Transcripts For CNBC Squawk On The Street 20170508

Thoughts on apple and the hot investments that he missed. Its a merger monday. Comcast and charter, theyre not merging, dont worry. But they have an announcement. Kate spade and coach, yeah, they are. Plus other deals brewing. And france has decided what the new president means for the u. S. And the global economy. First up though, Warren Buffett sharing his latest views on investing this morning. This is what the oracle had to say to becky earlier this morning on squawk about stock valuations. The most important item over time in valuation is obviously Interest Rates. I mean, if Interest Rates are destined to be at very low levels, not necessarily as low as they are now, but very low compared to the 100 year averages or 50 year averages it makes in i stream of earnings from investments worth more money. Buffett said bonds is a terrible choice relative to stocks. Take a listen to that. Anybody that prefers bonds to stocks is making a big mistake. I have been saying that year after year after year. Now, i dont i wont say that under all circumstances but it is ridiculous in my view for somebody to buy a 30 year bond and some countries 50 year bonds at these rates in preference to buying stocks. Stocks will bounce around a lot more. They can go down 50 . But a 30 year bond can go down 50 too at these rates. Bonds are a terrible choice against stocks. Echoing what he said in the past, that rates are the most important too many in evaluating valuations over time. Not unthinkable they stay low for a long time and he meant about a hundred basis points from wherer right now. For me thats the most important take away. If you sweat all the Interest Rates we have, youll miss the big picture. Dont make a move on france or large gdp or on companies. But i liked you know, they spent more time this weekend talking about things they missed and they were things that were kind of really extraordinary. I think the most important one was google. Because he was doing this huge amount of business with google for geico and he just point blank said you know what . I should have bought it. I wish more managers would come on our show and said i wish i had bought it because i found it so liberating. I mean, he got apple. He talked about by the way the ibm discussion about look, watson may not be commercial yet. I looked at watson, very candid man. He made me feel better about stocks. You come in on monday feeling better, but one of the things that makes me feel good, for instance we have a huge slate of fed speak this week. He basically is saying thats so granular to him. I loved it. I thought it was great. It was great. Listen, berkshires performance over any period of time you want to measure in terms of longer term you cant argue with it. No. He outperforms the s p, unlike a lot of other companies we know in their stock prices. Thats why there are periodic discussions of whether hes lost his touch or whether sectors are too foreign to him. Suspici suspicious of dynamic and high on single payer. For a lot of people, maybe we figure it out like other countries have. Look, hes talked about kaiser permanente, but these guys speak from such massive experience. Theyre very empirical and rationale. They have looked at situations and decided look this is the way it should be. There was a great moment where becky said arent you a republican to munger . He said im a different kind of republican. Just refreshing. The whole way. The whole way. Refreshing. I know this is an aside, but im i think its remarkable that these gentlemen, one who is 93 and one is 86, the mind body connection, when you have that kind of mind, your body stays strong. More cherry coke. My wife said what are you listening to . What are you listening to . Because its 6 00 they came on. You know, one time he mentioned apple. This time it was ibm. He basically said this wasnt a long term view of it. But you have to listen to them because they put everything in perspective. They also make you feel like you know what, owning companies is good. And i dont think yes, they do completely favor index funds. But at the same time, i mean, he just said, look, i saw a lot of kids with their iphone. We can do that too. I think that theres room for individual stocks in a portfolio of index funds which are definitely still the bedrock of what you need. David, you want to do this . Yeah, sure. We mentioned some merger monday. Thankfully we actually got a headline that will make it that. Because sinclair is finally announcing the deal. Been much reported on as a possibility. Its worth 3. 9 billion. Certainly important for sinclair shareholders and tribune shareholders. It includes 35 bucks a share in cash and 0. 23 shares of sinclair class a and it brings together the 42 stations that the tribune owns with sinclair and it creates a power house in terms of television stations. The local stations. Not talking about all the networks although they get some ownership in the food network and things of that nature. There may still need to be divestitures but the reason this can happen is because the ownership restrictions had been relaxed at the fcc in terms of how many stations one can own. Sinclair called it a transformational acquisition that will open up a myriad of opportunities for the company and theyre complementary to the footprint and will create a media platform that of course does include many of the largest markets in the country. So again, a deal in which a brief time it appeared that fox was trying to participate. Got together with black stone. Eventually dropped out and sinclair gets what it had been after. The rule changed in a way that made it so this deal would not have occurred because i know that i looked at next tar and thats another terrific company. They have kind they had kind of maxed out. So i guess its game on. There are more it is game on. It is. Wow. Theres a concrete example of something yes. In terms of what theyll allow. By the way they still may exceed to certain extent some of the restrictions. It may require some divestitures. I havent finished reading the entire press release to see if theres a mention of that at that point. Sinclair may sell in market where currently owned stations such divestitures will be going through the approval process. So theres that, jim. Its not something that could have occurred a year ago. When i had nexstar on, they make a compelling case, local tv its what people watch in the morning, how they vote, they want to watch the commercials. It was a big year, with the election year. I want to remind people not everything is facebook. Thats for sure. Sinclair was already the largest owner of local stations in the country and now poised to control a third of them. And coach is acquiring kate spade. 2. 4 billion in cash. Coach says it maplans to mainta kate as a separate brand. Premium is based on a price last december prior to all of this speculation starting. Terrific buy. Coach had a magnificent quarter. Its a very energized company thats gone back to its roots in terms of how it works. Its got great clothes. We cant just think of it as a Handbag Company anymore. They made some acquisitions. This is another good deal. Take out another competitor. Kate went through ups and downs since the end of december when we learned about the idea that its for sale and might be sold. You get the earnings per share not an insignificant multiple looking at the comps. I mean, coach trades at 16. 6 times. And berlusconiurberry is around the time. I know people are upset because they saw where the stock was. It was too high for what is basically an industry that is really hurting. And thats one of the things that i find about coach, the accessory business. Remember these are places they sell their own stores but they are theyre in the mall. So i think kate people should be pretty glad. Its being done as a tender offer and it can close pretty quickly. Not an enormous deal although, you know, almost 3 billion. Its an important deal because i have been waiting for the consolidation of the companies that sell into the Department Stores. This is first one. They have been all very laggard. Matthew boss has a piece out in jpmorgan saying you think that capacity is really coming out. It will be a 30 year bleed. Theres 3,064 stores that closed this year and thats almost nothing. So you need to have the companies merge. I keep hoping that the f corps will do something. Well get to nordstrom and macys and kohls along with a bunch of media names. The French Election came out as elected, macron beat he opinion. 66 of the vote. The polls had him up by about 24. Le pen had promised to pull france out of the eu if she won. People may wonder if theres not more of a relief rally today, jim. But discussion is about how many seats he can win. Yeah. The French Market had a good week last week. One of the things that i think maybe we get away from this is this this constant worry about whos going to lead the eu. If we talk about italy it will be the same thing. Youre not going to get it was the the dutch election was the high tide of socalled nationalism. I think that the french in the end really there was a lot of commentary. We have had some great from michelle and from wilf. But that last debate was kind f of you know, kind of a shocker to the french people about a lack of knowledge of the country. And i just think that when we think about europe now we should think about it as an area of great growth. Because we keep Getting Better and better numbers out of europe. When are they going to stop easing . A lot of the chatter does it give draghi enough cover to do something serious . There was a great interview that michelle and wilf had. Is there going to be reform . Yes. When is it going to happen . We dont know. At what kind of reforms . Dont put us down. 35 an hour workweek wait a second. It wasnt like trump who called for a massive tax cut. Right . And said no to china. And, you know, it wasnt like that. Well get a lot more on todays movers this morning including this new agreement between comcast and charter. Later on an exclusive with dell founder and ceo michael dell. Get his take on the changing tech landscape. The s p comes off the first record close since march 1st. The dow half a percent away from one of its own. Back in a moment. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at Td Ameritrade. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Our 18 year old wase army in an accident. 98. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family, and we will be with usaa for life. Comcast and Charter Communications confirm that they have a new operational agreement that will involve the two Companies Working together on Wireless Communications plans over the course of a year or even more and across much of the country. A key part of the plan as weal calls for them to only Work Together with regard to National Network operators and its got as you might expect a number of the Wireless Companies in that sector chatting this morning, wondering what it may mean. It may not come to much. If you want to go back to the mid 90s i remember a partnership between pack tell and nynex that was put together by what were then the old phone companies if you recall to compete with cellular one. What ended up happening . They ended up buying each other. Not much more than that. And thats one take away for some investors to say maybe this is leading comcast to potentially think about trying to buy charter one day . Although regulatory wise, hard to imagine thats something that would be allowed. What it will allow, well, you get access to the network overall. You get the buying power of the two companies together to allow them to get hand sets at a lower price. So there are some efficiencies there. And you do preclude them from doing anything to buy a sprint or a tmobile separately. Now, some this morning i have spoken to seem to think does it mean they want to get together to buy one of the companies . That to me is sort of the fanciful thoughts of people who have Nothing Better to do. When was the last time you saw a 60 plus billion dollar deal by two separate companies for one company, it just doesnt happen. This is more about trying to see what they can do in terms of wireless and their own mobile virtual agreements they already have in place. Getting some handset agreements perhaps. Then seeing if they want to come together under one brand. That would be important for a wireless a wireless offering. Right now, separate brands. Well, john measure in the Conference Call at tmobile point blank attacked comcast, Parent Company of our company. Its a store business, they dont have the scale and you see tmobile ticking up and you see sprint coming back. The tmobile quarter was excellent. People say, look, you do need the stores, you do need that scale. The Tower Companies last week, american tower, sba, those were on fire. As people continue to say that these unlimited plans are really, really causing a slowdown for everybody. So its a lot more capacity is needed because they have so much stuff swamping the networks in terms of theyre swamped. I find my comcast wifi faster than if i use my verizon. Apparently the two companies, they talk all the time. And they decided well this is at least something worth giving some thought to. Or moving ahead on for at least a year in terms of not being able to do anything with anybody else. David dont know if it will amount to much. Im not sure if they believe that it will or it wont amount to much, but at least they want to give it a try. Do they really want to actually take a big step into what such an incredibly competitor arena. At t is doing everything it can to diversity away you get hbo with at t. Everybody is being creative about not losing subs although verizon has yet to really emerge with something that would tell me that its going to stem those losses. That was still the big surprise of the quarter, the verizon losses. That becomes a continued question as to what verizon will do. By the way, one thing they want to do is buy this Company Straight path. Oh, my. Straight path, straight up. Its verizon thats this Multinational Telecommunications company that Straight Path refers to in the press releases. 184 a share. This thing started with the 95. 63 deal to sell to at t. Then they went up from there. You know what 184. It was a heavily shortage stock. Really questioning its worth. Well, they were right to question the worth. It was worth four times. Investors expected at t which has three days to respond may come back and try to best verizons latest bid. This is all just spectrum, thats all Straight Path had. They were supposed to build it out but they were doing fake things. Are you serious . Fake cell sites that didnt really work. And the ftc said stop doing that. The only thing that didnt happen by Warren Buffett is that he didnt say i like Straight Path. They covered Everything Else. Thats for sure. Well get you more on what buffett, munger and gates said on squawk. Look at the premarket as we kick off a busy five day week. A lot more squawk on the street in a moment. All right. Were counting down to the opening bell here to start the week. You want to talk a little bit newell in the yeah. Nwl. Now, david, this was a company, my Charitable Trust owns it. It had been a tough ride, why . Because they indicated that things had gotten tough we are the channel. Remember, they sell into the they sell into the targets of the world which have always been pretty terrific places to sell. Until amazon. Well, mike polk got it together. He raised the numbers very big and dividend very big. I think a lot is international, but a lot of it is new products and a lot is getting rid of what jordan, he didnt like. Hes really kind of sold a lot of product. Added to the candles. So many different right. So many different versions had been put together by Martin Franklin and that was the definitive deal for the guys. Now theyre the Largest Consumer Goods Company and they have the best growth. I mention that because we only think about what cpg what companies can do really well here. Im not saying its a takeover target by any means by kraft heinz. But this group has gotten little growth. Mike has more growth than the others. I have him on tonight to explain whether they have the really terrific by the way, sharpie business. They had elmers glue. They got rid of the tool business to Stanley Black decker for a good price. Some say flotsam and jetson, i say look out. The Yankee Candle business that has turn around. One thing theyre doing together is making money, making money for the shoulds. A lot of a lot of people thought hed short this. Amazon, his store would be amazon, but hes apparently figured out the channel. Congratulations. It will be great to hear. Because hes really turned this thing. All right. We have an opening bell coming up right after this. En this bel. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. 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Youre watching cnbcs squawk on the street. Live from the Financial Capital of the world. The opening bell in about 90 seconds. Something for everybody as we kick off the week. Well get fed speak all week long, 83 of the s p have now reported. Got some m a. Got buffett on squawk this morning. Of course the French Election. Oil is trying to respond to this consistent jawboning from opec today. Its incredible because you have thank you, russia, brazil for this. Yeah. The saudis have basically held off the market. But then you have half a Million Barrels coming in from the United States. So its really a bush. Isnt the world picking up, but then you realize that at 50 we have Many Companies that are selling futures. Thats kept a lid on it. So were really in a narrow range but its predictable. The russians and the saudis come out when theres panic at 45. There was an intranight low at 44 on thursday night. I still think it has to be tested. But i will say that those guys, russia and the saudis they do know how to come in at the right moment before you break it down to 40 because the United States is pumping like mad. Mad. The latest report out of reuters, they would extend they would consider extending these cuts for nine months. After that six month announcement back in january. So well watch it closely. Lets get the opening bell. S p at the bottom of your screen. At the big board this morning, it is duff phelps. Celebrating the 30th anniversary of the select income fund. Over at the nasdaq, cavium celebrating the tenth listing anniversary. Micron, an important downgrade today. Everybody wants to get in ahead of what will be a tipping point. The micron they make a lot of flash but theyre principally known as a dram maker. So the stock did not go up. Often thats a sign by some people to say you know what, this is really a price rise too much. Theres been a 46 increase in Capital Spending to try to make more d rams. Typically by asia. When pricing goes up this much there tends to be a crash. When i talked to apple last week, they were really saying that, look, the inside these costs, dram in particular, going to come down big which is going to really expand the Gross Margins for apple. I think that when you read this, you should think two things. One, the Semiconductor Equipment and the dram market are theyre getting less hot. Certainly come down in price. Because of just an overwhelming supply. But the companies that use them, in particular apple. Very big windfall. Dont forget. I know Warren Buffett talked about apple. He was indifferent about whether he was buying it or not. But if you want to see an expansion of Gross Margins, dram prices come down. They buy a lot of them. The other one is evercore resuming tesla. Outperform. Target at 330. Target at 160, the split is on. Well, the tesla Conference Call was one where i mean, i really think you need as i said, you need mind altering drugs. Look, friday night was Cinco De Mayo night at bar san miguel. That would have been a good time to listen to teslas Conference Call. The red queen is the mushrooms. They say that because at one point someone says do you think you can do a million cars in 2020 . He said maybe more. Remember what the doorman said. Yes. The doorman said the model 3 is big. You come through the Conference Call and you say, all right, like what happened this morning when Warren Buffett was talking about amazon. You have to have a tremendous leap of faith. And if you keep your head, you keep your head at the 160 price target. If you have that leap of faith that its a Technology Company and theres really the the bounds are limitless you want to pay these prices. But when you listen to the call, you have to understand that mark fields is saying, listen, things are autonomous cars. When you listen to tesla anything you ask, anything you ask it gives you more. So its like you could say, hey, is it nice out . Super nice u. Its super nice. I did want to get to some other m a news. Akzo nobel saying no thank you to ppg. The third time they have done that. And perhaps the final time that at least these two companies are going to have a civil back and forth. Although things are already getting a bit testy. As they have been. Ppgs response to the rejection from that akzo nobel is getting particularly yeah. Getting nasty there. Hostile. Thats the real question. Will they choose to become hostile under of course the laws of the netherlands where akzo nobel is incorporated. That will be a key. There is a shticking. That will enable akzo nobel to in many ways certainly defuse what might be a hostile front for ppg but not entirely. You can go through the round about of them replacing the board and its not worth getting into right now. P pg though goes through some of the scenario and says, listen, we wanted to talk to you after april 24th when we made our last offer. We made another attempt to talk to you on may 4th. Then you told us on may 5th, you want to talk, get to rotterdam on may 6th at 3 00 and well talk to you which they did for 90 minutes and nothing came of it and they rejected them and of course ppg said were very disappointed in that. We continue to believe the proposal that we have is vast vastly it provides more to the shareholders than splitting the companies that akzo nobel to spin the chemicals. It would be a fabulous deal because you had Sherwin Williams merge with valspar. The paint difference its a duopoly. They could go into home depot and say, listen, the game the games changed. You do need scale when you go up against home depot and lowes. This would be a fabulous deal for ppg but remember this is no longer a chuck bunchs ppg. I would think he never did anything hostile. Mr. Mcgarry is saying we need this. I dont know if he gets it, ppg has been going higher and higher in part because people think he will get. Hugh grant is their lead independent one from monsanto who sold the company. Its worth watching because ppg, it has been a fantastic stock since they started this. If they get encouragement from the Shareholder Base theyre probably going to keep going at it. But again a lot of potential impediments of them being able to successfully see through. Theres some debate around that because it does get into the intricacies of takeover law there and the presence of the shticking. Masco is up, kitchen and brand, fortune brands is fantastic. The best is Stanley Black decker. They bought craftsman up. Bought the tool business from newell. Anything at home depot it sells at home depot has been terrific. Elliott a large shareholder and akzo pushing them into talks. They filed a small its a small company. Take a look at it though. You seem to know it. It was incredible. You know every company that i missed a bunch of quarters. I have to tell you everybody who i know who owns arconic has gotten a call from elliott and arconic. Thats been very heated. My Charitable Trust owns arconic. I think that the i have to tell you that the elliott slate is stronger. Strong slate. Strong slate. Wow. You have turned. Yes, i have because you see they fired klaus kleinfeld. I noticed that. Klaus is out. When klaus was out, who was the visionary who should have gotten credit for the split, and Patricia Russo is the chairperson and i remember her from lucent. One of the things that makes my feel like elliott has more game. Theres mr. Hess from united technologies, retired. A group of people who can come in and great some noise. Dont forget that Warren Buffett owns precision cast marts. Maybe they would be they might buy arconic which has so much of the engine of the actual engine, the ring around the engine for united technologies. So stay tuned on that one. That is very, very heated. As youre talking, guys, s p hits its first record high since march 1st. We got to 2401. Oh. Been a while. Nasdaq has been doing it day after day. But nasdaq is lagging behind. Goldman has a note this morning looking at whether or not nasdaq can continue to outperform s p. They say over 12 months, yeah. Not by a lot. I dont know. Valuation is not out of line with historic. People are quietly saying Better Things about this market. Its overrun a lot of price targets. People kind of couldnt figure it. I know theres a feeling that perhaps when repeal and replace failed the first time the economy slowed. Theres an overall sense that maybe now that its out of the house it can take up Something Else. I feel like the spirits are back. And a lot of that is because the quarters were great. I mean, wow. Quarters were amazing. Especially in information technology. Now looking at 21 year over year Earnings Growth. Yeah. Only telecom is in the red. Alphabet is great. Facebook, the window, they opened to sell some and facebook had a great quarter. Microsoft had a great quarter. Cloud based, just anything cloud based had a great quarter. Did you hear Charlie Munger giving bill gates a hard time about it . That was so funny. Yeah, youre five years late. Well, i know. Munger is hes unique. I mean, the question was, bill, what did you miss at microsoft i wish we were in the phone. I wish we were in the surge. And munger piled on. It was a great moment. You know what just cracked 150 . Apple. Well i thought his comments on apple were kind of listen its the oldest Consumer Product company that hasnt had to cut price. You talk about the price of it and how people love it. Its really interesting. It was liberating to hear him talk about it as being a company that has pricing power. That people love and cant live without. Its a different narrative from the analysts who keep saying, where is it . They dont have a new iteration and its doing great. I dont know how they do that. And the answer is that he said its a Great Company. I know then he compared it to ibm where he said it didnt pan out as a Great Company and the commentary about watson was i felt very double edged. That watson could be great. But the commercials indicate that watson is already great. I think that theres a sense he said watsons good off of a low base. There was a lot of damming with faint praise with ibm and a lot of praise about apple. It was between 6 15 and 6 30. I got it. Thank you. Apple, that is an alltime high in market cap as well. Remember were going back and forth on that in a bit. Because they had reduced the share count even though you had a new all time share price it was kind of the lure of ibm. Incredible return of cap that will apple is able to do. Mr. Buffett talked a lot about the rails by the way. There was a note about warrior coal today. A bunch of guys liked it. Thats steel coal and natural gas we think of oil at 350, a lot of utilities switched to coal which is particularly good for burlington northern. He said the biggest swing in a big story. Why are the rails up . He gave you a good insight into the rails. Natural gas came in a little. That was a great story you want to be in the railroads after you listen to buffett. Pretty amazing story. So lets get to bob pisani on the floor. Good morning. Happy monday, everybody. A mixed market at the open. But europe right now, we are down just fractionally, but remember, we closed at a record high in germany on friday. We close at a multiyear high in france. So you see a mixed market here whats going on. But overall europe has been a great per former year to date. I like at the stoxx 600 which is the s p 500 of europe. I closed at a 20 month high on friday. There you go. Down fractionally today. Lets not quibble, its essentially at a multiyear high and thats because theres strength in europe. If you wonder why its a lot more than just political risk. The earnings have been better and the earnings are rising. Earnings estimates, and we have seen better economic growth. And the ecb is there and we have lower political risk. Thats the icing on the cake, but not the main thing and not the only thing. A lot of people wonder what this have to do with me . A lot of Big Companies get a lot of their revenue from europe. A lot of people point to priceline, but i count to the companies that are 15 of the revenues like hewlettpackard and goldman gets about 21 of its revenues overseas. Amazon, 20 . United technologies, apple gets about 17 . 3m, these are Big Companies that have somewhere around 15 to 25 of their revenues overseas and thats a big tail wind for them in terms of the earnings situation. Here in the United States today, mixed market as you can see overall. Energy still a problem. Even with oil to the upside. Theres not much follow through with energy. Tech has been a fabulous performer. Thats Still Holding in there very well. We had a big discussion in morning meeting about stocks priced to perfection. Well, they are priced to perfection. When you get this kind of perfection its hard to argue with it. Earnings are rising. We have lower risk for geopolitics. The u. S. Economy is improving. The Federal Reserve is essentially neutral on the markets. Everyone believes theres two rate hikes coming. They have done nothing to dissuade that. Thats why im calling it neutral for the fed and tax cuts are in play. You get this kind of perfection its no wonder that World Markets are essentially at new highs so we have the u. S. At an histor histor histor histor historic high right now. Japan helping, 16 month high over there. Thats what happened when you get a global not necessarily synchronous, but Global Economic expansion helping out. Take a look at the United States overall still fantastic here. Were at new highs on the indices. We have modest amounts of in highs. Thats because some key indicators like tech stocks have been dragging these indices forward. So i would like to see more new highs but the advanced declining line is at new highs. More advancing than declining stocks every day for a long time. The volume on the light side. Volatility, ill call it high complacency but im not sure that means that much given the ability of the option markets and how diverse the option market is. The bottom line, yes, stocks are priced to perfection and yes, theres a good reason for that. A lot of perfection. Its about as good as it gets for the markets right now. A lot of reasons that there might be risks out there, including north korea for example. Right now the s p 500 over 2400,the first time. Historic highs. Back to you. Thank you, bob pisani. Lets get to the bond pits and Rick Santelli at the cme group in chicago. Good morning. Carl, as we look towards last fed meeting not the last one, but the one in mid march thats the last time we saw two year note yields in the 133 camp. If you look at the 24 hour of tens, as we start the roll into the time zone the little bit of slippage that carried overnight ended. So yields are now up a basis point everywhere on the short end up a little bit more. You can see what im talking about. But lets stick with more of a macro view. You can see it looks as though were now hang out in the range we hung out in earlier in the year but lets compare it to europe. Especially not only after the French Elections but think italy, think germany. They still have all of this yet to come. Our chart with regard to the two year euro minus 66, big negative there. But it wasnt that long ago it was minus 76. Look at bound, not as much horsepower. The euro versus the dollar getting a lot of pub listy after the macron win. There was a lot built in. And open it up to november 1, you can see we have had lots of action around this 110 area. Many look at it as resistance and looking at the dollar index rebounding a third of a cent. Maybe theres some truth to that, at least technically speaking. Carl, david, jim, back to you. All right. Rick santelli. When we come back, vanguard founder jack vogel will join us later on as to what Warren Buffett is aissing about is saying about investing. The s p is now back to 2397. Back in a moment. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Welcome to holiday inn thank you wait, i have something for you making every stay a special stay. Holiday inn, smiles ahead. Whether for big meetings or little getaways, member always save more at holidayinn. Com when this guy got a flat tire in the middle of the night. Hold on dad. Liberty did what . Yeah, Liberty Mutual 24hour roadside assistance helped him to fix his flat so he could get home safely. My dad says our insurance doesnt have that. Dont worry i know what a lug wrench is, dad. Is this a lug wrench . Maybe . You can leave worry behind when liberty stands with you™. Liberty stands with you™. Liberty mutual insurance. Warren buffett speaking this morning to our becky quick from his Berkshire Hathaway annual meeting. Heres what he said talking about missing the boat on google. Charlie actually brought up the fact that we missed it too. Google i should have had some insight into because geico was a heavy user very early on. Here we saw value in something at that time i had no idea what were paying, but we were paying 10 or 11 a click that had no cost of goods sold and wed keep doing it. We could see that. So i should have had more insight into that. To your point earlier, jim, through geico he had a window into the companys business. I think that was one of the periods that he said, listen what an unbelievable insight he had because that cost of goods sold has is always what attracted me to that company. Its really what does it cost . But theres always people who say, listen, now amazon is going to go after them. Theres always someone going after them. In the meantime they have not sat still. They got youtube. They did data center. Theyre way ahead on the autonomous car. My hope is that when intel finishes its merger with mobile, they can make the chips low enough that they can sell into waymo. Waymo and fiat have a great deal so i think that people who want to write off alphabet are not looking at things since ruth porat got there. Nice discussion this morning too about the evolution of the industry to where you do not need capital or capital investments. Its not exxon or ge anymore. You can have a trillion dollar business and not need equity capital. I love the fact they look at the different businesses and then they do the read throughs from the businesses. They dont sit still. Its they have to read through the housing and rails and geico is just incredibly important to get customers online. That was something that people didnt think could happen. Its only now that its dawning on people. It dawned on him very early. Didnt necessarily make him pull the trigger but when you speak to a lot of Consumer Product stores, look, they have on t the they have to be on google. Thats the point of service. They have to be on amazon. The biggest adopter of clorox, unilever is a great adopter of this. They know. But theyre not holding companies, theyre not buying shares of google. Well get to stop trading with jim in a moment. Itll get better. Im at the edward jones office, like sue suggested. Thanks for doing this, dad. So i thought it might be time to talk about a financial strategy. You mean pay him back . Knowing your future is about more than just you. So lets Start Talking about your longterm goals. Multiplied by 14,000 financial advisors, its a big deal. And its how edward jones makes sense of investing. I count on my dell small for tech advice. With one phone call, i get products that suit my needs and i get back to business. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. What are you doing . Getting your quarter back. Fountains dont earn interest, david. You know i work at ally. I was being romantic. You know what i find romantic . A robust annual percentage yield thats what i find romantic. This is literally throwing your money away. I think its over there. That way . Yeah, a little further up. What year was that quarter . What year is that one . 98 thats the one. You got it nothing stops us from doing right by our customers. Ally. Do it right. Lets get out of that water. It is time for cramer and stop trading. You see apple going up. And Warren Buffett alluded to the idea that they dont have something theyll have something later. The iphone 8 is getting a lot of talk about as is samsung. People buy universal display, that is supposed to be in everything. Theres a 10 short position. These guys are fantastic. This is light emitting diodes and sky works is doing well. Broadcom is doing well. This is the one that everyone seized on as being the next generation and i have to tell you i wouldnt get in front of the juggernaut. Forget it, a Great Company. Its been held down for a long time. Its got the right product and be theyre pretty amazing. You have been resolute. They yeah, theyre not scientists, not hype artists, but theyre scientists and engineers. Because theyre not in Silicon Valley doesnt mean theyre not smart. Who do you have on tonight . I have newell, the power of brands and michael polk people jareden had some brands, hes getting rid of some of that stuff. Ski stuff. See you later. You want consistent growth. And rubbermaid containers we use them don stantsly. I was at stu leonards and i think youd rather die than go to stu leonards. Its really terrific. Ill take you there. Youll be flabbergasted and youll never shop again. I went once. It was fun. Well see you tonight. 6 00 p. M. Eastern time. When we come back, vanguards jack bogle on Warren Buffett and the markets record run and an exclusive with dell founder and ceo, michael dell. Jon fortts got that when we return. Approaching medicare eligibility . You may think you can put off checking out your Medicare Options until youre sixtyfive, but now is a good time to get the ball rolling. Keep in mind, medicare only covers about eighty percent of part b medical costs. The rest is up to you. Thats where aarp Medicare Supplement insurance plans insured by Unitedhealthcare Insurance Company come in. Like all standardized Medicare Supplement insurance plans, they could help pay some of what medicare doesnt, saving you in outofpocket medical costs. Youve learned that taking informed steps along the way really makes a difference later. Thats what it means to go long™. Call now and request this free decision guide. Its full of information on medicare and the range of aarp Medicare Supplement plans to choose from based on your needs and budget. All plans like these let you choose any doctor or hospital that accepts medicare patients, and there are no network restrictions. Unitedhealthcare Insurance Company has over thirty Years Experience and the commitment to roll along with you, keeping you on course. So call now and discover how an aarp Medicare Supplement plan could go long™ for you. These are the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Plus, nine out of ten plan members surveyed say they would recommend their plan to a friend. Remember, medicare doesnt cover everything. The rest is up to you. Call now, request your free decision guide and start gathering the information you need to help you keep rolling with confidence. Go long™. Good monday morning. Welcome back to squawk on the street. Im Carl Quintanilla here with sara eisen and david faber. Markets off the initial high of the mornings, a busy morning and week as we Pay Attention to that buffett said this morning on squawk, the French Election. Plenty of fed speak and m a. Our road map begins with Warren Buffett speaking out. His warning to investors. Thoughts on the economy. The united scandal and more. Well bring you all the highlights from omaha. Busy day for deals. Comcast and charter announcing a partnership. Coach buying kate spade. We have all the details. Macron wins, the political outsider defeating Marine Le Pen and we have reaction from paris straight ahead. First up, after a busy weekend in omaha, Warren Buffett joined our becky quick for a threehour special this morning. Becky has some highlights from their conversation. You can essentially go anywhere because you guys covered a lot today. We did. The three of them happened to have a very deep and a very broad series of interests and expertise. We dug into a lot of different issues but one of the big topics that we touched on today was health care. Its not only important for consumers but for businesses. In fact, buffett says when it comes right down to it for american business, Getting Health Care right may be even more important than getting taxes right. Probably hear more from Business Leaders about corporate taxes. Being causing them to buy with one hand tied behind their back in terms of foreign competition. Corporate taxes as a gdp have gone down to 2 so they have been cut in half as a percentage of gdp, but health care has gone from 5 of gdp to 17 of gdp. And business pays a lot of the health care costs. Of course, getting the Health Care System right, how you do that, well, that depends on who you ask. There are all kinds of opinions on how to do it. The house passed the bill last week that went through about how to change obamacare. How to change the american Health Care System. Buffett had some thoughts on that as well. He said when it comes right down to it, that bill that the house passed does one thing for sure. It makes guys like him a lot better off. Im 600,000 better off because of what happened this week. Now it has to go through the senate and other things. But it was huge what they did on cutting taxes for the rich in this i mean, theres one clear cut message that comes out of that bill it is were going to cut the hell out of income taxes for the rich on investment income. Now, bill gates was here as well and he pointed out that when you look at the health care problem, there are two very distint problems. The first is trying to figure out how to bend the cost curve, the costs that have been spiraling rapidly. Its now 17 of gdp as buffett pointed out. And you have to get some control of that. Gates said the other issue is figuring out how to pay for it and thats where you get the tax issues, who will pay for what. Charlie munger was here as well. Charlie came out with a pretty radical idea. He happens to be the chairman of Good Samaritan hospital in los angeles, so he has experience on hands on issues of how health care and how hospitals are dealing with these issues. He thinks we should go to the universal Health Care System. Basically, medicare for everyone. And if you want to buy out of that, opt out of that, you have the money to do it, you could go ahead and do that. I pointed out hes a republican and that doesnt sound like a very republican idea. His quote back was, im an unusual republican. Carl, ill send it back to you. I thought that was a good moment, becky, its issarah. I know you talked about the stocks, but it was interesting to hear him talk about some of the bad behavior with wells fargo, with united. Were wondering is he going to sell a stake like he did with ibm. Sort of backed up the investment. What was your take on how he answered those questions . Well, i think he kind of looked through it. His point with wells fargo, they have made some pretty serious changes. I quoted back his own comments from the solomon brothers if you lose a shred of reputation for the official ill be ruthless. How come you werent ruthless when it comes to wells fargo, because he didnt weigh in publicly on any of the issues. He said, look, if youre the ceo who lost his job, then you probably felt it head on. He pointed out that wells fargo has made some changes as a result and he said, look, youre probably not going to see any big problems coming up there because theyre so strict and so concerned about this and so on the forefront of the issues. When it comes to united he said he never spoke with oscar munoz ever, even before or after the united issues with david dao, the passenger being dragged off the plane. He didnt know if munoz had seen the clip before he made the kind of tone deaf response that came out afterwards where he was defending his employees. He understood why youd defend your employees. He said thats every chief executives response. And he also said look, youre going to have issues like this and that somewhere in Berkshire Hathaways empire that are employees doing things wrong all the time, all you can do is make sure you fix things and move on. He didnt sound like he had lost faith in either of those two investments, sara. Becky, well come back to you for more as long as you stay sitting upright after a long weekend. Becky quick in omaha. Thanks. The market rs are digesting comments from buffett over the weekend. Lets bring in david wolf and back here at post 9, Alexandra Lavin that will. Buffett said on the markets at large that the stocks are cheap. Are rates are to be at these levels for five years he said hes having trouble finding opportunity to put his 95 billion to work. Is that code for stocks are expensive . Yeah, i think so. Its interesting that, you know, one of the worlds greatest investors is sitting on 95 billion in cash. And hes lamented over the past couple of years that hes having a hard time putting that money to work. That was my big take away from the meeting actually, carl, i think buffett what he did a good job of giving us his evolving thinking as how tough it is to put this money to work and how he may have to change some of his classic margin of safety precepts in order to put that money to work. Meaning what . Going further into tech or Something Else . I think the field is wide open. When he talk z about he doesnt want to come back in a couple of years and have 150 billion in cash and that in ten years they may have 400 billion in cash. Given, if he didnt put anything to work. I think theres a chance that berkshire could look very, very difficult five to ten years from now. He could do four 100 billion deals, he could do three 150 billion deals or maybe the composition doesnt change hardly a bit but hebeis in he buys in a huge amount of stock. That means going to more fair value which is 1. 5 to 1. 6. Im sure he doesnt want to do that. But his hand is being forced as we speak and i thought his remarks on how that is informing him was really insightful this weekend and then he talked about that this with becky this morning. You have been looking at the Portfolio Holdings and in your notes it says we have to see how good he is at selling for a classic buy hold investor. What did you mean about that . He said the stock doesnt know what price you bought it at and hes certainly made some changes by selling ibm and he was a 9 holder of ibm altogether. So i think hes in addition to that cash thats there, he looks at what he has, how he can take advantage of that and then have more cash to invest. It was interesting to hear how he talked about some regrets. Missed google and amazon. And around technology. I wonder what the take away is. I think adding on to the further comments in how Berkshire Hathaway might change and look over the next five to ten years i think the comments about google and apple were very telling. That they were a sign that you know maybe i need to look at new industries and look at things in different ways so i dont miss that the next time around. Yeah. The comments i mean both on google and amazon this idea that its very tough psychologically to pay 10 x when you could have bought it at 1 x. If he was forced to do it, he would do it, but hard to get your head into that place. It is. Going back to that, the stock doesnt know what price you bought it at. It could be more than 10 x. Thats the thing about the market. You know, my grandmother used to say, you can never judge Interest Rates, you have to buy when you have the money. I think to a certain extent obviously Warren Buffett is much more sophisticated than my grandmother was back in the days of selling Municipal Bonds but thats always the case. You have to look at where the value is today. He did say its not unthinkable that rates stay this low for a while. And by low, he meant maybe 100 basis points higher than where we are right now. Does that make sense . I think that makes sense. I mean, we still arent seeing gdp going up by any measure that would suggest that theres a need to increase rates faster than they already are. I think well see the next two increases over the year. I dont see Interest Rates going significantly higher than that. David, on that gdp point, buffett sort of gave us this is a constant buffett theme but a reminder he doesnt make Investment Decisions around gdp numbers and elections when referencing the French Election. Seems like a good lesson for investors that get caught up in the short term numbers. Yeah. I agree. Hes the classic long Term Investor and he also, you know, kind of took a little rewind in history about how much he would have missed if he had been focused on Economic News that he doesnt have an edge or in terms of politics. I think thats a very big lesson. A very important lesson for investors. I think maybe even in terms of amplifying that lesson when he talks about the efficacy of investing in index funds. For those who say im going to invest in the invest fund, i wont try to pick stocks im going to go live my life and wont worry about it, thats another way of saying that, thats buying whole. Thats not worrying about all the daily vicissitudes of the news and the changing stock market environment. That has proven to be a good thing. I guess. I wonder how many investors that are making up the market right now invest like that to buy and hold and dont Pay Attention to some of the big near term risks like the French Election was for the future of the euro. I think your point is right on. When the markets are in the ninth year of a bull market everybody is a long Term Investor. Lets have a 20 correction. Lets have a 30 correction. Lets have another typical bear market. I think the long term horizons will for the most part for too many investors will evaporate very quickly. I think your point is spot on. Finally, im looking at the bshares of buffett. Lagging the s p by about 600 basis points this year. Is that people are uncertain about his prowess as a seller as opposed to being a buyer . I dont thinks true. Going bag to the go back to the comment before, think of how many elections hes been through. Hes been through a lot, he wont look at where his returns are right now, versus the s p but taking that longer term view. I dont think so. Good to see you both. Thanks. Coming up on the show, it is a big deal for big day for deals. Straight path getting a new offer from the mystery bidder and coach buying kate spade. Warren buffett kicked off the Shareholder Meeting with some high praise for jack bogle. The vanguard founder will be joining us straight ahead. The shows about to start how do i look . Like a bald penguin. [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Welcome back. A wealth of telecom and media related stories to get through this morning. Lets start with a partnership announced between comcast, the owner of our network right here, and charter this morning to explore efficiencies to enter the wireless market. Remember, both companies have these mobile Virtual Network agreements already in place with verizon, which allows them to resell verizon spectrum as their own service. Comcast has already started to roll that out. Now theyre going to be partnering with charter to roll out in their regions the wireless offering of their choice. Why getting together . Well, it may help them in terms of efficiencies in buying handsets. It may also help them in terms of network access. And you might see at some point a combination of the two companies into one brand in a wireless offering. But thats not where they are right now. Now, as for how investors are taking it this morning theyre saying, okay, that kind of makes sense to me. But why this one year provision that doesnt allow them to do anything with any other mobile Network Operator . That will at least keep comcast from bay at considering something. It doesnt stop verizon from attempting to buy charter, but charters price may simply be too high for verizon. At least where it would want to sell for verizon to really consider. As for tmobile and sprint, we continue to look at the two companies and wonder whether theyre going to try to engage in as ceo claure indicated last week, some talk about a linkup. At this point, comcast and charter going to explore working together to build out their own wireless offerings and gain efficiencies in doing so. Does it actually pave the way for comcast to potentially look at buying charter some day . They may want to. But you have to remember we do have a department of justice in this country. By the way, thats the case for anything between sprint and tmobile. You have to wonder if the doj even in the Trump Administration would allow it. You can own more stations and sinclair announced the deal to buy tribune this morning. It will bring together tribunes 33 stations with what sinclair has, make the largest Single National owner of local broadcast stations. That being sinclair. It will have significant power in many of the areas. Why . Well because the fcc has lifted the ownership caps and restrictions although sinclair is saying it does expect it has to divest at least a few of the stations that it will be gaining here. As you can see, both Companies Responding positivity to this deal this morning. Even though it had been well telegraphed. It did represent what was it, fairly significant premium on tribunes price before we got talk. 26 before we got talk of this potential deal. Finally, speaking of stocks that have done well since deal talk began, Straight Path which really owns spectrum, but spectrum is very valuable for either at t or perhaps even more importantly verizon. As it seeks to build out its 5g capabilities and that is why verizon came in to top what was originally a 95 bid from at t. Or i should say deal from at t to buy the company. Then came back again after at t raised. 184 is where we are right now, but investors expect that at t is going to respond yet again. Sending Straight Path shares up to 217. Well above the 184 deal. Verizon is not saying its not then, but its them as everybody has speculated in terms of who the other bidder is. At t will have some Big Decisions to make, sara, as this thing eclipses or roughly approaches 3 billion. This stock was trading in the 30s not long ago. A lot of the stories are intertwined. One note i wanted to bring up does the Charter Comcast partnership make it less likely that verizon would go after charter . Do they have to back off now . That verizon oh to buy. No, it doesnt affect it in that sense. They dont have to stay away at all . That means charter cant do anything, but it doesnt stop verizon. Charter and the key shareholder they would want 450. Its hard to imagine that verizon would be able to do something without massively changing its balance sheet. This industry is going to be fascinating to watch over the next few months. Separately, many investors are breathing a sigh of relief today after centrist Emmanuel Macron beat Marine Le Pen by a wide margin. Winning the race to become frances next president. Our Michelle Carusocabrera joins us from paris. That was certainly a macron strong hold. Well, theyre celebrating but theyre also protesting. We have live pictures where protesters have come out because theyre against the policies of the winner of yesterdays election, Emmanuel Macron. We understand theyre going to march to the place. The headline number, you have 66 of the vote, versus 34 for le pen, but there are another set of firms that you should know. Which speak to the widespread discontent actually. Turnout was the lowest for an election in 40 years. And of the people who actually decided to go to the polls, almost 10 of those people voted what they called blank. They didnt vote for either one of the candidates. That means that macron received 20 million of a possibly 47 million votes and thats only 43 . Thats hardly a mandate. Why are they unhappy . I had at least two different voters yesterday tell me macron is too free market. Why . Because he wants to reduce the strict labor laws that are here in france. He wants to pare back regulation and he wants to simplify taxes and pensions. Thats not very popular in france which still has a large socialist group of people. As for whats next for Marine Le Pen, shes going to reform and rename the party, going to try to win more seats. And shes also somebody who is politically active and considered to be very popular. Were showing you the live pictures, you can see the riot miss police are out. Theyre not surprised there would be antimacron protesters. Remember, there were 11 candidates in the first round and almost 50 of the voters went for the antieu candidates so you can see why theyre not happy. Thats a big part of the conversation as we move into this next chapter. Michelle, good to have you there. Michelle carusocabrera in paris. When we return, coach buying kate spade for 2. 4 billion in cash. Well talk to the president and ceo of the American Apparel and Footwear Association about what that means. Stocks in a pretty tight range after losing the initial highs. The dow is down 24. This is my headquarters. This is where i trade and manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. I did active duty 11 years. My in july of 98. And two in the reserves. Our 18 year old was in an accident. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. It actually helped to know that somebody else cared and wanted make sure that i was okay. That was really great. Were the rivera family, and we will be with usaa for life. Usaa. We know what it means to serve. Call today to talk about your insurance needs. More deal news to tell you about. This one in retail today. Coach announcing it is buying kate spade for 18. 50 per share in cash. The total value of the deal 2. 4 billion. Coach says it will be able to save about 50 million in costs. Their operational efficiencies within three years, guys, analysts like this deal. They dont see it as a surprise. Been a Long Time Coming and rumored since that was leaked back at christmastime. The idea here is that coach may be up for becoming more like a european luxury giant where theyre more conglomerate status. Analysts say its a good thing because its less reliant on the own name sake bag. Things can be trendy in the handbag market. Coach came off a strong quarter. Its resonating with consumers and reinvented itself. Kate spade interestingly has a strong Consumer Base in handbags. And in clothing. It just couldnt get the Public Company thing right. It had trouble expanding internally. Thats something that coach has presence in. So analysts like this. I mean, they look at this very positively, david. I know youre looking at the valuation as well. Well, the valuation was fairly high in terms of earnings per share. Even 8. 5 times ebitda in terms of street estimates. The market likes it. It will be accretive and double digit accretive in 50 million in synergies, but the real barometer is the performance of the stock price of coach. Which clearly is saying hey, we like it. Yeah. Has done better and is doing well today. For more on retail, lets bring Rick Helfenbein into the conversation, president and ceo of the American Apparel association. Will we see more deals like this . I think youll see more deals like this. I think this deal is beyond brilliant. I know david is looking at the valuations. I like at the shoppers, the millennials. You know 90 of millennials use their phones to either shop or price compare today. And kate spade has a huge millennial following. I think putting a truly classic and brilliant brand like coach attached to a kate spade, one of the smartest moves i have seen in a long time. Im very excited about this. Do you think that coach can model itself after some of the european luxury giants where they take on a number of different Luxury Brands . I think thats probably their long term plan. I wouldnt be surprised. They want to expand beyond their core customer. And their core customer is liking their product right now. You can go back in our retail history to when like Tommy Hilfiger challenged polo. Then you look, you know, at all of the things that you can do to add customers and i think michael kors challenging coach was a wakeup call. Coach is on fire, their new designer is brilliant. They have selena gomez too. Selena gomez. They have a lot going for them. This is a good deal. Although citi had a note out last week, they said in terms of whether or not coach you can call it a turn around. If we put the turn around label on companies that shrink sales by 30 plus, net income down 50 from the peaks, wed be labelling many more as turn around stories. Is this more a matter of managing really low expectations . No, its not managing expectations at all. Its understanding the retail environment. Retail environment as you know is changing rapidly. We have had 14 bankruptcies so far this year and there are probably two more sitting in the i think with us so you have to be able to figure out how to adjust to your new customer and your new customer is 18 to 34yearold millennial who has their own ideas how to shop. Whats particularly interesting right now what are they shopping . What are they spending money on . Themselves. You know, you look at resorts and spas theyre all on an uptick you try to book a cruise right now, hard to get tickets. This is very interesting. And then you look at like the jobs markets. You guys were talking about it on friday. Largest increase, travel and leisure. Handbag sales up 20 in the last year. So handbag actually i think was luggage sales so people are traveling. People are spending money on themselves. Theyre also increasingly buying online. In fact, Warren Buffett this morning was talking to becky about the changing retail environment and the big elephant in the room which is amazon. Listen. How come you dont buy shares of amazon . Stupidity. I would i was impressed with jeff early. I never thought he could pull off what he did. Whats really i mean, i thought he could pull off something but on the scale thats happened. Its changed your behavior, you know, its changed everybody in the offices behavior. And the remarkable thing about jeff and Everything Else is hes a hes done two industries almost see mull us toly that dont have much connection. Its been a narrative and theme, were headed into the Department Store earnings this week. Is that present again . Each Department Store is learning how to adjust to the market and look at the mall landscape in america. And a number of years ago we had 1,500 malls. We have about 1,100 today. Probably shrink down to 1,000. We have way too much retail space. A lot of paring is going on. But people are spending money. You have to figure out how to attract that customer. Look at the millennials, they stopped using their feet to go to the mall but they shop from their hands. People have to understand that and relate to that. Why go to the mall when you can bring to mall to you . Thats been going on. But the reverse of that is very interesting. Amazon is opening up a store in washington. They have opened in manhattan. So youll see retail go on. Retail will thrive. But people have to fully understand whos buying. What does that mean for the Department Stores and as we head into this another period of earnings, when are we going to see the bottom . The bottom is coming, but its a question of adjustment and of timing. Smart retailers are adjusting as fast as they can. But the problem is they cant move as fast as the internet moves. Brick and mortar moves a lot slower, but there will be a time when all of these things will morph together and well be in a new shopping environment. People will get it. People will understand. People will adjust. I thought it was interesting with Warren Buffett, you know, when you get into these discussions about trade when he talked about road kill on saturday. And what he was really trying to say, you know, Berkshire Hathaways named after two textile companies. Beckshire was from new bedford and hathaway from massachusetts. He understands road kill better than anybody else and his point was you have to educate people for the new opportunities that come along. You cant stop what runs in front of the truck on the road. Just have to adjust and people have to change. People have to learn. A lot going on. Its happening in retail. As we speak. Sure is. Thank you. Good to check in with you. Rick helfenbein from the American Apparel and Footwear Association. Lets get a news update with sue herera. Good morning. Defense secretary jim mattis enrived in copenhagen and he said that the u. S. Will look at russias plan to create several safe zones in syria. We have to look at it the devil is always in the details, right . So we have to look at the details to see if we can work them out. See if we think theyll be effective. Can we actually execute them . Pyongyang university releasing a statement on the recent detention of an american citizen saying the arrest of kim haksong was not connected with the work of the university. North korea says kim was detained on saturday. Former acting attorney general sally yates who was fired by trump will testify this afternoon. She is expected to tell the senate panel she strongly warned the white house about Michael Flynns contacts with the Russian Ambassador to the u. S. Weeks before flynn was fired. Thats the news update this hour. You are up to date. Carl, back to you. Sue herera, thank you very much. When we return, Warren Buffett sending a warning saying this investment is a big mistake. Anybody that prefers bonds today to the stocks is making a big mistake. Ed i have been saying that year after year and year and stocks will bounce around a lot more and they can go down 50 , but a 30 year bond can go down too. Bonds are a terrible choice against stocks. Well talk to legendary investor, vanguard founder, jack bogle in a moment. The power of the nasdaq market. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. Whether its connecting one of or bringing wifi to 65,000 fans. Campuses. Businesses count on communication, and communication counts on centurylink. U. S. Markets largely flat after both the nasdaq and the s p hit some record intraday highs this morning. Berkshire ceo Warren Buffett warning on squawk that buying bonds over stocks is a big mistake. Buffett telling shareholders this weekend that our next guest has quote probably done more for the average investor than any man in the country. Joining us this morning, vanguard founder and former ceo, jack bogle. Jack, what a nice contribute over the weekend and we would be doubly remiss if we did not wish you a happy birthday today. So happy 88th. Thank you, carl. When warren announces it to the world, a lot of people find out. He called you a hero, man. I mean, how do you take that . Well, i mean, to be called a hero by a hero gives it more credibility than being called a hero by a nonhero. But i already written him a letter this morning of thanks. Im not a hero. Im an ordinary guy who gave a damn about the people who were investing. I wanted to make sure they had a fair shake. If thats heroism, well, so be it. Yeah. But it was wonderful to be out there. You had a lot of occasion to talk over the weekend about say the level of indexing and at what point that gets dangerous after a week in which thats been a big part of the market conversation. You say what . 75 and have it not become dangerous but dangerous in what sense you said . Well, what happens is people only understand this, carl. What indexing does is neutralize a large part of the stock market. Theres no trading in the stocks, so if the i believe dexing as it is indexing is short of 25 , if the market were neutralized at 50 , well, turnover in the market is around 250 . So it would theoretically and simplestcally put take it down to 125 . Thats a huge turnover. When i came into the business it was 25 a year. So nobody knows how these things will fit together. But i think indexing can grow an awful lot more before it makes the market and takes any kind of efficiency out of the market. And what people dont underst d understand, carl, its so funny. They say well if the market gets inefficient, it will be a lot easier to make money. For active managers. Well sure, it will. But it will be a lot easier to lose to the market because there has to be people on both sides of the equation. Theyre trading with each other. Its so simple. So its not going to change the world. Indexing is here to stay. And you know i feel very good about starting the ball rolling all those years ago and continuing to preach it all these years later. 44 years later. Jack, people took note of the comments because theres such a massive rush particularly into etfs. Im wondering what you say to those who worry that we havent gone through a financial crisis or any type of shock a large rise in Interest Rates for instance during this period when so many more individual investors are in etfs. How thats going to play out. Well, etfs are different from what i call tifs, traditional index funds. The s p 500 being the classic example of what i started way back in 1975. That was an instrument designed to be bought and held forever. Its the antithesis of trading as the early ads said. Now you can trade the s p 500 all day long in realtime. And my reaction to that was what kind of a nut would want to do that . So there was a lot of trading going on in etfs. And some of the less liquid seconds. You have heard about the gold section. Something going on in the high yield bond section and its the trading and the microscopic division of the market in the tiny parts that will cause trouble if it comes to the etfs. I dont look at the traditional funds being threatened. Theyre total international, total bond market. Those are the dominant forms of investment for the traditional funds like ours. Thats where the money is going mostly. The fact of the matter is that in the last 15 months, last year and a quarter, we have taken in its kind of frightening. 400 billion and the entire Mutual Fund Industry has taken in 350. Which means everybody else has had a negative cash flow together of 50 trillion 50 billion. Jack, you had some thoughts on long term annual returns in the years to come. Versus the ones we have had in recent years. And for both stocks and bonds, doesnt sound like you see a heyday in the near feature or even our medium term future. No, its going to change the dynamics of how people invest, i think. The reality is since 1982, the s p 500 has given us a 12 annual return. And that means you made 60 times on your money. Thats just the magic of compounding without any costs. And so thats so people are looking at that number and afraid, thinking it will happen again. I want wont happen again. And its easy to tell you why and thats we started that period with about a 5. 5 or 6 dividend yield. Today the dividend yield is 2 . We ran through the period with a 5. 5 Earnings Growth. I dont know what it will be in the coming decade lets say, but i think 4 or 5 would be pretty good. Finally we started with the Market Selling at nine times earnings and by my count using my accounting standards, Gaap Earnings of earnings already in the bag past earnings the market is selling 24 times. So it cant go to 48. I dont think. And the dividend yield is what you get when you buy in today. No argument about that. You can argue about whether Earnings Growth is better than 4 or 5 or less. Its not a very profitable argument because nobody knows but that would give you a combined return, counting the negative the reduction in the p e and the lower dividend yield of probably 4 a year. So the you take 2 out to get from nominal returns to real youre at 2. You take 2 for the average mutual funds cost and you g get well not very much. Wont do the math. But im just thinking back to your friend Warren Buffetts comment on the market valuation. He looked at it relative to Interest Rates and says if theyre still going to remain very low, then that still bodes well for stocks even at record highs. I guess, jack, you have to put that into perspective as well when looking at the dividend yield which pretty much matches up with the ten year treasury note yield right now. Warren buffett is Warren Buffett and he invests for the long term. He doesnt have any requirements, you know, when he retires i think hell do okay without having a big cash position. I dont think hell retire any more than i will. But im looking forward to going on his board when im 90 which he promised me out of the meeting. But the reality is that with bond yields about lets say 3 overall. And stock returns at about 4, i think short term and i mean a combination of short term bonds and intermediate term bonds im with warren. Thats a judgment on my part, but youll probably get out of the bond market a 3 return over the next decade. It could be 4 in the stock market. So i dont look at having a bond position after the typical investor who when that day comes well have a couple of good market declines in the period. Next decade, we always have, we always will. And the bonds give you more comfort. A little better ability to stay the course. And not panic and so for someone whos typical like our balanced index fund, 60 s p 500, 40 Corporate Bond index. I think thats going to be a fine investment. Its always good to have a chance to look parted down the farther down the road with you, jack. I hope you celebrated your birthday in style. In my style, quiet. It will be a family thing. We had a party at vanguard and for everybody who has been here more than 25 years and there must have been five people in the room. Thats to me we dont like road kill here any better than Warren Buffett does. Well talk to you soon. Great to see you. Great to be with you all. Happy birthday, jack. When we come back, Warren Buffett is United Airlines largest shareholder. Find out what he had to say about the pr nightmare after the passenger was dragged off one of the planes. The dow is down 11 points. Apple leading the dow right now. Hey gary, whatd you got here . This bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. Switch and you could save 509 on auto insurance. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Heres a question. When ceos visit the white house do the shareholders get richer . An academic looked at this question and well present his findingsed a tradingnation. Cnbc. Com. More squawk on the street coming up. Its too time to get to rick at the cme group for the santelli exchange. Take it away, rick. Thanks, david. Id like to welcome my first guest of the week, jim bianco. Everybody was up late watching the cubs lose. It just ended a few minutes ago. And you found something important for the markets . The yankees have been a Team Associated with high payroll, older free agents. The cubs won for the first time in 108 years. The cubs win undervalued assets. Kris bryant paid 1 million a year. The yankees are winning. The best record in baseball. What does this have to do with the markets . The market is expensive. The market is old. Buying this market now is like paying 25 million for a free agent and sometimes like what the yankees, it works. It seems to be working right now. Youre rewriting an old ox yum. Buy low, sell high. According to to jim, now its buy high, sell higher. Can it work . Proof in the pudding . History shows over long periods of time if you pay up for assets, it usually doesnt work, but it is working now, and it has been working in the cycle. Largely driven by some of the fundamentals. Earnings yeah. Let me stop you right there. You could argue what happened in november, which candidate was put into that move, the candidate that didnt get elected, but theres little doubt. This earnings season can validate that. Absolutely. Earnings season, people were whispering we might get 10 Earnings Growth. Were getting 15 . Its been a huge baseball analo analogy, upper deck home room with earnings. The optimism that people have seen, at least in one heard data place, its showing up in earnings. Thats supporting the expense i old market. What isnt going along and seems a little bit out of phase are treasury yields. We see that big move from basically the 170s that ultimately went to 263 in tens. Here it sets. 237. Thats ten base points higher than it was not that long ago. Many experts say two more tightenings this weir. If i cipher, that means a target range of 225 to 250. Higher than the tenyear is now. Is that likely . Probably not. An inverted yield curve, but everybody is betting on rates going up. So theyre thinking that the tenyear is going to be much higher than yield when theyre overnight rate is where the tenyear is, but it doesnt seem to be playing along with the earnings season move, does it . No. The stock and bonds move have been decoupling. Every human being on the planet, everybody is positioned for a 3 rate. Less so in the last couple of weeks. But the vast majority of people, the vast majority of opinions are rates are going to 3 . Thats not even a forecast. Its a fact. And thats why the treasury markets has had a hard time going higher. Theres no more sellers. The sellers have already sold and theyre waiting for the higher yields. Youre basically seeing beware and monitor the lower end of 2. 16 range. Yes, before the end of the summer. Jim, thank you. David faber, back to you. Thank you very much. From chicago to right here at the lets look at whats coming up. We have an exclusive interview with michael dell as hes getting ready to take the stage. He has an announcement. Hes trying to shake up the cloud world when it comes to the economics of it. All that coming up on squawk alley. Stocks are taking a pause, sitting at record highs for the s p and the nasdaq. The green sectors, energy and consumer discretionary. Everybody else in the red. Squawk on the street will be right back. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. Im dominic chew. Check out whats happening in real estate. That sector the worst performing sector overall. Keep an eye on it as we watch the markets trying to go toward record highs. Thats it for this hour of squawk on the street. Now over to the gang on squawk alley. Good morning. Its 10 00 a. M. 11 00 a. M. On wall street. And squawk alley is live