quite a ways back. This down 2. 2 gets lost in that. So these numbers are much worse than anticipated. Maybe the thing to pay most attention to, continues to be the fiveyear note yield testing some important support in a mid oneteens. Watch the 113 to 115 yield level. Sara, back to you. Thank you, Rick Santelli. Just days after the treasury announced new rules which broke apart the pfizer allergan deal, former treasury secretary hank paulson was on squawk box saying companies do need to pay their fair share, but also criticized the Treasury Department. Were a nation of laws and rules. You cant change the rules, you shouldnt be changing the rules after the facts and changing them and changing them and changing them again. Shouldnt be changing the rules after the facts, some choice words for jack lew. Well have much more on this inversion debate later in the hour. Earnings season kicks off next week. And expectations are low. Earnings for the s p 500 are expected to decline 7. 9 on last year. That would be the steepest fall in almost seven years. Strip out energy, the aggregate decline is 3. 6 . Jonathan gollub, good morning. Good morning. We get on to the discussion about expectations are so low, therefore do we bounce because we beat expectations, lets understand why analysts have been pulling the bar down. The economy is growing, unemployment or employment is growing. Why are we in this situation . Is it about individual stocks like apple or biotech. A couple of things. At the beginning of the year when the market was falling apart, analysts thought we were heading into recession, they slashed their numbers without looking at the economic data. This is the worst quarter of the entire recovery for downward revisions. Then you look at economic activity, it looks like it didnt justify it. Were seeing so far of the early reporters, theyre beating by 7 which is almost double the longterm average. The same thing happened the First Quarter of last year when you had the market falling apart in january. The numbers got slashed. You had a massive beat. Thats one thing. On your question of apple, really the whole recovery cycle, a huge part of the earnings story has been that apple and biotech have added a third of all of the earnings for s p 500, and that actually is now contracting on a relative basis. Biotech is adding, but less, and apple is showing up with negative growth. People need to take that into account. To complete the snapshot from s p, there are only three of the ten s p sectors expected to show gains, consumer discretionary, telecom and healthcare. Is the assumption thats effectively in the price now . I think it is. I think what people are looking at as we go through earnings season, number one, volatility is down. This riskoff environment is over. Companies will be willing to provide guidance going forward. It doesnt mean theyll say things are great, but a quarter or two ago they were saying theres too much uncertainty. By looking more forward, thats a positive. Bigger beats, and most importantly the latter part of the year will have much better earnings as we cycle through difficult comps. So youre going to have a beat and raise for many ceos through earnings now. I dont know its beat and raise. It will be a beat, forward guidance, and better numbers at the back half of the year. This could actually be a positive response to what really will be a lousy earnings season, but nowhere near as bad as feared. How does a Company Issue guidance when corroda, brexit, an election, june hike maybe are all in the back half . You know, lets be honest, i think well be looking at zero rate policy, you know, overly aggressive Central Banks for probably the remainder of this cycle. The real question from a corporate perspective, if the risk of a recession is off the table, business and you dont see currencies moving wildly and come down a lot, they will have a bit more visibility. Doesnt mean they wont be optimistic about the future, but theyll extend that visibility more than they had been. Jonathan, you hung on to your s p target, the one you lowered just before january, which would imply a 9 gain for the s p from here. Is this earnings recovery going to be good enough to get there . It will almost be good enough. Theres two things we need. You need Interest Rates back over 2 on the tenyear, otherwise theres no way the banks put in a good year. That wont get you over the finish line. You need oil to average over 40 bucks, were just below that now. Theres been a huge move off the bottom. I expect both those things to happen. To be clear, you need somebody to shift the bond market in order to return Bank Earnings to where you think they should be. You need a more hawkish view from the fed to raise the stock market . I think what you need is economic right now, if you look at the economic data, the isms are coming in, back in the low to mid 50s. The jobs reports are good. If we stay on this path, its the market that will push Interest Rates over 2 . The market will drag the fed. They like to be behind the curve. Theyre good at it. Nice to see you. Thank you. Some news at this hour coming out from bmw. Lets get to phil lebeau. Another automaker believes car sharing is the way of the future. Bmw announcing that it is launching what it calls reach now, a Car Share Service that will be started in seattle, actually headquartered in seattle. A bit of a twist here. Theyll be offering a chauffeur service, 370 cars in seattle. Everything from the i3 to the 3 series. Some mini coopers. Then expand it to ten other cities. Heres a bmw board member talking about how this service is different than the other ones out there. We think that offering this Outreach Program is the right way of basically moving forward to a mobility offer, which covers everything the customer might need. That means if you want to drive yourself, you can doe it, but also you can be driven with our cars. How much will this cost people in seattle . 49 cents per minute when you use the vehicle. Then they have a cap in terms of if you take it out over hours. Bmw is not the first automaker to get into the car share business. Not long ago, General Motors launched maven in the ann arbor area. You have mercedes with car to go down in austin, texas. Zip car, of course, leads the car share business. Again, guys, this is another example of an automaker believing car sharing in certain urban markets can succeed. Whats interesting is bmw is launching this in seattle, not long after they shut down their drive now Car Share Program in San Francisco because they couldnt make it work there. Also interesting and worth underlining, this is cars as a service. This is what the break through is, isnt it . Its no longer well sell you ca cars, this is cars as a service. A whole new basis. It is a whole new business. The interesting thing is how much demand is there for people who say i want a car for a bit of time in an urban setting as opposed to having to buy one. Clearly we believe it works in an urban setting. Almost everybody agrees. The question is how much growth is in that industry. Phil, thank you very much. Phil lebeau talking cars this morning. When we come back, some of the biggest names from fed speaking out last night. Yellen, bernanke, greenspan, find out what they had to say about the economy and the markets when squawk on the street returns. Jake reese, day to feel alive jake reese, day to feel alive in new york state, we believe tomorrow starts today. All across the state, the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in buffalo, where the largest solar gigafactory in the western hemisphere will soon energize the world. And in syracuse, where imagination is in production. Let us help grow your companys tomorrow today at business. Ny. Gov fed chair janet yellen participating in a roundtable with three of her predecessors saying the u. S. Economy is not in a bubble. Steve liesman has all the details on that. Yes, there was a lot of substance last night. I also just loved how humanizing it was for all the fed chairmen. It was definitely interesting. It was the first time the three living former and current fed chairs appeared. Yellen was joined by ben bernanke, paul volcker, and alan greenspan. They gave a qualified but generally healthy outlook to the u. S. Economy with yellen rejecting the charge that the u. S. Is in a bubble. We think that its partly transitory influences, namely declining oil prices and the strong dollar that responsible for pulling inflation below the 2 level. Were making progress there as well. This is an economy on a solid course, not a bubble economy. You only hope this doesnt end up in a jeopardy question. Greenspan was plainspoken about how difficult it is for the Federal Reserve to forecast. Monetary policy is very largely economic forecasting. Our ability to forecast is significantly limited. We have to keep the context of what we say in the context of what we know. No one knows that more than greenspan who famously warned about the dangers of irrational exuberance in september of 96 only to see stock market prices surge over 76 the next three years. Bernanke suggested that the subprime numbers wouldnt hurt the economy. Still, heres what bernanke said about the u. S. Economy right now. Domestic u. S. Economy is moving forward. Households are strong, generally speaking. Housing sectors continuing to expand. I dont see a particular reason to think a recession is more likely in 2016 than in 2015 or 2014. All the chairs did agree with global risk. While yellen said rates would be rising, she said it is clear that the fed would be gradual and cautious. If youre interested in this, we have highlights of last nights allstar fed talk right now on cnbc. Com. Didnt you find it refreshing to hear them joking about how embarrassing it was to have all that power and the joke where ben bernanke said it wasnt up to him to unwind what he did. Yellen said ill take care of that. Seriously, i thought the acknowledgement of the politics at play with the fed was an issue that maybe theyre feeling going into the election, and the idea that they just dont act alone all powerful. They answer to a board. They all chimed in there. No. Thats true. There was the one comment i think youre referring to by paul volcker who said we couldnt have done what we did, the huge Interest Rates in the 1980s, we couldnt have done it without the support of the people. A lot of people were unhappy, thats why the fed got that support. Sara, are you dehumanizing yourself in acknowledging that last night you were home watching this . Other people are out there watching the americans, house of cards try american idol. And youre watching fed chairs on the internet. No im proud. Thats fine. Its who i am. Its who you are. I do this for work, sara. You didnt have to be clear. Ien joyed it. I really enjoyed it. Highly entertaining. Dont you have to at some point i hate to break the kumbaya here, but arguably these people have done some Dangerous Things during the course, a lot of people theyre not answerable to anybody as you see from a lot of the criticism on capitol hill at the moment. Surely there has to be balance in there. There are huge dangers in what we have done. We saw that in what greenspan did written on the wall. There are danger theres what yellen has done as well regardless how they might term it. You can take that attitude. Some say despite the mistakes, ultimately the fed has benefited the economy over the long haul. But i think what youre raising is to me an interesting question about whats the proper way for the fed to conduct policy. I dont think you can fault a policymaker for make the best decision with the data that they have. The trouble s as greenspan said, you dont have good data. Its hard to forecast. We know we cant do policy based on the gold price. Thats too inhibiting. We cant do it based on the forecast. Thats too uncertain. How else should we do it . Theres rule basing out there. That has its pitfalls. Theres a good, important debate about how we make policy the best. Theyre aware of the criticism that they get around the policies. That was clear. Of course. Theres a humility in the way they conduct themselves. The problem, steve, there isnt a humility in the actions and the scale of what they and others are doing. Thats my basic point. They have gone far down the rabbit hole, if thats what you mean. They changed the world. Current experimental policies, thats correct. But the economic situations are quite extraordinary. And continue to be. Thank you. Coming up, the Succession Plan at disney coming into question this week as the companys coo and heir apparent to bob iger steps down. Jim stewart of the new york sometimes will join us on set after this break. Wow, that was random. Random . No. Its all about understanding patterns. Like the mail guy at 3 12pm every day or jerry getting dumped every third tuesday. Jerry every third tuesday. We have Pattern Recognition Technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. Td ameritrade. Wont keep you up at night. N know you have insights from professional investment strategists to help set your mind at ease. Know that planning for retirement can be the least of your worries. With the guidance of a pnc investments financial advisor, know you can get help staying on track for the future youve always wanted. I am a technological breakthrough. This morning i read over 4000 articles on leukemia. In less than a second. speaking japanese i can understand euphemisms, idiosyncrasy and complex metaphors. I know every detail of every public Quarterly Report in the last 20 years. And im just getting warmed up. Hello. My name is watson. Together we can outthink the limits of whats possible. Welcome to the cognitive era. Shares of disney slightly higher today after the sudden resignation of thomas staggs, who not long ago was considered the heir apparent. Now with no other obvious candidates to take mr. Igers place as the companys ceo, our next guest says the disney board may have little choice but to beg mr. Iger to stay. Joining us at post nine is cnbc contributor, Pulitzer Prize winning author, New York Times columnist so many other things, too. Thank you very much. I remember disney war your great book. Thank you. I read your column this morning, jim. Knowing what a great reporter you are, i still feel like i dont understand what happened here. Who was it who really pushed iger or the board to say we dont like him and why . Well, the board and iger have not answered that question. Whether privately they have done it, i assume they have. Ive been told by everyone involved it was truly a joint decision. On the other hand, if you look at the disney board, theres no doubt that this is igers board. About half of them have been on here a year or two none of them, it would be standing up and contradicting the ceo. He changed his opinion. He did. Its clear when he spoke to staggs, he said you do not have the boards full confidence and you do not have my full confidence. This is pretty brutal. As i point out today staggs literally saved igers life. Yes. By giving him the heimlich. This doesnt even get you a gracious sendoff. This is a tough world out there. The entertainment industry, theres something about it that ceos dont want to leave. Everybody is saying this is not iger trying to extend his stay. Look at the known facts. Theres no one inside to take over any time soon. Maybe four, five years, but not in the twoyear time span. Floss obvious person outside. I dont know the whole universe of possibilities. Maybe theres some young 45 wonderkin, who knows, millennials in digital can step in, but theres no name that i heard that makes sense. The reality is iger has got to stay. Whether he wants to stay or doesnt, he cant really leave. Can i be clear . He said a brutal thing to his number two, thats purely because its the judgment hes come to. Its not because iger wants to stay on . Iger says he doesnt want to stay on. I think the circumstantial evidence is there that he may want to. That would be one hell of a thing to say to your number two rather than say i would like to stay on, will you stay with me . Im not saying hes lying. I think he genuinely believes that there are flaws. But lets face it, arent there flaws in everyone . Not at disney. If you have been observed for six years in readiness for this job, are you perfect . Is there something you did wrong in six years . Of course there is. An outside candidate may look like a bright, shiny new object, but you have not had the opportunity to see this person. I guarantee you, whoever it is, they have some flaws, too. I will say this from everybody i talked to, my going back years of reporting there, tom staggs may not be perfect, but hes a terrific executive. I know. So is mr. Iger. Iger is great. The fact is that many ceos are also judged in their total tenure of their time as co on how they plan for succession. Absolutely. Hes a pretty buttonupped guy. I wouldnt put him in the same category as annize n izeisner. From a shareholder perspective, if iger wants to stay three years, four years, five years, i wouldnt have a problem with that. Hes done a fantastic job. But youre right. Ultimately his tenure will be measured by whether he finds a great successor. As several people pointed out, the bar has gone up very high. Everybody loves tom staggs. Inside the Company People were devastated by this. Somebody told me he was heart broken, a high level executive. I heard nothing bad about him. Outside, wall street loves him. This is a tough act to replace. Now well venture in speculation, is there a sense he wants to go out on a high . And that whether its shanghai or espn or Something Else we dont know about, is keeping him from being able to do that . I dont think so iger could leave on a tremendous high right now. A rocky year to date. Yes and no. Things could get tougher, too. If youre him and you want to go out on top two years might be what youre looking for. Things are about as good as theyll get. The main cloud is the problem with cable hanging over the big espn espn. Thats not in the control of a disney ceo really. The unbundling phenomenon is affecting all cable companies. It will hit them hard. Look at rest of their businesses. Can you grow a double digit now . How many movies can they make . How many animated films can they make . Ones theyre doing have been hugely successful. I would have never believed he could turn around that animation unit the way he has. He has great creative talent in there. Where is the growth going to come . Thats a big question. Maybe from shanghai disney. Shanghai disney, but where do you build the next theme park . Asia, europe, north america. Where . There are not a lot of places left for theme parks. There are some real challenges there. I think iger in two years will be reaping still good things. Its a good time to go out on a high. Maybe he has plans for the next five years. I want to play a role here, i heard he did. The chairman of marvell, which sold the company to them, not on the board, but significant influence. Have you heard that . Ive heard a lot. Ive heard a lot. Now he doesnt share. Not going goat too teen into the reporting. He is a controversial figure. And i would say i dont think he has a lot of daytoday influence on management decisions at disney. Thats probably good. Okay. Is your next step parsing the names weve heard bandied about . I dont think any of those names will work. Really . Yeah. Ive kind of explored all those things. I dont see it happening. You got another book in you, dont you . I can see it. Does this have a fairytale ending . Lets see, maybe. Maybe iger will pull that out. Aint no fairytales at disney. I just got chills talking to you. That was crazy. Jim stewart from the New York Times. Straight ahead, Business Leaders fighting back against what some are calling an antibusiness sentiment in government and politics. More on that when we come back. . Kind of like grandkids equals free tech support. Oh, look at you, so great to see you none of this works. Come on in. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Good morning. Im sue herera, heres your cnbc news update. Secretary of state john Kerry Holding talks with the iraqi Prime Minister in baghdad after arriving in an unannounced visit. Afterwards he told reporters that Islamic State fighters have not been on the offensive in months. U. S. Said the coalition conducted 26 air strikes in iraq and syria on thursday. Iraq releasing video showing iraqi jet fighters targeting hideouts, vehicles and personnel. Scuffles broke out between migrants and police in a greek refugee camp. More than 11,000 people have been stranded at that camp. Opposition supporters launching tear gas to disrupt the inauguration ceremony for kosovos new president. After the arrests, the ceremony continued. Back over to you. Thank you very much. Were about an hour into trading on friday. Lets see whats moving. American express will be leading the dow followed by boeing, chevron, along with a bunch of oil names leading the s p. Murphy oil at the top of that list. The biggest loser on the s p is gap after that disappointing march sales number, comps down 6. The Company Called the month challenging. Another story were following, democratic president ial candidate bermers with a scath Bernie Sanders with a scathing attack in the wall street journal. Ges ceo striking back yesterday saying were in the business of building real things and generating real growth for a nation that needs it now more than ever. Im proud of all that we do . So whos right . Joining s joining us is former chief economist jared bernstein, and also with us, the president of the American Action forum, doug holtz eakin. The animosity between Corporate America and politicians is higher than its been in a normal campaign trail, not to mention what we saw from the treasury breaking up that 160 billion deal. Why is this . Youre right. You didnt mention the fact that Bernie Sanders went after ge by name suggesting that immelt and his company is hurting the moral fabric of america. I think immelts response was robust, compelling, he has a right to defend himself. He did it well. Lets not miss the point. At the end of jeffs oped he said bernie, youre missing the point. I think jeff is also missing the point. The Bernie Sanders campaign, this is not just a democratic thing, its on the republican side as well, is that the game is rigged against the little guy. When you have a company like ge who pays a fractional tax rate on overseas earnings that offshores 60 of their jobs, its not illegal. Its a typical multinational practice but underscores the problem that all their profits theyre making are not reaching the middle class. Doug, it almost doesnt matter whos right. The problem is that its escalating. With ideas like this out there, pop li populist frustration growing, where does it leave us . Does it leave us vulnerable to other countries like china who are more supportive of their enterprises gaining on competition . No question about it. The rhetoric and the substance of u. S. Policy has been aimed directly against the Business Community and its hurting us and our ability to compete globally. It should be remembered when ge makes a profit and that profit is paid out in dividends, it goes to the same kinds of folks Bernie Sanders is worried about, Pension Plans if theyre a firefighter or policeman. Theres a contribution made directly in the form of livelihoods and the jobs that are created by ge in america, and also for the retirements. I think this is a very unfortunate episode. I beg the question what is it that Bernie Sanders wants a company like ge to do. He focuses on the taxes. Theres never been suggestion that ge violated the tax laws. I agree with that. So the implication is the moral thing for ge is to pay more in taxes. How much more . Were missing here the broader point. Doug is right, ge, to my knowledge, doesnt break the tax law, but they have 1,000 tax lawyers that managed to afford them an effective tax rate of less than 1 in 2014. Now, heres the thing you have to realize. Doug says our companies are not competitive. In fact, our corporate sector particularly our multinationals have been doing great. You know who haenlt been doing great . The middle class. Its the source of this anger. Doug, sanders makes two points here. One is the profit point, the other is the idea that you continually lose jobs in the economy as people shift that employment overseas. If you look at what immelt said, he said we have 125,000 jobs in this country. If you read jack welshs book, in the 1980s, 2530 yea, 30 year they had three times as many jobs. It may have been appropriate for ge to down size in that way, but its also appropriate for Bernie Sanders to point out there may be an issue there. The issue is a Public Policy issue and not a business issue. We dont want to freeze ge in the past. Its an industrial manufacturer. It has to have operations around the globe and its sensible to locate in growing markets. The u. S. Is no longer the Fastest Growing market. Thats what a business has to do to make sure its profitable and can continue to employ the people it does employ in the United States. The Public Policy issue is how do we handle the transitions for those folks who leave the manufacturing jobs and go elsewhere. Thats an important issue that the middle class is mad about. I think doug has hit on the problem there. I appreciate his analysis. What doug is saying, to my ears, is that youve got a set of goals among multinational businesses, of which ge is one, theyre a good and effective one. Then you have a different set of goals among politicians and policymakers who have to be looking on the outlook for the wellbeing of the middle class, for their jobs and incomes. For those folks, outsourcing, paying a 1 effective tax rate is an unfortunate trend. A difficult trend. The thing were talking about here, its the broader point, you raised earlier, the ultimate goals of a Multinational Corporation have been diverging. Thats a real problem. I wonder to put a lid on this could i just comment on that . Yes. One thing thats important to remember, theres a certain amount of fondness and looking back to the past with rosecolored glasses here. We will not replicate the 50s and early 60s when the u. S. Was essentially the monopolist of the global economy. What are we going to do . So what we in that framework, the idea was lets make corporations be the place where we put all our social benefits, pensions, healthcare. Thats not the future. You want the government it is now a Public Policy mandate do you want the government to step up and take the place of what the Multinational Corporation used to be providing for the middle class . Is that where youre going . Well, we have to have better private pension policies, a social safety net thats effective and pro work. Thats the 21st century challenge. Gentlemen, we have to leave it there. Good discussion. Well continue to have it as we continu continue. Thank you. We want to get to sue herera at hq with breaking news out of texas. Yes. Out of san antonio, at Lackland Air Force base, there was an active shooter situation this morning. Deputies responded to that. The fbi is responding to that. That is a look at google earth, thats the Lackland Air Force base. We know of two fatalities. The scene is still active. The sheriff, Public Information officer clarified the shooter is not still active but the scene is still active that happened moments ago. Two fatalities. The fbi is responding as well. Lackland air force base is basically the location for u. S. Air force base military training. It has a Tech Training command component to it as well. This developed about a half hour ago. The sheriffs have responded. We know of two fatalities. Were monitoring the situation, as you look at this live picture outside of the air force base. Carl, back to you. Sue herera, thank you for that. Squawk on the street will be right back. Whoa. Whats going on here . Oh hey allison. Im val, the orange money retirement squirrel from voya. Val from voya . Yeah, val from voya. Quick question, what are voya retirement squirrels doing in my house . Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . No, im more like a metaphor. Okay, a spokesmetaphor. No, im. Youre a spokesmetaphor. Yeah. Ok. See how voya can help you get organized at voya. Com. Gap shares down sharply after a drop in sales. Courtney, dragging down the whole sector. Definitely. Art peck has said the retailer has a year of transition behind it and that hes confident the right strategies are in place for longterm growth but theres clearly a lot of shortterm pain. Its one of the few retailers left reporting monthly comparable sales. Total comps have not been positive since last march. For this march total comparable sales fell 6 . Lower sales means higher inventory. Its no surprise gap is beginning april with higher levels of goods than planned. The biggest weakness remains the Banana Republic brand, which comps plunged 14 . The retailer has admitted the product and the brand hasnt been right for some time when it comes to color, style and fit. But executives say the products quality is improving. Comps have fallen by double digits, 9 out of the last 12 months at Banana Republic. Old navy, the standout brand over the last few years saw comes plunge 6 in march. No global president has been yet named at old navy. The namesake gap brand, comps fell 3 . The retailer says weak traffic was partly to blame. Gap inc. Also runs lululemon, but the company does not break out those results. Gap started to show signs of weakness when art peck took over the ceo job in february of 2015, despite making a number of structural and strategic changes, shares have fallen 42 under pecks leadership. Simon . They should have fought harder to keep him. Courtney, thank you. Dow up 127 points thanks to largely the price of oil. Lets get over to Rick Santelli in chicago for the exchange. Hi, rick. Hi, good morning, simon. Good morning to jim bianco, my guest today. Jim, when i consider japan, i look out and i see a country whose stock market has not done what they thought it would do given the stimulus. They take rates negative, still seems to deteriorate, lets talk japan. You know, japan is an interesting case. They went to negative Interest Rates on january 29th, almost nothing that they expected to happen from it has. Theres currency strengthen, it was to weaken. Markets were supposed to soar, they did for a while but have fallen back. The issue is negative rates. Sidney homer wrote a book we all have a copy. He traced rates back to the egypti egyptians. You will not find negative rates in that book. This is new. We had negative rates here and there, but this is new. Nobody understands it. Nobody knows where go with this. Its confusing everybody right now as far as the meaning and what im supposed to do. Its not confusing the people. The people are buying safes in japan. They cant keep safes in stock. They need bigger mattresses. The 10,000 yen note, their highest currency, theyre producing more of them, because people would rather store currency than get into negative rate. The fed in 2009, they looked at the idea of going to negative rates. They calculated the volume of a 100 bill and the volume of the vaults in the country and figured out the break even was minus 35 basis points. If the funds rate got there, banks would store all the current sis. You store it there versus taking a hit on it somewhere else. The thing about europe, they have a 500 euro note. Nobody has done the study in europe. The break geeven has to be lore but nobody is storing euro notes. Why arent the europeans doing the same thing. Theyre in a state of shock. They are in disbelief they have negative rates. Theyre not sure what theyre supposed to do. Theres an institutional sedentary there that if you said, look, lets clear out vault space and clear pallets of vault notes, they are one of the big issues then when Interest Rates are much higher gold has negative carry. Nowadays though, no interest associated with it makes it the highest instrument around in certain respects. They yielded in the outside world. Thank you very much and were going to go back to the game. Hugh johnston and martha fox out of the u. S. Both named as directors. Theyll be stepping down at the Shareholder Meeting in may. Partnering to strengthen its power and impact. Clearly thats a whole discussion about the challenges facing twitters board which well have in squawk alley, simon. What happens to an Oil Boom Town when Oil Prices Take a hit . Were live from one such town to find out when we come back. Taking control of your health isnt easy. But cigna is there for you. Literally. Just download our free coach by cigna app. For personalized programs from a team of Health Coaches to help you achieve your wellness goals. Cigna. Together, all the way. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Feeling the pinch of the general move lower. Scott is live from new mexico in a town called hobbs which i imagine is very pleasant at this time of year, scott. You should come visit sometime, simon. I should. You would be most welcome here. What youre looking at is something you wouldnt have seen here when oil prices were up above 100 barrel. Those are fracking trucks. Hundreds of trafracking trucks t would have been hard at work when the boom is going on. You see that all around here at lee county town new mexico and if the trucks are idle so are the workers that operate them. Theyre about 7. 5 . And when prices are high, the result in Downton Hobbs is that business is low. And workers and their families have fun to burn. They didnt have the time to spend it. And now they have the time and may not necessarily have the money. Now the good things going on in hobbs is the fact that they were socking money away during the boom they say so actually now they have some money to do some Construction Projects that they couldnt do when construction was so expensive. So that is helping them. The mayor of hobbs says that thats the key when times were good they socked the money away. If you take the excess and put it in the bank and not spend it like you think youre going to have it forever then it does not create a huge issue. Slightly different issue for the state of new mexico where they struggle to balance the 6. 2 billion budget that meant spending cuts. It meant dipping into reserves and there are warnings from forecasts that this is not over yet even though oil prices are coming back up. The good thing is that here its a relatively inexpensive place to produce oil so they can break even at around 40 barrel so were right about there but its not enough to get these trucks back out into the field. At least not just yet. Guys. Interesting story. Thank you very much. Scott reporting for us in hobbs. Ly stick with that town. It will go far, scott. Dont give up on the hobbs. It will go far. Coming up the former best buy ceo explains why tax inversions could help with jobs. Thats ahead, next. This just got interesting. Why pause to take a pill . 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, or adempas for pulmonary hypertension, 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 and a 200 savings card john and kayla are out today but with us for the hour, sarah and mike here at post nine. David faber doing some work. Kara is with us. The executive editor at re code. Well talk to them. A report from goldman sachs. Yesterday or two days ago we got jamie dimons letter as well. This one perhaps not as full of some of the Dramatic Conclusions or at leas