Transcripts For CNBC Squawk Box 20170509

1st. Is that what the date was . The fear gauge hitting the lowest level in more than two decades. The volatility index closing yesterday at 9. 77, the lowest level since december of 1993. I cant imagine thats not a place where you would buy. Though normal stocks that hit new lows what do they do . Hit more new lows. Stocks that hit new highs, hit more new highs. It can only go 9 more lower. Yeah. This only happened five times ever. Having always thought in a contrarian way that complacency and when people get participants get bullish, you worry. Call ratios, you worry. Percentage of investment services. If its that complacent i admit, okay, its not going to be le pen, but the world at this point, theres nothing that were not thinking about that could happen that could throw us for a little bit . It scares me. The flip side is if premiums are so low, you can buy insurance and remain long or replace your stock with calls. There are different ways to use this to your advantage to remain long in the markets. One electromagnetic pulse from north korea that shuts down an entire grid that is your fear. Thats a binary issue. Because once that happens a lot of bad things happen. If the world ends, it doesnt matter if youre in cash. Doesnt matter if youre hedged n cash, all that out the window. Well tell you whether people are hedged or what theyre doing. Overnight in asia, the nikkei down. The hang seng is up. A little over 1 . European equities, 48 hours after the macron victory in france, cac up, dax up, ftse 100 up, and the italian ftse as well. The big stories were watching today. Shares of hertz down sharply. The car renting company reporting a loss of 1. 81 this qua 1. 61, far more than the 81 cents expected. That stock down 17 1 2 percent in premarket trade. Shares of hertz plunged 88 since 2014. Express scripts will start offering cheaper drugs for unsuinsured customers. They will offer a lower rate for a select group of frequently used drugs to those without insurance or those stuck in plans with high deductibles. And target is taking the fight to amazon prime and walmart. They will test a next Day Home Delivery Service called target restock in minneapolis. Target says Household Essentials like laundry detergent and coffee will be packaged at a nearby store allowing the delivery the next day. Amc entertainment topping street expectations. Admissions revenues surging more than 69 in the latest quarter. The company saw a big increase in food and beverage revenues. Shares of marriott getting a pop after beating on the top and bottom lines. The Worlds Largest hotel chain reported a nearly 67 rise in quarterly profit as more people booked rooms at higher rates. Pandora reporting a smaller than expected loss in its latest quarter but guidance was weak. Shares trading higher as the streaming Company Announced a 150 Million Investment from kkr and a boardroom shakeup as it gears up for a potential sale. A couple things on the agenda. At 10 00, the job openings and Labor Turnover survey along with wholesale trade data. Three fed speakers, regional president s neel kashkari, Eric Rosengren rosengren and rob kaplan. Lots of earnings on tap. Discovery communications, liberty media, dean foods and valeant all report before the opening bell. Well bring you that news as it crosses the tape. After the close, electronic arts, news corp. , tripadvisor and dow component disney. We will get comments from bob iger. Dont miss it. An exclusive interview or a cnbc first interview with bob iger, thats at 4 10 eastern time on closing bell. Joining us is ed keon from qma, and jurian timmer. Knowing both of you as i do, and im not sure that technicals necessarily are pairment in either of your view. I guess what the vix is indicating, that is a positive in the French Elections, positive earnings, things like that. You would probably be part of the camp that says this is good stuff. You dont need to look at, you know a gift horse in the mouth, take it for what its worth. Weve become more cautious over the last month or two. Because of the complacency . Not necessarily directly because of that, but i think there are first, valuations have gotten to the point where we have gotten nervous. Not horribly high but nervous. There are some signs that maybe the Economic Growth might be slowing at the margins. Even though earnings have been terrific, much better than expected. Weve been trying to be more cautious. When you see ill get right to you did you strain something. Do you need an ice pack. Youll see. Its just age. When you see a headline, investor anxiety drops to a 25year low, does that make you think this is a this is a usa today or business week death of equities or Something Like that . You generally do not want to be aggressively buying when the public is complacent. So thats not directly playing in our thesis, but its reason for caution. You see that through the upper valuations. So its reason to be, i think, more cautious than to be more exuberant. The election in france did not fix the senates fear about Obamacare Repeal. Didnt make tax reform score any better on a revenue neutral none of these things help here necessarily. Nothing has changed here in our prospects either. Has it . No but its one more piece from the wall of worry thats been removed, if you will. I thought you liked to build pieces of the wall of worry for the market to climb. If the wall of worry is going away, this is the sort of the i think the outcome from the French Election has more to do as europe as a region to invest in ive been bullish on europe to the u. S. Because its lagging behind. I think because youre from there. Does that color your my dutch pride . Yes. Do you ski . No, i grew up in aruba. Anything else going on over there other than speed skating . Soccer. Soccer. A bit of soccer. Okay. So when i was eluding to fundamental types, you look at these things as positive. You dont look at them as instilling too much complacency, things are good in your view . If you see the low vix as a sentiment measure, sentiment is an ab tribute of priattribute o. If something comes along to shake up the apple cart, well have a problem. In the absence of a catalyst the vix is like credit spreads. Normal is slow, then you get occasional shocks. The question is what will create the shock. This is abnormally low. Does that concern you . Weve said this, this only happened fivetimes in the vix history where weve been in single digits. Single digits are the norm, and then the spikes are the abnormal. Certainly since last february, a year ago, when the global cycle bottomed, we had investors getting bang for the buck. If you look at the return of the s p versus normal vol, you usually get 10 of return for 14 vol. Over the last 12 months we got 17 return for less than 10 vol. So this is about as good as it will get. Certainly investors should expect at some point to see some more volatility. Even with the French Election, the vix went to 18, but the s p only fell about 2 , 2. 5 . It doesnt necessarily mean prices go down when the vix goes up. Why do why did you say earnings were so much better than you expected . You missed that. I went to work at ibis for a long time. The fact they beat consensus was not surprising, the fact they beat growth. I think corporate earnings are good. But theres a warning sign that reminds me of the late the 090. If you look at the gdp, that number has been flat. Youre seeing a divergence between the s p 500 and the broader sample taken for the nippa products. That happened in the late 90s it was a warning that trouble for the markets ahead. That compared with some other things, tightening of credit standards, auto sales off their peak, it doesnt mean things are terrible but just little warning signs that we could see a downturn in the economy. Were not priced for that. Were not priced for a soft patch. I think theres a possibility even though i think the Second Quarter will bounce back, theres a possibility that growth this year will be sub 2 and that were not really breaking out of that soft range weve been in for several years. Just by you saying that suddenly stocks have gotten less cheap, even though earnings were way above what you thought, we were at 21,000 on the dow before we knew the earnings. If the earnings came in better than expected, the market didnt get more expensive t got che, i cheaper the last return was based on the beat in earnings. So now thats in the price again. So earnings are still quite high, but also prices. The vulnerabilities that things will get worse is heightened by the fact that is already reflected in prices. Joe, if you think of it this way, after the election the pe based on trailing current earnings jumped from about 18 1 2 to 21. The market was pricing in an earnings rebound. Which happened. Q1 earnings are growing, 14 year over year. Thats against easy comps, last year q1 was the cycle bottom. Even if you take calendar year numbers, you apply the usual drift, we should end up at about 126 at the end of the year, an 8 gain from last year. Thats about the normal 6 , 7 gain. But the challenge for the market is it has to grow into its new valuation. 21 times trailing is too high. So the pe has to come down as earnings grow. And then price goes up less than earnings. I think thats where the risk is that the market priced in a nice outcome. Now it has to actually grow into that. I think the market will end the year from here, maybe a couple, 3 higher. Which is good. Im not bearish. When you think about expected return of a couple percent over eight months with the historical volatility of stocks, it doesnt look attractive. We also rotated towards europe. And were just fairly cautious in our equity allocations now. Good number on friday. So i guess the fed is back on track. You saw buffett yesterday, andrew, said the most important thing to think about are yields. In ten years. Thats the one thing, if you knew rates would stay low, you would stay lock. Th stay long. Maybe the fed is important again. Fed is always important. You know what irritated me. He said im getting a hell of a tax cut with this Obamacare Repeal. Yep. Does that mean when obamacare was passed, it was a hell of a tax increase . Yep. Thats all this is is reversing what was done to the wealthy when this very unpopular bill was passed. So i didnt hear anyone saying this is a hell of a tax increase on the rich. Now im hearing just by getting rid of obamacare shg its, itsf a tax cut for him. The most unbelievability thiloe not as unpopular as you described. I saw yesterday, heritage came out saying it was just as unpopular as it has ever been. Heritage. Of course. They went into they looked at a cnbc poll that asked a certain question quoting breitbart. When you take an entitlement away, its going to increase. Its also understood. Understood. Andrew whe where are we going with this . Most of the added people covered are medicaid. So when healthy, working age people are suddenly covered by medicare, if thats the way you want to go, thats fine. But thats really what it is. Increasing the number of people that are in that entitlement. Maybe as a society we want to do that now. Thats the question. But one thing that got me yesterday i kind of missed it did buffett say his entire tax bill was 4 million last year . I think thats what he eluded to. I didnt pay 4 million. But were in the realm i think my net worth versus 60 billion. He is right. He is undertaxed or structured everything in his life in a way to totally avoid paying taxes. Thats staggering to me. Hes giving it all away. I know he is eventually. Not eventually, but 40 is given away. Thats also his choice to direct his philanthropy where he directs it. He says i would rather choose than the government do it. Which you told me you like. You applaud. Hes just no, but to always talk about you want to keep the money in the market, right . Yes. Private market rather than the government hands. But hes very pro higher taxes. He is. Would be easy for him if he felt this strongly about things, just write a check for 100 milt on. Why . Thats a silly argument. 60 billion. Why give it to the government when you can distribute it yourself to charity. Because hes always lecturing about tax rates being i dont want to speak for warren, he would engage in a conversation with you about a wealth tax. He would. I dont know that. I think he might engage with it because he knows it will never happen. 20 wealth tax may make sense for people over 10 billion. Now youre confiscating profits . No but for someone made in the Free Enterprise system . For someone who all wants to raise taxes on everybody else and who paz no tys no taxes its not that he pays no taxes basically pays no taxes. He made his money in the stock market. I know how he has done it. I know how he sets it up. If he was spending it, that would be a different story. Hes a very frugal man. Something you identify with. I do. Any way. Ed, jurrien, thank you. Lets get to washington for the top political story. Eamon javers has more. We had sally yates testifying yesterday on capitol hill. It was the first time for Many Americans to hear the voice of the former acting attorney general. Remember, she was fired by the Trump Administration shortly after they came to power. She was an Obama Administration hold over. She was on capitol hill yesterday testify being some of the intrigues surrounding former Trump National security adviser Michael Flynn and his intera interactions with russian officials. Sally yates testified she had a conversation shortly after donald trump was sworn in with don mcgann, the white house c counsel for trump, and she raised concerns that she felt flynn was lying to the Vice President. We began our meeting telling him that there had been press accounts, statements from Vice President and others, that related conduct that mr. Flynn had been involved in that we knew not to be the truth. But more than the question of lying and what was the truth and what was not the truth, yates said to don mcgann that was she concerned about potential of compromise with the russians. That is if he had not been telling the truth inside the white house the russians would know that and could potentially use it against him. Heres how she explained that piece of it. Compromise was certainly the number one concern. And the russians can use compromise material, information, in a variety of ways. Sometimes overtly, sometimes subtly. Again, our concern was that you have a very sensitive position, like the National Security adviser, you dont want that person to be in a position where again the russians have leverage over him. In many ways this was a tale of two hearing hearings. For democrats, the focus was on the 18day gap between that meeting and when general flynn was ultimately fired by the Trump White House avenfter deta leaked out to the media. Democrats want to know why did it take so long for donald trump to fire him after lying to the president and potentially compromised for the russians. For republicans, the focus was on news media leaks about all of this. How that got into the newspaper. Sally yates and James Clapper were both asked if they had been sources for any of the media information. Both of them said under oath that they had not. This is not the end of this conversation. But a few new details about who knew what when and what they did about that. All right. Thank you. Coming up, when we return, were going whale watching. Some big investors at the sohn conference revealing some big investment ideas from tesla to teletubbies. On power lunch today, wilfred frost will be sitting down with lloyd blankfein. Blankfein. Blankfein. Hey. Pass please. Im here to fix the elevator. Nothings wrong with the elevator. Right. But you want to fix it. Right. So who sent you . New guy. What new guy . Watson. My analysis of sensor and Maintenance Data indicates elevator 3 will malfunction in 2 days. There you go. You still need a pass. 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. A used car,g this information. Read it carefully. If you want to stay on top of your health, one simple thing to do is take the pledge to go and get screened for the cancers that might affect you. So stand up to cancer and take the pledge at getscreenednow. Org it only takes a minute to take care of yourself, and nothing rhymes with org. Welcome back to squawk box. The sohn Investment Conference providing ideas from real estate plays to tesla. Leslie picker was there. She has some highlights. The sohn kicked off with the bulls. Century link and its merger with level 3 was touted. Chamath palihapitiya urged investors to buy convertible bonds in tesla and to participate in the upside in case elon musk is the next thomas edison. Debra fein brought up tel teletubbies as her next play. Much of the audience was looking for a big pick from ackman, but he opted instead to talk about Howard Hughes corporation, which he owned for years. Cliff robbins talked about Investors Bank corp. But there were bears there. David ireinhorn said he was shorting. Gundlach createded an account at twitter, and he has already over 1,000 followers. What would you say the big takeaway . What was everyone buzzing around in the hallways about afterwards . People were surprised by the number of tech picks and tech long picks that there were. You look at the s p 500, the nasdaq, just consistently going higher. You have these smart Hedge Fund Managers who say here are specific opportunities that we think can still go higher from here. All right. Well have chamath on in a bit. He was on yesterday in the afternoon. Closing bell. Asked about we always talk about ibm. He was asked about watson. He laughed and said watson is a joke. We talked about how there are people in the valley who think watson is like an if then program and a great marketing effort of our time. Well have a conversation about that. I like im not worried about him being ineffectual, im worried about him being manevolent. You are talking about it like its a he. Its watson. I think its a he. Its an it. If im traveling somewhere, and they got me asleep but my life sthey have my essential life things, he can turn them off any time. Once machines is this a gender bias issue . I dont know. I think its peculiar that joe thinks this is a person and you can assign a gender. Hes got a it sounds like a guy. A thinking entity, so therefore its supposed to be a thinking entity, chamath will tell us whether its a thinking entity or no. He might not like the way youre talking about him. Him. If hes good at what he does, im worried. Okay. Thank you. Leslie picker. Thank you. It will take over blackrock, we know that. Coming up, disney set to report after the closing bell. Well find out if cost cutting at espn helped offset subscriber losses. Analyst predictions next. [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 back. Youre watching squawk box live from the Nasdaq Market site in times square. Good morning. Equity futures had turned positive last time we checked. Not in a big way, but s p is up a third of a point. Dow jones up about 12. Nasdaq up just under 2. After all the trading and movement yesterday, i think we had a fivepoint gain on the dow. We are watching shares of apple. The companys market cap briefly topped 8 800 billion after Berkshire Hathaway said they boosted their apple stock to 20 billion. The market share hit 800 billion when it was at a price of 153. 44. Its there again at 800. I think brian white put a price target yesterday of i forget, 206 or something. Which put it at over a trillion. Over a t . Yeah. Amazon preparing to launch an improved echo. The wall street journal reporting the new device features a seveninch touchscreen and a camera for video calling. The announcement could happen as early as today with the new echo going on sale as soon as next month. The new device priced above 200. Separately a new Research Firm says the voice controlled speaker also command more than 70 of the u. S. Shares u. S. Market this year. That puts it far ahead of google home a similar gadget that has a 23. 8 share of the market. The number of active users of voice controlled speakers will more than double this year to more than 35 million. Im shocked by that. 35 Million People have one of these devices in their homes already. Do you have one . We have both. You do . We have a google home and amazon echo. We tried to get them to talk to each other. The fcc says its website was hit by a deliberate denial of Service Attack yesterday after john oliver called on his viewers to flood the fcc website with complaints to save net neutrality. The fcc says hackers not john oliver fans downed the site. Disney set to release Quarterly Results after the bell today. Expected to report profits of 1. 41 a share. Joining us to talk about the profits of disney is the ceo for cfra research. Good morning to you. Great to be here. Thanks for having me. Do you think theyll nail the 141 . I think were right around the consensus expectations. This quarter, i think s going to be tempered by difficult comparisons across the business. I would look to, you know, this back half of the year for the acceleration. Thats where i think the focus should be. Big issue for you is what . Everyone is talking about espn. And for good reason. The data that has come out, in terms of the shift from traditional to nontraditional distribution is sobering. If you look at the pay Tv Subscriber losses this squauqua and also the overthetop gains that were seen, we think that the pay tv industry is somewhat at an inflection point. Obviously espn is exposed. Were getting more cord cutters, so investor are focused on that. If you look beyond that, this is happening at a time where the studio and Consumer Products are kind of reinventing the whole idea of content creation, franchise. Pipeline is robust. So i think theresheadwinds, bu same time things to be excited about. How do you want to hear espn being talked about on the Conference Call . They laid off 100 mostly onair or audience facing people. They said they have to recognize how people are consuming sports content. It seems like a totally different way of viewing espn. Thats right. Its a new paradigm. So i think espn is facing major programming cost pressures. They are trying to mitigate the impact of that. Ratings are down, thats putting pressure on advertising. So investors need some Comfort Level to be able to view espns longterm prospects in a favorable light. The mantra that ig ser taer is about is disrupt or be disrupted. The question is how soon will these overthetop offerings make up for the subscriber losses in the pay tv universe. Thats the biggest challenge theyll try to mitigate. Well have bob iger on cnbc later today after those earnings. Theres always the issue of bob iger himself and his contract. Are we going to hear anything today about that . I think he put that issue to bed. Hes got his contract extended for another year, 2019. I think that buys him a lot of time to look for a wellgroomed or external successor. There somebody out there inside that you know about that you think could do this job tomorrow . Frankly i think at this point in time its hard to put a finger on a leading candidate. Youll have to look outside of the company, which buys them time, as you look to igers extension. Ultimately the succession question now has been pretty much addressed. And investors are shifting their focus elsewhere. Why is 65 even in the bob iger is 66 years old. He probably has about you look at his physical health physically problem 35 years old. Have you seen shatner . Shatner is on a race around the world. Hes 85 years old. He could still be a ceo. Why not give him a fiveyear i would give him another five years. Maybe he doesnt want it. I think maybe he does want it. Probably want it if its a football team. Maybe he will run for office. Theres nothing magical about 65. Youre right. In this day and age its no longer absolutely. I wouldnt be surprised if he kind of has another extension beyond 2019, though the chances of that are slim now. Investors wanted him there as long as possible. Do you think he acquires his successor, acquires a Company Whose ceo then succeeds bob iger . Thats like a netflix . Thats farfetched at this point. I dont think theyll have a successor through acquisition. So you dont think theyll do a major acquisition then . Theyll do acquisition in the couple billion dollar range. We all talk about a netflix transaction. Something that gives them true access to the consumer in a way that they dont have now that creates almost a universal ott platform for all of their content. I wouldnt rule that out. But its hard to visualize how that can come together given the valuations for some of these companies. Thats the problem. The problem is the multiple on netflix and disney are so far off, it doesnt having said that, you can look at the acquisition record that theyve had which is spectacular. Bob likes to talk about, you know, marvel, lucas film, pixar, he gives you a postpicture look at growth, 9 900 billion in box office. Thats as close to low risk in the film business as you can get. How disappointing is it that they do not have an internal successor . To the extent that is part of the job of running a company, of planning to have a successor internally that people feel comfortability with. That was originally the plan. But that got derailed. We all saw what happened to tom staggs. That came as a shock. Every company should have a backup plan. Its nice to say, wellrun companies always do, but a lot of times they dont. No, a lot of times they dont. But to me the ultimate standard for a truly great ceo is somebody who has the who is grooming the successor, no . I think it would be you should never go to a meeting that can start before you get there. I would not want people to think they can replace me as ceo. Heres a quote. I get up at 4 po in t3 hk 3 4 3 morning, no matter where i am in the world. So he does sleep in. He probably works until 6 00 p. M. So he does sleep in. Where can you find someone with that level of experience that can run this conglomerate. Thats part of the challenge. People are waiting to ea potential announcement of a chief operating officer. Theres issues with finding the right candidate. Tuna, thank you. Thank you. Well look for those numbers later. Coming up, the very young i dont know why he cant do 70. 72. He doesnt want tofrmt. I dont think you know that. I dont. Well have sam zell at 7 00 a. M. Plus Venture Capital investor Chamath Palihapitiya will be our special guest for an hour at 8 00 a. M. Yet at the sohn conference he told cnbc that ibms watson is a joke. Which is good. If youre outside the ship and you say let me in, watson, he wont say im afraid i cant do that, and drew. And later, the aflcio with a website that attracts union pay. We will have Richard Trumka. Youre watching squawk box. 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. Whoa,i just had to push oneion. Reabutton to join. Its like im in the office with you, even though im here. Its almost like the Virtual Reality of business communications. No, its reality. Intuitive one touch Video Conferencing is a reality. And now its included at no additional cost with vonage business. Call now and see why 3,000 companies a month are switching to vonage. Business grade. People friendly. Time for the executive edge. Small Business Optimism dropping for the Third Straight month. Kate rogers has the details of the nfib report. For the third month in a row, small Business Optimism took another dip. The National Federation of independent businesses monthly read on main street sentiment fell to 104. 5 for the month of april. Expectations for Business Conditions fell 8poi points. The nfib said this is directly tied to House Republicans pulling the bill on the American Healthcare act directly before a vote was scheduled. Now that that is passed, sentiment could be raised. That being said thfshgs is the sixth month for high optimism. Sales expectations numbers increased, as did the number of firms seeking employment. But finding skilled employment is a major challenge for Small Business owners. Taxes jumped to the top of the list of concerns in april with 21 listing it as the single most important problem. In the past it had been government regulations and red tape. Taxes falls under that category as well. But the nfib said shifting taxes to the top concerned said this group wants to see action from b. C. On what they voted for back in november. Taxes as well as healthcare. So this particular month did not capture the newest version of the healthcare act. No. So next reading could capture it, the following reading could capture whatever happens with the senate. Exactly. So the next reading should capture what happened in the house, round two. Right. Passing the bill. Also some of what we have heard on tax reform. Though even though theyre promising parity between large corporations and small busine business businesses, its not sure how that will work. But having an equal Playing Field is something that advocates were happy about and main street as well. Kate, thank you. Coming up, the effect of tax reform on charitibility giable. And as we head to break, a look at whats going on in the european markets. Green arrows across the board. Germany with a gain of 0. 6 . Rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. Deartheres no other way to say this. Its over. Ive found a permanent escape from monotony. Together, we are perfectly balanced, our senses awake, our hearts racing as one. I know this is sudden, but they say if you love something. Set it free. See you around, giulia so you miss the big city . I dont miss much. Definitely not the traffic. Excuse me, doctor. The genomic data came in. Thank you. You can do that kind of analysis . Yeah, watson. I can quickly analyze millions of clinical and scientific reports to help you tailor Treatment Options for the patients genomic profile. You can do that . Even way out here . Yes. Even way out here. Charitable giving is up, hitting a record 373 billion in 2015. Thats according to an estimate from giving usa. But today, there are some concerns that President Trumps proposed tax plan could leave fewer dollars flowing to charities. For a look at the state of giving were joined by Stellene Volandes the editor in chief of town country. The magazine is out with its yearly philanthropy issue and holding its Fourth Annual summit in new york. The three covers of the philanthropy issue. How do you choose these philanthropists. We really take the idea of philanthropist of the year very seriously. So we look at who has made news and made real impact that year. But also we looked at what are the areas of concern. And youll see we have Cate Blanchett by david mill bnd and they discuss the refugee crisis. John legend and cory booker talk about criminal justice reform. Those three topics seem to us urgent topics to discuss. It seems like one difference between this year and past years is that youre recognizing philanthropists who are not just giving money, but devoting time or other ways of showing their dedication to a cause. Philanthropy really begins very simply with a question of what can i do . And i think that over the last few years certainly there has been a great focus on wonderful, big donations. And thats certainly true again this year. The combined giving power of the list is like 319 billion, i think. I think we also have begun to see that philanthropy needs to be more broadly defined. Theres a wonderful section on the list called why didnt i think of that. And it really celebrates ingenuity. It celebrates a man who in south korea sends information across the border on balloons to north korea. A man who created a whole Online Community for Mental Health to combat the stigma. And so the idea that we all have something to give, i think, is very important this year. You think if we change tax policy around, philanthropy in terms of the deduction, it would change the way these people give . Its an interesting thing to think about. Because, of course, then were all saying that a lot of philanthropy is about the tax break. So thats im asking. Certainly, some of it is. But i think to stay that it will change dramatically is to be cynical and to say that it wont change at all is to be naive. I think that whats happened this year is that the concern for some areas of that need donations, that need time, that need new ideas, is so high that i think it could balance out whatever Tax Deduction you dont get. So basically not much of an impact . I think this year there probably would not be as much impact as other years. I think that we have people who are concerned and i think sort of ready to do their part. Who on this list is a name that we have not heard about . Well, there is the man i spoke about before lehman bok, he lived in north korea, suddenly discovered that the information he was getting his whole life was incorrect. Now hes in south korea and using information as philanthropy. And i think the idea that facts matter, that information can save you is something that is important this year, and i think that it really also shows that everyone has something to give. Is there anyone on this list giving awaymonny that we havent heard about . Meaning secret billionaire of some sort . Well, we have a wonderful piece in the issue, not on the list, about philip anchel who is this reclusive billionaire. But i think that we celebrate people, certainly for their financial donations but i think that we also spend the whole year looking for people who give in a whole variety of ways. All right. So the summit is today. Im on my way there. Excellent. Celine, thank you for joining us. Thank you so much for having us. Thanks. Still to come this morning, real estate magnate sam zell is going to be our guest host right after the break. His take on the economy, politics and climate for business in america of course, never one to hold back. And then at 8 00 a. M. , Venture Capital investor Chamath Palihapitiya is going to be our very special guest for an hour. Yesterday he told cnbc that ibms watson is a joke. We will talk to him about whether he was trying to tell a joke or not. Squawk box returns in just a moment. Good morning. Another record high for the nasdaq. Today earnings and fed speakers take the spotlight. Sam zell is here to tell us where he thinks the market is headed. And share his thoughts on the president s first 100 days. Maybe on his first 109 days or 10 days, whatever it is. Opening the door to a Virtual Office. How tech is changing the office landscape, and what it means for real estate. That story is just minutes away. Plus former British Foreign secretary David Miliband on the uk snap election, what french president macron brings to the economic table, and reaction to yesterdays travel ban hearing as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning, welcome back to squawk box right here on cnbc. Were live at the Nasdaq Marketsite in times square. Im Andrew Ross Sorkin along with melissa lee this morning, and of course joe kernen. The futures right now this morning take a quick look. Dow looks like it would open up higher about 23 points higher, s p 500 up almost two points higher and the nasdaq 3. 5 points higher. Among the stories front and center at this hour, small Business Optimism remaining near historically high levels. The monthly optimism index from the National Federation of business did tick down 0. 2 of a point in april. The reading remains near the highest level since the 1980s. The april decline stems from curves over health care reform. Three fed officials will have public appearances today as investors try to look ahead to the june meeting. Minneapolis fed president neel kashkari, boston fed president and dallas fed president will be speeding at separate events. Cash carry and kaplan are voting members of the fomc for 2017. Whether we raise rates in june is the big question mark. Widely anticipated Earnings Report coming after the days closing bell, dow component walt disney expected to report earnings of 1. 41 per share. The key issue for disney in recent quarters has been subscriber numbers at its espn cable channel and we will keep an eye on that. And then we can tell you that the ceo of disney will be on closing bell later today. Stocks on the move this morning. Amc entertainment topping expectations admissions revenue surging more than 69 in the latest quarter. The company also seeing a big increase in food and beverage revenues. That stock slightly higher this morning. Pandora reporting smaller than expected loss but guidance was weak. Still shares are trading higher as the streaming Company Announced a 150 Million Investment from kkr and a board room shakeup. Health care tax reform are key topics for investors. Yesterday we asked Warren Buffett for his thoughts on President Trumps tax plan. Im 680,000 better off if Everything Else is equal. Just because of what happened this week. Now has to go through the senate and a lot of other things, but, it was huge what they did on cutting taxes for the rich. I mean, if theres one clearcut 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. Joining us now is billionaire investor and real estate magnate sam zell. He just released his new book, am i being too subtle . He will be with us for the hour. I made the point, sam, earlier, that the 680,000 that mr. Buffett is would would not have to pay, this was this is the new tax that was levied a couple of years ago with obamacare on the wealthy to pay for obamacare, so if you repeal obamacare its really just reversing this, what bill gates called, i think he called it a super progressive tax because its very progressive because of who it affects. And its just reversing that. So it i found it disingenuous to call it a huge tax cut for the rich. I agree. I think that the tax was kind of a violation of what was the deal at the time and getting rid of them makes a lot of sense. And i dont think its for the rich or the poor. Its just balancing out the system. For obamacare which, you know, you can well talk about the replacement plan and the repeal, and maybe tax reform as well with you. As a High Net Worth individual i was also, it just struck me that the i dont remember the exact number warren said that he paid in taxes last year but i think it was 4 million and change for a guy thats worth thats cheap 60 billion or so. Did you have a higher tax bill than 4 million do you remember . I will try to get you the number. Well play back the tape. Right. I thought it was in i thought he said Something Like four. I thought it was Something Like so youre above four at this point . Im afraid so. And i dont hold anything against anyone that looks at current law and even arranges their the way they take income, whether they avoid dividends. They avoid Capital Gains. Whatever they do, i think thats not, you know, avoidance is fine, obviously tax evasion is against the law. I dont hold anyone against that. I just dont know about lecturing people on paying more in taxes, when you pay less than 4 million. A little less than 4 million. Thats what he said, in quotes. A little less than 4 million. So you know what . That probably is a indictment of the tax system that we have right now. Its not simple enough. And there are definitely too many loopholes for people that are doing that well. Tax reform that youve seen proposed by the Trump Administration are there good things and bad things in it . Where are you on that . I think, you know, i think its so hard to have an opinion at this stage of the game. Because i think that the degree to which its going to get changed as it goes from the house to the senate and back i think were in the first inning. And im not smart enough to know how were going to end up. How do you other than to the extent that we can make it simple. And people can understand it better it will help our society. We had been on the all tax reform all the time then suddenly the Obamacare Repeal and replace came back to the forefront. And the house actually passed that. Again, i dont know what happens in the senate. And i dont know what happens when it comes back to the house. I dont know how this works. But is it possible for the republicans to take away an entitlement at this point without being hurt politically . I dont know, to tell you the truth. I mean, obviously so far taking away anything is anathema. But sooner or later, you know, if we were going to have to take away stuff from everybody. Whether it be this year, obamacare, social security, i mean, you cant afford all the entitlements weve written. So, by definition, were going to have to take either take away or create massive inflation. So, if you were advising well, lets talk about the first 100 days. 110 days, whatever it is pip should probably do you know the exact number . Anyway, its over we said were going to look back at the 100 days. That would have been a cutoff. Since the president was inaugurated, how do you you like what hes done. I know youre worried about immigration. The antiimmigration sort of stance, but i think that generally speaking, hes done okay. I think, you know, perhaps a few less tweets, a little more gravitas, would make all of us more comfortable that this president is a lot more than previous president s. But im not sure that this president is ever going to be a lot like previous president s. I think he has, however, given hope and optimism to the country that it desperately needs. You know, when i was on your show, maybe a year ago, i think i said i thought we were in the 8th inning. And i think what trump has done is create abut i think were going to extend this further than we would have had we elected another democrat. The economic recovery. Not just the stock market. I dont necessarily connect the stock market and the economic recovery. Stock market goes up and down. The fed, Everything Else. And some other issues. The economic recovery is the key. We solved the unemployment problem to date, the employment problem is very much a function of people in some respects, you know, taking jobs, dramatically below their education levels. And also a lot of people dropping out of the job market, which makes unemployment numbers look better. Hmm. Youve been coming on for awhile. Ive known you for a long time. You long time democrat. Until when . Or still are you still registered . Oh, no i was a democrat you were a democrat until they nominated mcgovern. Then you went independent. Would you call yourself independent . I think im probably closer to a republican today. So a republican at this point. But im social issues social issues im definitely a liberal. Economic issues im definitely conservative. All right. So, what do you think trump is at this point . I dont think he knows. In as far as judges that hes nominated. Theyre great. I think his judges are great. I think his nominees for cabinet positions is terrific. The fact that were going from a administration that had 4 Business People in the cabinet to 50someodd percent, thats really important. Last time i think it was bill clinton who said, its the economy, stupid. So, the idea that were are reorienting our government toward the economy, and recognizing how important the improvement in the economy is to everybody, i think is a very positive thing. And i think its probably reflecting why youre getting positive Small Business numbers, et cetera. But in terms of the extra innings, how many extra innings can we play if there arent any more points on the board, so to speak . Or do you think there are points on the board because there are Business People in the administration and it doesnt matter if we actually Pass Health Care or tax or any of that . Because the yankees played 18 innings the other night. Okay . Thats a long time. Thats true. Thats true. But, i think, you know, theres a lot i dont know the answer to how many innings but, i think that you look at American Business today, Corporate America has never had more money in the bank than they have today. Thats a lot of fuel for extra innings. And what we need is confidence. Need people to spend. Need people to hire. We need people to promote. All of which comes from more confidence. Let me ask you a question, which is the market right now, the vix is suggesting that things are about the least uncertain theyve ever been. Theres as little volatility as ever before. As the investor that you are, both in the market itself, but also in real estate and what might describe as a real economy, do you have that same level of conviction that everyone else seems to about where we are . Do you know what the chances Amazing Things or terrible things happening are very low . I think theyre very low. I think just the opposite. I think the vix index is talking about the stock market. Right. Its not talking about the economy. And i think the economy has all kinds of issues that are hanging out over it whether it be the middle east or venezuela, or ukraine, or china or north korea. All those are all those political Events Worldwide going to have no effect on our economy . No effect on our stock market . I dont believe that. Do you . Have you changed the way youre investing in this new administration which is to say did you think there was more opportunity in the fall before the election than now, do you see more opportunities today . How are you thinking about it . I dont think theres any question that weve gone from an antibusiness administration to a probusiness administration. I think a probusiness administration translates into a much more positive environment. So i think im much more optimist optimistic. I think that where mr. Obama had to spend a trillion dollars to create a bill, i think mr. Trump, in repeal a trillion dollars worth of regulation achieved the same objective, really creates stimulus. Have you put more to work put more money to work in the past couple months . Too short a period of time to answer that question. Certainly i think were more enthusiastic today than we were in october. Your book, am i being too subtle . I thought you were being too subtle. Did you say halfassed . I did. I could talk slower if you no, no, no. I just i would say yes you were being a little too subtle originally and then i would say you became where i like you to be now. Ive been accused of a lot of things. Never being too subtle. You know yesterday the other thing we didnt talk about, andrew, with Warren Buffett was the complete sort of reputation. I like refute yags, i think its a better word, sarah palin came up with it, so i use it, dynamic scoring. Buffett does not believe theres anything at all to dynamic scoring when youre doing supply side growth programs and you say maybe well get more sox revenue because of that. Thats like going to a fight with one hand tied behind your back. If you dont believe in dynamic scoring why would you pass tax reform . I dont think he thinks we should. I dont think he thinks taxes are the issue. Why would you pass any piece of legislation . The idea behind passing legislation is to make things better. To make them dynamic. Dynamic scoring suggests that nothing changes no matter what you do. All we got him to concede was that 100 taxation might cause people to work less. But its almost as if 95 would be okay under certain if fairness to warren, though, there are a number of studies on both sides of this issue which would suggest that even when we have lower taxes, we havent necessarily gotten that much more revenue i mean its not clear that just because you lower taxes andrew the only one that i could come up with is every single time weve cut Capital Gains tax revenues to the government has increased. And at no time when weve taxed Capital Gains tax did dynamic scoring come into the process and say, theres going to be more revenue. Every time all right. So how do you explain that . Sam is with us for the rest of the hour. We go all the way back to reagan, we go back all the time. I go with andrew and he tells me it was defense spending. I say it was dynamic scoring was what did it. I dont know. If it was defense spending we did end the cold war so at least we got something for it anyway. It was all good. It was all good. All right. I want you to come back and be like in a time machine go back and come into the workforce i was in 1981. You were at camp. 1981. Anyway, coming up, coming up, Technology Opening the way for Virtual Offices. Diana olick joins us with that story after the break and later the Trump Administration defending its travel ban in federal Appeals Court. Well speak to the ceo of the International Rescue committee David Miliband about the issue in just a bit. Take a look at futures were indicated for a higher open across the board. Ross the board. Rays always been different. Ross the board. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. 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. Information technology has caused a boom in Small Business. Anyone with a computer can launch a website and start working from anywhere. For some where you work is still key, even if it is virtual. Diana olick joins us now with more. Diana . Well, melissa, where you work can say a lot about your company. So what if youre a startup in your moms basement . Well believe it or not, with a little technology, the sky can be the limit. On the 85th floor of one world trade center, there are receptions, offices, conference rooms, and coworking spaces. But its whats not here, or rather who is not here, that matters. Virtual office is really people who are working from home. Australia based serve corp has operations in 24 countries but entered the u. S. Only recently during the recession. When real estate prices slumped. They took space in several prime locations, including one world trade, where theyre selling both the space, and the address. We number 40,000 customers who dont rent any space from us. They can use our space on a casual basis. They can use the infrastructure that weve got, and new technology, the telecommunications tech nogs. The ceo of a small Tech Consulting firm in oregon, just seven employees. But youd never know that from his one world trade address. Theres a good deal of prestige that comes along with being here. Its the most recognizable address in the world. So starting at 250 a month, clients can get the fivestar address, the urban area code, secure email, and a reception who answers for their company, and can accept real mail or faxes, and they tell me 40 of their revenue now comes from virtual clients. Andrew . Thank you, diana. We want to turn back to our guest host real estate titan sam zell who has a new book out. I wanted to ask you about this whole Virtual Office phenomenon. What do you think of Companies Like we work and where this is all going . This whole concept began in the 50s, with a guy who was an anchor tenant in the construction of a new bunch of office buildings. He did very well until the Office Market softened. He was followed by headquarters, regis, all of which did very well, until the Office Market softened. We have yet to find out what happens to we work and things like this. When the Office Market softens, which is probably not too long from now. You did say we may go into extended innings, so maybe they have a little bit longer than we thought. But have you ever put money into one of these kind of companies . Yes. You have . Yes. Successfully . No. I would think that this well successfully, until the market turned. Right. And one of the things we hear about we work in particular is that not only are they trying to create Virtual Offices, but they actually want to go in to companies and effectively create a service, if you will, to recreate the dynamics within peoples offices. Is that a is that a viable Business Model to you . I dont know whether its a viable Business Model, but i wouldnt let those guys near my business with a ten foot pole. You know, how your business runs, the culture of your business, how decisions are made, is something that evolves and represents the culture of your company. The last thing i want to do is introduce somebody elses culture that may not agree with and have them influence the way my company is run. To the extent that you are a buyer in this market right now and i dont know if you are, where in the country do you see opportunity . Why dont you ask me what im selling. Are you a seller . I think im much more of a seller today than a buyer. You just told us that the economy is going into extra innings. I would think that you would be a buyer. Oh, i dont think that that is necessarily great opportunity because recovery lasts a lot longer. If Corporate Americas starts spending money, building plants, making commitments, then the possibility of changing what inning youre in and how you feel about the inning is much more realistic. So youre selling. I think in the last four or five years weve been much greater sellers than buyers. Sam zell. He is never subtle. That is part of the title of his book. Coming up, a National Security or religious bias . The courts questioning the Trump Administration over temporary ban on travelers from six muslim countries. Were going to hear from former British Foreign secretary David Miliband in just a bit. And then in the next hour of squawk box, tech investor, coowner of the Golden State Warriors champal palihapitiya is going to join us. Hes going to talk about why he says ibms watson is what he calls a joke and what he thinks of Warren Buffetts take on the supercomputer. Only tmobile one gives you unlimited data with taxes and fees included. Thatll save you hundreds. Get two lines of unlimited data for a hundred dollars. Thats right. Two lines. A hundred bucks. All in. And now, the brand new Samsung Galaxy s8 is here. So what are you waiting for . Get the new galaxy s8. Plus get 2 lines of unlimted data for a hundred bucks. Taxes and fees included. Only at tmobile. There goes my sensitive bladder. Sound familiar . Then youll love this. Always discreet. Incredible protection. In a pad this thin. I didnt think it would work. But the super absorbent core turns liquid to gel for incredible protection. So i know im wearing it. But no one else will. Always discreet. Ive discovered incredible. Bladder leak underwear that hugs every curve. Cant tell im wearing it. Can you . Always discreet underwear. For bladder leaks. 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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. A used car, but weve got the get tdigital tools to help. Now with xfinitys my account, you can figure things out easily, so you wont even have to call us. Change your wifi password to something you can actually remember, instantly. Add that premium channel, and watch the show everyones talking about, tonight. And the bill you need to pay . Do it in seconds. Because we should fit into your life, not the other way around. Go to xfinity. Com myaccount good morning, welcome back to squawk box here on cnbc, live from the Nasdaq Marketsite in times square. Among the stories front and center were watching shares of Valeant Pharmaceuticals this morning. The drugmaker reported a quarterly profit compared to a year ago loss helped by a one time tax ben fit. Valeant raising its full year forecast and that stock is surging premarket by more than 12 . Well be getting a fresh read on the labor market when the government releases the jolt report expected to show 5. 7 million job openings at the end of march, roughly equal to the prior month. Hedge fund Elliott Advisers is going to court to try to oust the chairman of akzo nobel after they rejected three different takeover bids from ppg industries. Elliott says the rejection of those bids is a flagrant breach of fiduciary duties. Federal Appeals Court heard a legal challenge yesterday to the Trump Administrations socalled travel ban for more lets bring in David Miliband, who is ceo who formerly served as British Foreign secretary. Good morning to you. Good morning, andrew. Whats your take on this news and where does this all go . Look, the legal stuff is going backwards and forwards. But the big question is not is it bad law . Is it bad policy . Because were in a situation four months into the administration, they say theyve got concerns about the vetting process. But they havent yet started a review of that vetting process because theyre caught up in court and my message is very simple. We can get out of this mess by simply doing a review of the refugee vetting process, which is the toughest way of getting to the u. S. , and then if they want to bring in some improvements they can do so. And i think the fact that theyve overreached in this way is actually getting in the way putting the law piece aside for a moment do you believe that the vetting process as it is today is good . Not good enough . No, i think bad . How do you rate it and rank it. What do you know about the actual process . Great question. Look there are 21 steps to the vetting process for a refugee to get into this country. It takes 18 to 24 months upon average. It involves 12 to 15 government agencies, including the cia. It involves biometric testing to make sure people are who they say they are. Its tougher to get to the u. S. As a refugee than by any other route. And so my message to the administration is simple, totally legitimate for you to want to review the system when youre coming to office, youre a new administration. But dont stop the existing system and cause chaos for people who are expecting to come here. And, frankly, for americas relations around the world. Because youve got allies of the u. S. Like jordan, with citizens of syria, who have fled to that country, theyve been promised to come to the u. S. , and now theyre stuck in limbo and that isnt good for anybody. What is this costing your agency right now . Well, its suspended. Its costing the refugees rather than us. Right. So the refugees have had to buy travel tickets, and then you saw the scenes when their flights were canceled. Right. So its not a matter of what it costs us. Weve had to make some reductions because the Administration Says it wants to reduce the overall number of refugees coming. But were not a profitmaking agency. Were not making profit out of the refugees arriving here. And americans should know they have a successful Refugee Resettlement program. 875,000 people have come here since 9 11. Youve got business leaders. Youve got political leaders. Youve got academic leaders who have all come through that Refugee Resettlement. How do you articulate to those who dont like, frankly, refugees coming or even immigrants coming into the country right now, who say, people eventually going to take our jobs. That even if it looks like theres full employment out there right now there really isnt full employment there are so many people out of work and this is only making it more competitive for those jobs that people dont even have. I think the best answer to that is that refugees are a proven record of job creators not job destroy ert. And just think of some of the Great Companies across this country that have been led and founded by refugees. Theyve created jobs for people rather than suck jobs away from people. Were talking about a global refugee crisis at the moment. 25 million refugees around the world. 14 Million People displaced. A fraction of those are coming to the u. S. From syria, which is the greatest crisis less than 15,000 refugees have come in six years. The u. S. Last year took 85,000 total. Were not talking about millions of people. Germany, 900,000 asylum applications this year. Theyre dealing with it. No one is saying the u. S. Has to do that. But for a modicum of humanity to help the most vulnerable of cases those most vetted people get the chance to restart their lives and contribute to this country. From the irc standpoint how comforting is it that le pen did not rise to victory in france, and that Angela Merkel looks a little bit more secure and her party looks more secure after the victory over the weekend . I think that youre seeing the pushback against so called populism in europe. We shouldnt be complacent. 35 , 34 of people in france voted for someone of the extreme right, avowedly of the extreme right questioning whether or not france had had a role in the extermination of the jews in the 1940s. So were talking we shouldnt be complacent. But macron i think is occupying a unique space in european politics now. Because on the one hand hes saying he wants to reform france. On the other hand hes saying youve got to boost growth. Listening to the discussion earlier about the need to get confidence going and get the economy moving, the eurozone desperately needs to get out of this low growth syndrome. And i think macron, by being a reformer, is also able to be someone who credibly can say weve got to get the economy moving. What else happens in the rest of europe right now . Meaning, do you think that the extreme side of it is going to win out . Or do you think this is a true sea change . I think that youve got to say that europe has showed remarkable resilience over the last ten years. If you think about what greece, spain and portugal have been through, 25 youth unemployment at one time, 45 youth unemployment, there has been resilience in those countries. But what they need is some Economic Growth. Because what we saw in italy last december when the renzi government otherwise popular lost the referendum it was having on reforming the constitution, frankly that was an economic vote and the challenge for the germans now is how are they going to build a new consensus within europe . I think youre right its not just mrs. Merkel. The cbu and the social democrats together have strengthenstrengthene strengthened theyre now competing with each other but theyre in coalition. Theyre competing in the september election. I think the extremes have been driven back in germany. Thats obviously a good thing but the policy mix has got to get stronger. You invest in europe right now . Do you find it interesting . We have people who come on and say between the u. S. And europe, actually europe may be more of a value proposition. Maybe thats true in the short term but, i think the longerterm issue is that europe doesnt have the demand or inclination to work and consequently theyre great for wine, cheese, castles, you know, tourism. But its not i dont see it as a great economic power that you want to invest in. David, would you like to rebut that . Give your province i live in new york. I run an american ngo, american headquartered ngo but try telling german manufacturing that all they are is cheese and wine and castles, i think theyd have something to say about that. Theyve got a pretty good deal with, you know, with where the euro is, and you know, obviously they thats the whole argument. And you know, extreme, the word extreme is in the eye of the beholder. Maybe i shouldnt have used some people think that merkels policies have been extreme in terms of, you know, bringing to bear a lot of the problems that europe is facing right now. Theres a reason that populism rose in europe. Well, no, no one thinks that mrs. America s l responsible for the syria crisis. Im not saying. Im just saying that people disagree with her policies. Which is and call her policies extreme. To you the other policies are extreme. We also heard that Dynamic Growth doesnt work if you cut taxes or deregulation and theres not much europe can do, right . Its not going to help if they cut taxes. Germany is in a position where its a very strong fiscal position, actually got plenty of room to reflate the economy. That was the best line that le pen has that france is going to be run by a woman either way. It was. Because germany benefits from the eu. Who else does . Well i think that the fact that the southern european states despite the trauma of the euro remain committed to it. The fact that the northern border states, france and italy are the core of europe on the real issue. Now i think that your point, though, is that the germans are in a fiscal position where they could actually run a much more expansion i think is the core of the argument. Youre actually right about that. David miliband, thank you. Thank you for the work we do. We appreciate you being here this morning. More from special guest sam zell on the markets and the economy. In the next hour tech investor and coowner of the Golden State Warriors Chamath Palihapitiya will be our special guest. And aflcio Richard Trumka will join us. Snooe i count on my dell Small Business advisor for tech advice. With one phone call, i get products that suit my needs and i get back to business. And the wolf huffed like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies child giggles symbicort. Breathe better starting within 5 minutes. Get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. Im sorry. Sam zell is giving me a look and i love him. Welcome back to squawk box. In tech news this morning, amazon preparing to launch an improved echo. The wall street journal reporting that the new device features a seven inch touch screen and a camera for video calling. The paper says the announcement could happen as early as today with the new echo going on sale as early as this month. The new device said to be priced above 200. An increase from the current price of 150. Separately new Research Firm emarketer says amazons voice controlled speakers will command more than 70 of the u. S. Market share this year, far ahead of googles home device which is a similar gadget which has 23. 8 share of the market. The number of active u. S. Users of voice controlled speakers like this more than doubled now 35 Million People have one of these things in their home which is remarkable to me. Do you have one joseph . Never hooked it up. Are you afraid sam zell is raising his hand. I have two and i havent hooked them up. Why not . Are you afraid that theyre spieg on you . Im technologically challenged. Thats part of it. But my samsung is listening to every word i say. Your tv. They may be recording you. I know. I know. Theres strength in numbers. Maybe im not saying anything that interesting, 35 Million People. You only hope. We can only hope. Coming up were wrapping up our time with sam zell. This time last year when he was on the show he said world trade was sounding an alarm for stocks. Well find out if hes changed his tune and what he thinks of the president s trade agenda. Meantime lets take a check on futures and how we are set to open. Dow looking down about 23 at the open. S p looking to add about 2. Stay tuned. Stay tuned. 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. Anybody that prefers bonds today to stocks is making a big mistake. Ive 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 30year bond and some countries 50year bonds and so on, at these rates, in preference to buying stocks. Stocks will bounce around a lot more and they can go down 50 . But a 30year bond can go down 50 too at these rates. Bonds are a terrible choice against stocks. That was Warren Buffett, of course, talking to becky yesterday in omaha. Lets get back to sam zell, author of a new book am i being too subtle . And we said wed talk a little bit about trade, sam, because i think there were a lot of people that, you know, as President Trump was coming into office, they, you know, the republicans, hes got gorsuch and conservative ideas but then on trade, it almost seemed like that was different than your classic free market republican idea. And people were worried about it. Was there reason to worry or does it look like, you know, it wasnt as, i guess the worst Case Scenario did not come to pass with china and tariffs and things. Well, i think that trump is a provocateur and i think he throws out a lot of ideas. I do think that one of the things that hes done and done very successfully is to make everybody realize how much of our trade agreements were really Foreign Policy. I mean, the Foreign Policy behind nafta was very simple. Stop illegal immigration, strengthen our second largest border in the world, and it was phenomenally successful. But you couldnt sell it like that. You instead sold the whole thing as trade. Guess what . Trade didnt work out well if you solely used trade as the measure. Somewhere in between is probably the appropriate balance. And interestingly enough, i have partners in mexico and we have a number of investments in nextco. I was surprised that theyre not anywhere near as alarmed about trump as we think they are. And i mean many of them said to me, you know, we spent our whole life, whatever we build, we sell north, and this trump thing has forced us to think about where else we would sell. Also forced them to think about where else they would buy. I mean, theres an article in i dont know what newspaper the other day the fact that mexico is the largest buyer of milk from the United States. And for the first timexco is in new zealand trying to negotiate the purchase of milk. So it goes both case and i think when its all said and done nothing that trump has done as opposed to what he said, something that he has done would alarm me on the trade issue. Andrew, if watching the relationship with president xi, sometimes it almost looks like if you have good personal rapport with the leaders that your overall trade policy might somehow be softened. It has not been it still could be, youve got navarro, he talks tough. He still has north korea, right . True. Thats driving the relationship right now, not trade. But also rapport and Everything Else. Can it still happen . Can there still be a trade war that wilber from soft wood in canada or something is that still a worry . You tell me. How much power and influence navarro, bannon, have on yes. Gary cohn. But it hasnt happened with china. We havent called them currency manipulators. You would acknowledge the worst case trade war scenario at this point hasnt happened absolutely. And doesnt look like its going to happen either, does it . It looks like hes going to be a different president than the campaigner in terms of very well may be. Im just asking. I i thus far, he seems to have not gone down that road. And you were worried about it. You dont think he has either. And not likely i dont think he has. Not likely to . And not likely to. And i also think that its very important, trump is very much of a personal person. Yeah. And he puts great value on his personal relations with other people. Thats the way the world always used to work before we got him to this technological scenario. I travel, you know, a thousand hours a year on my plane because i go see people in their locations. Because its so important to create a real relationship with someone youre doing business with. Unfortunately thats an Old Fashioned idea but a very effective one. And i think trump is practicing. So we didnt do the tpp people like to do these big deals because you can do them more quickly. Is a oneonone approach to negotiations with all these different trading partners, do we have the time to do that . And can eventually be better should we try and do, you know, do more at once . I think that very much depends on the timing. And i think the tpp was driven by the desire to get something done, as opposed to the desire to fix things. And when the objective is the objective as opposed to what the objective stands for, you generally produce negative results. Hmm. Weve been through a lot of different periods. I would go all the way back to i can remember when president kennedy was assassina assassinated. And i remember the animosity and animus words w. I remember it, you know, towards really reagan, from the left. All through his eight years. Is there any way this heals . Any way that we it becomes a country more god forbid something happens. Remember george w. Bush became sort of the president of you know, he became more the president of the entire country on september 11th, if you recall. Does this does anything ever happen to lessen the resistance . There are people that, hillary now has got a super pac, just call it resist. I think that theres always going to be resistance. Theres always going to be people on the other side. The degree to which there is denial that President Trump was elected, is preposterous. And its a selffulfilling, you know, scenario where you talk to yourself and then you agree with yourself. I think mr. Trump is president of the United States. I think over time a lot of these denial people will come over and i think its likely that trump will be much more less of a tweeter going forward. Which i think precipitates that kind of denial. Coming around a little, andrew . I mean, do you agree . Do you im trying im trying. Theres seven stages, i think. Seven stages of grief. Like denial, and then grief, and then im not grieving. Im not grieving. Okay. So youre out of that stage. Where you know the seven . I dont know the seven offhand. I just remember andrew the day after the election, morning after he said we talked the night of the election. He said that hes our president now and hes our president now i mean. It was 10 00 at night you messaged me. And you said, looks like were going to be talking about President Trump tomorrow and i gave you a hug the next morning when i came in. You did, i know. Then you lost it again and you just, you know, now youre i think youre you think im coming back . Coming around. It takes awhile right . Takes awhile. Well not everyone is with you. Am i being too subtle . Name of the back. Sam zell, thank you. Thanks, sam. Appreciate it. Coming up, Chamath Palihapitiya joins us for the next hour. Well talk tech investing and why he says ibms watson is a joke. Plus tracking executive pay the aflcio will reveal a new website which they say could level the compensation Playing Field. Check on the futures as we approach the top of the hour here looks like a higher open across the board. Oard. At fidelity, trades are now just 4. 95. 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. Have no fear, wall streets anxiety index hits the lowest level in 24 years. As the nasdaq and s p 500 rally to record highs. Is tesla the next apple . A Venture Capitalist turned Hedge Fund Manager makes the case for a not so bumpy road ahead for the electric carmaker. Plus the players championship tees off this week. Well talk to the worlds number one golfer dustin johnson. As the final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Good morning, welcome back to squawk box right here on cnbc. Were live at the Nasdaq Marketsite in times square im Andrew Ross Sorkin along with joe kernen, melissa lee is here. Becky quick is off today making her way back from omaha this morning. In the meantime want to take a quick check on markets right now. Dow looks like it would open up higher about 26 points. Nasdaq up about 6 points and the s p 500 up about 2. 5 points. A quick look at the 10year, as well as the slowly flip the board around there it is 2. 392. Joe . Thanks, andrew. Among our top stories today, liberal political moon jai inis expected to win in south koreas president ial election. Official results are still out of the way but the victory would end more than a decade of conservative rule. South koreas president was forced from office after a corruption scandal. Back in the United States President Trumps review of d d doddfrank will be done in stages and not be completed until early june as originally targeted. Will not be completed. And according to a report from reuters officials now say that theyre going to do it piece by piece the findings will be and give priority to banking regulations. Shares of valeant are surging in premarket. The drugmaker reported a quarterly profit compared to last year so reversed the loss helped by a onetime tax benefit. Valeant also raised its full year earnings forecast. Ackman gets out of the stock and it goes up. Of course thats always the way it works. You hear 12 move and you realize its only a dollar. Yeah. Exactly. Which sort of is encapsulates the whole sort of almost shakespearean what happened to that stock. And to ackman. Lets get back to our guest host. Sam zell. Where do we want to go now sam . A lot of times we do six, seven, and eight and people that were watching at six, theyre a whole new group of people watching at 8 00. Lets talk about some of the things that weve already talked about. A lot of times its helpful with a guy like you, whos made so much money over so many different business cycles, i mean youre the mather of selling, selling when its time, buying when its time, and normally nobody else is doing it when youre doing it. You mention so a year and a half ago you sold 5 billion of multifamily stuff, right . Who did you sell it to . What was we sold it to barry how they doing with it . I think theyre doing very well with it. We expected them to do very well with it. From our perspective, Equity Residentials started out as a multifamily Company Based in suburban garden apartment project, beginning around 2000. We decided that we needed to shift and become a cbd company. Over the period from 2000 until a year and a half ago we were slowly making the conversion. We had an opportunity to in one fell swoop complete the conversion. And we did so. And we were raised a bunch of money. Wee distributed 10 a share in dividends to our shareholders, and it was a great deal. And reflected the fact that we thought that we had gotten most of the benefit from the ownership how liquid are you right now overall on a scale of one to ten . Historically youre at one place. Where you are right now . Are you more liquid than youve ever been . Talk about Equity Residential talking about you as i mean you were in rail cars. You were i know you were we were involved in lots of different things. How liquid overall are you . I think were very adequately liquid. Youre liquid now. Which is a common carry on whether you should be a buyer or seller. Which is a commentary on if you think you should be a buyer, part of being a buyer is being able to or willing to leverage up to impact increase the impact of your bet. Yes. But earlier we also spoke and you thought that the election probably extended the economic recovery longer than you would have thought. I know in the past youve worried about the fed sort of it being a sugar high in the equity markets, at least. What about for the overall economy . Well, i think the feds role is still very benign. We are in fact, seeing increasing Interest Rates. I dont think Interest Rates have reached the inflation rate yet. So, the real Interest Rates are still below zero. And so i think that theres a lot of, you know, area to go yet. I believe that severe low Interest Rates of the past few years have been negative overall because i think its eliminated any sense of urgency. Any sense of need to act. Whether it be corporations with record amounts of cash. To individual startups, which are lower than theyve historically been. So i think returning to somewhat higher Interest Rates, i think is a very healthy thing. Hmm. Do you think that you have differentiated between the economy and the stock market. For awhile you thought maybe the stock market was benefiting from all the Central Banks around the world. Yeah. I dont think i ever stopped believing that. And youre still at the but does it seem like the election of trump may be the underpinnings, maybe the prospects for business have improved to the point where the stock markets more based on reality than i think that trump has a very unique opportunity an opportunity to materially deregulate, particularly the heavy emphasis on regulation over the last eight years. I think that could generate stimulus without increasing any debt. And i think thats a very unique opportunity, and i think the stock market is reflecting that. Right. And which is a different view than the stock market is reflecting future legislation on tax reform and obamacare. It could have just been deflecting regulation. There may be future benefits to repeal or change in obamacare, or other legislative changes for lowering tax rates. But i think the biggest motivation for the stock market has been the impact of deregulation. I mean, you know, six months ago if you had a puddle on your property it was navigable water. Not anymore. Thats a big step in the right direction. Sam, thank you for all your time. My pleasure. Appreciate it. Got a lot still ahead on squawk box, including world number one golfer dustin johnson. Hell be joining us live next and just how much do the highest paid ceos take home last year . Aflcio out with executive pay watch study. Well bring you the names and numbers. Plus u. P. S. Announcing a partnership with the dubai world expo. Ecommerce and tax reform first on cnbc and later do not miss a cnbc exclusive interview with lloyd blankfein, thats on power lunch 2 15 p. M. Eastern time stay tuned youre watching squawk box on cnbc. I mean wish i had time to take care of my portfolio, but. Well, what are you doing tomorrow 10am . Staff meeting. Noon . Eating. 3 45 . Uh, compliance training. 6 30 . Sams baseball practice. 8 30 . Tai chi. Yeah, so sounds relaxing. Alright, 9 53 . I usually make their lunches then, and i have a little vegan so wow, you are busy. Wouldnt it be great if you had investments that worked as hard as you do . Yeah. Introducing essential portfolios. The automated investing solution that lets you focus on your life. So beautiful. What shall we call you . Tom name it tom studies show that toms have the highest average earning potential over their professional lifetime. See . Uh, its a girl. Congratulations two of my girls are toms. I work for ally, finances are my thing. You know, im gonna go give birth real quick and then well talk, ok . Nice baby. Lets go. Here comes tom 5 nothing, stops us from doing right by our customers. Ally. Do it right. Whoo look out. Weve got news from the golf world, joe. First on cnbc. Lots of stuff going on here. Dom chu joins us from ponte vedra beach, florida. Dom . So, thanks, guys, very much. Were here at the famed 17th hole at tpc sawgrass the site of this weeks players championship happening again on the pga tour. They call it the fifth major. And were here for a very important reason. Its the crosssection of sports and business, and the pga tour is in the process of inking one of the biggest deals, if not the biggest deal ever in the history of the game. So were joined by jay monahan commissioner of the mag tour, also the chief sales officer at fedex and number one ranked golfer dustin johnson. Lets start off with the news. Mr. Monahan, the pga tour has a very big announcement. Yes, dom. Today is a milestone game for the pga tour and golf. Our great friends at fedex who weve been in business with since 1985 are extending their commitment of the fedexcup through 2027. We launched the fedexcup in 2007, seasonlong competition. Really bolstering all of our tournaments, culminating in four playoff events bringing a dramatic conclusion. When we launched it, there was some skeptics at the outset. Made some adjustment in the early years, but ten years later you look at the list of champions, you look at the moments that have been created, the fedexcup is embedded in our sport. Our players, its one of their that is a goal at the top of their list and near the top of their list every single year. And today really is a testament to our players. To have a company, a worldclass company, one of the best companies on the planet make this length of a commitment forward to our players is something that were very proud of, our players are relatable. Theyre purposeful, theyre global. Thats everything. Those are all the values that fedex represents, and like you said, today is a historic day and this is the Largest Partnership in golf history. The last fiveyear deal, it was 35 million a year in prize money that was allocated out there. Is this deal of that same size and scope . Well today were not going to get into the specifics of how the deal is going to change but suffice to say this level of commitment allows us to significantly raise the stature and impact of the fedexcup as we go forward. And well be talking about that, you know, in the months and years ahead. But this is a significant step forward for pga tour and the fedexcup. Don, fedex is putting its name on this for the next ten years. Theres got to be a reason why fedex would want to make this time of a longterm commitment to the game of golf and the pga tour. Take us through the reasonings behind why fedex wants to be this big part of the pga tour. Were excited about today. Tland are a lot of reasons. As you know, fedex, were a performance driven fact based company. We make decisions about renewals in anything based on facts. We have a decade worth of facts that suggest the fedexcup is a great program. Its great for our employees. Our employees are socially responsible. Youll see over 1,000 of them next month at fedex saint jude classic volunteering. Weve donated over 35 million through the years to the saint jude childrens hospital. A wonderful event and a wonderful charity. Its good for our customers. Its great for our customers. Think about this, the opportunity to take customers on a weekly basis out to play golf with a guy like dustin johnson, be totally embarrassed for four or five hours. But to be inside the ropes with a number one player in the world on a regular basis, thats wonderful. And most importantly we think its good for our shareholders. This program activates business for us. And thats very, very important. So when we look at it through those prisms, we look at it through customer, through employee and through shareholder were very comfortable this is a winwinwin and were real excited about the next decade. Dustin ive got to toss it to you because you turned pro in 2007. Your first year officially on tour in a season was 2008 and that means mathematically youve only ever known the fedexcup era in the pga tour. How important is a seasonlong playoff series culminating in a championship important . How important is that to players like you . Well its very important to me. Its, you know, the Fedexcup Playoffs is, you know, its the end of the year. Its, you know, its the biggest stage on the pga tour, and you know its something that i strive to win. Its very important, you know, throughout the year, too. It makes for every tournament count you know and it makes for an exciting finish, last year, you know, was the closest ive come, you know, finishing second to rory, but you know it was very exciting there at the end. How did you feel at the end. Were you cheering or other things to go down the way yeah, yeah i dont think ive ever cheered so hard for a fellow pga tour player as i was that week. You know, it was still a lot of fun watching the playoff in the club house. But you know, obviously rory ended up winning. But it was, you know, its still super exciting. I think it was very exciting for all the fans, and you know, it was exciting for me to watch. Now i know dustin, joe kernen back in studio right now has a question for you, as well, and you know hes an avid, avid golfer. He may have some questions for you about the game. Joe . And just commissioner monahan, wishing him luck. What a tough act to follow of what finch up was able to do. And fedex, love everything about fred smiths legacy. And it is a great deal and its great for golf. But dustin, great putt on 18. I guess youre as healthy as you need youre back, right . I mean theres no question that that back injury is history, right . You made the cut on the number and almost won the tournament. Which is weird. Yeah, i mean, the backs great, you know, im very healthy, and yeah, im very pleased with the way i played on saturday and sunday last week. Got off to a little bit of a rough start there on saturday, but other than that it was, it was very, you know, im very pleased with it. Only putt better was i guess brian harmans. But that was like the longest putt you made in four days, too, wasnt it . So if you had putted well you would have won that tournament, i think, right . Yeah. Yeah, absolutely. Obviously brian made a great putt there on 18 to win the golf tournament. But, yeah i missed quite a few pretty short ones. But you know, still happy with the way the tournament ended up. You know, played very well and im really looking forward to the players championship this week. One of the things wants to give you a putting lesson no, no, no. Ive had so you know, ive been right hand low, left hand low, belly, you know, claw, ive tried, you know, its its in my head i think. One other question i was going to ask you, dustin, just watching you over the years and watching the adversity that youve overcome, obviously, in some of the majors, and just i think a lot of us got thierry when you finally did it at the open, and you never seemed i cant tell whether it doesnt affect you or whether youre just so easy going or whether in your head youre just churning like crazy. I mean, whats going on, you know, when youre under the gun with pressure . Doesnt look like it affects you at all. Youve got the same expression. Well, i try to keep a level head. I think thats important, you know, especially when youre coming down the stretch, not to get too excited, not to get too down on yourself, but, you know, at the u. S. Open last year yeah, i just kiechbld, you know, i try to just focus on the job at hand, which was each shot that i was hitting, and you know obviously there was, you know, a rules issue that we had to deal with afterwards, but thats what, you know, i kept telling myself, well, you know, ill worry about it after im done, you know, right now i need to, you know, would worry about the shots that im hitting. Really quick must be kind of cool when the entire place is chanting dustin, too, and you finally did it. Maybe youre never going to lose again in a major. But, anyway, pleasure talking to you. Go ahead, dom. Thank you. I was just going to say really quickly as we talk about the state of the game, dustin has brought a lot of excitement to the game that a lot of young guns out there the Competitive Landscape has never been better in golf arguably. Absolutely. Tell us about the state of the game right now. Are we in a healthy spot for the game of golf . Absolutely. Theres a ton of momentum behind the game. Just a couple weeks ago the National Golf Foundation Came out with their annual report. Were at 23. 8 million participants. Thats more participants than basketball, baseball, tennis, soccer, we had 2. 5 million new entrants into the game, which is the largest number ever on record. Including larger than 2,000. The year that tiger was taking the golf world by storm. Were now at 2. 9 million juniors. That number is up 20 over the last five years. Youve got 12. 8 Million People that say theyre very interested in playing the game. And for the first time of that number were now eclipsing 20 million engaged and committed golfers. So theres a lot of positive signs and to your point, dom, there are, request all these young players, global players, global stars emerging every single week, we think that sets us very well up for tend growth with the game. Big deal, guys. Tenyear extension of the Fedexcup Playoffs here on the pga tour. Jay monahan pga tour commissioner, don, fedex and world number one golfer dustin johnson. Thanks to our golf channel viewers as well. Thank you for that. Did you know it was simulcast i didnt appreciate that we were simulcast. We were simulcast with the golf channel. Wow, that was a big moment touch more viewers. My brand. A lot of overlap. I could have gotten a shot on the golf channel. More watchers i really more watchers. Watchers. We recently had a heart attack. Watchers. But we are not victims. We are survivors. We are survivors. We are survivors. And now we take brilinta. For people whove been hospitalized for a heart attack. We take brilinta with a baby aspirin. No more than one hundred milligrams. As it affects how well brilinta works. Brilinta helps keep platelets from sticking together and forming a clot. In a Clinical Study brilinta worked better than plavix®. Brilinta reduced the chance of another heart attack. Or dying from one. 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With one phone call, he sets me up with tailored products and services. And when my advisor is focused on my tech, i can focus on my Small Business. Welcome back to squawk box. Want to get to our guest host for the hour. Made a big call on tesla at the stone conference yesterday saying the electric carmaker could be worth quote hundreds of billions of dollars in the next decade. And investors should buy the companys convertible bonds. Joining us right now is Chamath Palihapitiya the founder and ceo of social capital also coowner of the Golden State Warriors. We will talk about your call on elon musk. But before we do that, we got to talk about what you said yesterday about ibms watson, which im supposed to tell you, by the way, has nothing to do with sherlock holmes. Its a separate issue. Twitter told me that. But you said on the air yesterday, when you were asked about watson that you thought you laughed and then you said it was a joke. Meaning that the a. I. Technology was a joke. Why did you say that . And then ibm by the way, i should tell you, has sent us a statement which ill read in a second. I probably should have been more careful with my words. Heres the reality, if you want to break down what Artificial Intelligence is about, theres two really important things that are going on. The first is, trying to acquire all kinds of really interesting data. Right. To train machines to then solve all kinds of really interesting problems. Right. When you frame the problem that way, as someone who is investing in those kinds of issues, what you see are really two companies there in a meaningful way. And those are the two companies i talked about google and amazon. Right. Separately i have companies that weve been building and incubating for years in things like cancer and diabetes where were bringing Machine Learning to the market, where weve competed with competitors including ibm, and it was sort of a culmination of a bunch of realizations and market expectations, and but i probably shouldnt have said it the way i did. Let me read you what ibm has to say about all of this and we did drill down. Ibm says watson is not a consumer gadget, but the a. I. Platform for real business. Watson is in clinical use in the u. S. And five other countries, its been trained on six types of cancers with plans to add eight more this year beyond oncology watson is in use by nearly half of the top 25 Life Sciences companies, manufacturers for the things ap lagss. What do you think of that . I do not. I do not. But i would say weve been building a company for seven years now thats also doing something equally equivalently productive, and probably i would say better. Than ibm. Id love to put us in a headtohead and see how they do. And but just so i understand because i hear this from people in the valley all the time when people talk about watson in fairness to you, frankly, not even to ibm in this instance, they say the technology, the stuff that deep minds is doing, for example, at google, and what done is just at a different level. Its at a different level. Having said that these guys are doing this in a very different way which is to say that they are actually reading and taking in huge volumes of text, things that amazon and google are not doing at all, at least as of yet. Again, heres the thing. Depending on the type of problem youre trying to solve, what you really need to capture is not what is publicly and easily accessible on the internet, but its sort of all these arcane heterogenus kinds of data. And when you frame the problem that way, people are the resources of an amazon and a google can go out and tesla, which is another example, can go out and collect unbelievable amounts of very specific information to solve these really difficult problems, that is hard to replicate. And i think what youre seeing is just a level of frustration maybe in Silicon Valley where there are a lot of people building extremely Meaningful Solutions who probably are getting somewhat outmarketed. Right. And i think are probably reacting to that. And i think maybe let me ask the question in this frame, what do you think of the stock of ibm . Would you ever buy the stock . No, never. No, never . Why never . Well again im in the business of buying things that i believe can grow, many meaningful multiples over, you know, usually id like to think about things in five to ten year periods. And thats a business that i think can generate enormous amounts of cash. I think theyll acquire really aggressively. And so that kind of a sphere has a lot of value to a specific kind of investor. Not my kind of investor as a Value Investor . Like a Warren Buffett . Up until such time i think that warren has realized that the capital allocation, he no longer believes it. But was that the right decision in your mind . At the time, yeah. For a Value Investor there was a period when ibm was a fantastic stock. They were buying back ee noormous amounts of their own stock which meant you could count on inflation. Let me make it a little harder for you. The other company of course that Warren Buffett has bought recently is apple. Yeah. Do you think of them comparably . Theyre obviously in different spaces but in terms of growth trajectory. Meares what i would say and ive changed my mind on apple somewhat. I think what that is misunderstood about that business and ill be the first one to say i misunderstood it is there is an emerging business there that none of us are really paying enough attention to which is the ios business. So all of the business of apps and selling subscriptions is extremely cruelly misunderstood including by me. And if you look at that business carefully now im starting to get actually slightly nor constructive on apple than ive ever been. The services the services is incredible. When you look at the amount of money theyre making it is probably one of the single Biggest Software businesses in the world now. So, what it really is, is hardware on the surface. And some really powerful subscription and transactional software underneath and i think that if you really value that you could probably get really constructive. Because its up a lot since you were on where if i listen to you i would be really mad at you. Although we cant ambien or something and thats right before it made the most recent upleg lets talk about like what it takes to be a successful investor over a long period of time. Right. If i aspire to be as good as someone like a Warren Buffett or somebody else we have to be good over decades. Right. The most important thing that we have to do is kind of divorce ourselves from psychological bias. So when we make mistakes we at least go back and say, how do we reframe how we think about problems so that we can actually think about things correctly . And in the case of apple what we actually did was had an entire offsite dedicated to apple and we walked away and expanded the definition of the things that we would invest in because we were seeing that we were making a mistake. Okay. So the watson you saw was, was it actually edisons watson . What thomas j. Watson, founder of ibm. Thats right. So its not watson and crick either so its none of those things. Blame it on being a millennial. Because i would have i wouldnt have thought sherlock holmes. I would have thought edison, right . Edison is on the phone calling, are you there mr. Watson okay were going to continue this conversation in just a moment. We walk to talk tesla and elon musk. U. P. S. Striking an exclusive sponsorship and shipping deal with the dubai world expo coming up in 2020. Our Morgan Brennan spoke with ceo david abney ahead of todays event. Morgan joins us from the u. P. S. Sorting center in new york city. Hey, morgan. Hey, melissa, thats right. So u. P. S. Ceo david abney says hes hopeful about that he hopes that handling all of the content for dubais massive worlds fair will give u. P. S. Name value in the fast growing legion. Of course we also talked about package deliveries with gang busters growth of ecommerce. U. P. S. Has struggled to keep pace. Something thats pushed up costs. The reason the company is investing 4 billion this year. Analysts have said the clock is really ticking on the companys ability to make more money on those residential deliveries. So i asked abney how investors should think about the companys time line. Well, you know, many people would like for you to make investment and then immediately start returning. Where many of these things, automation, adding buildings, adding aircraft, you have to first expand the money, or spend the money, and then you build up, so sometimes its a little bit of a lagging effect. Now we also talked trade. Youll recall that u. P. S. Was a strong component of tpp which has since gone away but abney says he is hopeful about President Trumps recent decision to renegotiate or try to renegotiate nafta rather than simply pulling out. Were certainly encouraged that he made a decision not to exit nafta at this point. And we believe nafta should be modernized. Its a 25year agreement. We would like to see it modernized into a 21st century agreement. Things like ecommerce didnt really exist it 25 years ago. Those are the things wed like to see change. Now u. P. S. Would also lower from benefit excuse me from a lower Corporate Tax rate. Theyre on track to pay about 35 this year as well as infrastructure spending. Companies also getting pretty creative with some of its pricing strategies for later in the year during the holiday season. Were going to dig into all of that a little bit more later this morning. Guys . All right. Morgan, thank you. Thank you. Im getting a picture. Aerospace, transport. If its moving around, i think you send morgan out to cover it. When we return were going to talk to aflcio president Richard Trumka. He was tapped by the president to give advice on manufacturing policy. He will join us. Join us. s her . Apparently, i kept her up all night. She said the future freaks her out. How come no one likes me, jim . Intel does just think of everything intels doing right now with Artificial Intelligence. And pretty soon ai is going to help executives like her see trends to stay ahead of her competition. No more sleepless nights. Were going to be friends im sorry about this. Dont be embarrassed of me, jim. Im getting excited about this we know the future. Were going to be friends because were building it. Good morning and welcome back to squawk box. It was an zer graham bell, not edison. Im worse than you. Im worse than you. You know what . Im glad i got yelled at by like randall stephenson. If im going to get yesterday at by someone. Its not edison, it was Alexander Graham bell with the telephone. With the watson thing. With the telephone, yeah. So were both at least youre not as a millennial you are not entitled. Welcome back to squawk box on cnbc live from the Nasdaq Marketsite in times square. You try, you know, just talking on tv three hours a day when youre, you know get up at 4 00 in the morning. Aflcio unveiling its executive pay list. The list tracks ceos income for 2016. Among the findings the average ceo made 347 times more money than the average rank and file worker. Joining us aflcio president Richard Trumka. It begs the question, and its good to see you, mr. Trumka, i guess thanks for having me back on. Is your idea, or as a remedy if you think a remedy is needed is shining a light on this . I guess thats the reason for this initiative, i think ive asked you before, youre not looking for congress or someone to pass a law capping ceo pay, are you . Well, were looking to do a couple of things. One, shed light on the fact that the climb of the royal ceo continues, they get a 6 pay increase in 2016 while workers got a 2 pay increase. They continue to expand their domain, if you will, the royalty. We think that shareholders ought to become more active, and lower those, and that workers ought to get a bigger share of the wealth that they produce. They havent gotten a raise or wages have been stagnant for nearly 50 years while ceo pay climbs every single year without exception. They try you know, theres a multifaceted conversation, and i talked to andrew about it a lot of times. Because you talk about pay for performance and youve got a guy like say lets say just for example jack welch or something. That goes from a company goes from 9 billion in revenues to 300 whatever it was during his tenure. Shareholders are enriched. The employees are added. Overall and theres a marketplace. Where a ceo maybe his for his services, he does well one place. You see hes got this abilities. And the marketplace dictates like an athlete or like an actress that makes 20 million in a movie, richard, and i dont know if you thats three an actress makes 350 times what the gaffer with the microphone makes, and yet, you know, you dont hear the same type of grousing about or a guy with a good football, a lefty thats got a split finger fastball makes 20 million in a year. It seems like if youre good at something the market dictates you make a lot of money. People that you talked about nice speech but it doesnt work. For every one of those ceos that you talked about, there are 300 or 400 that have had poor performance. And second of all the system is rigged. Heres how it works. Each year they get a pay increase, and they say, my peers are here. And each year they want to be above their peers. They just keep walking it up. Its actually in some cases pay per pulse, not pay for performance. They take a company into bankruptcy, they make a record amount of money. They leave a company, they get a record amount of money. The system is rigged, it doesnt work, they ought to be held down by shareholders, and those superstars that youre talking about, theyll find a way to make it to the top and get paid handsomely. I dont think theyre doing too badly right now. Their average is over 13 million a year. In one case Irene Rosenthal made 16. She makes 1100 times what she pace her workers in mexico. She sends jobs to mexico and makes 1100 times what they make. So its hard for workers, who havent had a raise for a number of years, to say, oh, gee those poor ceos. Theyre getting paid for performance. Chamath people perform, their prod t productivity is going up every year. Chamath this year spends his time in Silicon Valley and knows a lot of people who make a lot of money. And you have to hire some of them. Engineers are one thing. Im talking about people at the very, very tippy top. Is it rigged . Heres where i think i agree with richard. Which is that what we do right now is we allow companies to report in two different ways. We allow them to report gap and nongap and we allow them to essentially hide the cost of stockbased compensation. Which i think the numbers that richard speaks to, a lot of it is in stock. The reality is if you were forced to actually normalize the way every company reports, and forced them to show how much they actually pay in stock, you would have probably much more regulating effect on the entire industry. Because right now people believe many of these companies are performing much better than they are. When you factor in stockbased compensation theyre not nearly as performance richard what do you say to the argument that shareholders should be holding these boards, feet to the fire, and managing the compensation issue, but they dont, or theyve effectively approved this and theyve decided its okay. And theyre the owners of the company anyway. Well, first of all, the shareholders dont approve these in many cases. Its only advisory for the shareholders. Its the board of directors, the board of directors are appointed by the ceo. He appoints his or her buddies, they sit on each others compensations if shareholders wages up the shareholders take the vote and say dont you think they would other side of this just for the purposes of this because joe and i debate this and im usually debating. Im usually where you are, richard. Taking the other side of it, if shareholders believed what you believed dont you think they would oust these boards . You would think so. But their vote is only advisory. 100 of the shareholders could vote to say no and its not binding on the board of directors. But they can vote the board out, richard. Moreover, more and more and more of the shares are held by the management people themselves. Theyre voting themselves a pay raise. I think a lot of i think a lot of this is like theoretically possible. You know the idea that shareholders will all of a sudden pick up picks and shovels and show up at a Shareholder Meeting and oust a board. But whats the alternative . And the problem for most shareholders is, they get these proxy statements, theyre byzanti byzantine, you cant read them, you check off the boxes that say this seems reasonable and you go back to work. The real problem is we play this really dirty game of hide the cheese here. So if you actually allowed us to understand how truly companies are behaving, and how theyre really performing on an eps basis you would find that a lot of these companies that right now look profitable are not that profitable. And thats actually a reasonable act that regulates i think an even bigger concern the rise of passive investing. You dont have people actively engaged in a lot of these issues. Thats a great point. A lot of proxy Advisory Companies advising how Index Companies or etfs youre absolutely right. Richard, when you throw down just the inequality or the fairness issue, lets say you have a private company, lets say you have either a hedge fund or a private equity firm and some of these guys make hundreds of Million Dollars a year. Much more than ceos. Youve got some hedge fund and private equity guys that have made a billion dollars in a year. You look at what the average person at one of their companies earns and its not going to be 300 times what they earn. Its going to be 3,000 times what they earn. So are is that something that we should just say is wrong, and its unfair, and that you you cant do that . Or i just dont understand where you draw the line on whether you let, you know, just the private sector work, or whether you actually want some type of regulation that disallows this . Well, its Pretty Simple where you draw the line. You say to shareholders, give them the power to have a real vote. Say its a private company but say its not lets say there are no shareholders. Its a private company or a hedge fund or a private equity firm and its not shareholders. Should that person be allowed to make a billion dollars a year . Thats a red herring. Look, thats a red herring. Im just asking trying to figure out if you use they do what they want to do. Were talking about ceos that are working for someone elses company. They dont own the company. They have shares in the company. They keep gobbling up more shares and giving themselves more shares. Look what theyve done last year. They used more than 100 of profits to buy back shares so that their shares go up. Very, very little money was left over for Capital Investment or wage increases for workers. Thats what were talking about. A rigged system that lets ceos without regard to performance increase their salary, their average salary every single year. Last year, or im sorry like twix, it was by 6 while workers got 2 . Right, so, okay then you do think we need some type of laws or legislation to address the rigged system or just more transparency and more Shareholder Activism . I think its a little bit of both. Shareholder votes right now are advisory. You know that as well as i do. 95 of the shareholders say dont give him a raise. The board still gives those ceos a raise. Right. So shareholder votes need to become mandatory. We need to have more transparency out there, so that Everybody Knows what that shareholder or what that ceos actually making. Not that you have to pore through hours and hours and hours of 10k reports to figure out what the ceo is making. Okay. And they also ought to compare it to what they pay their workers. So that the workers know how the increase how theyre losing ground to their ceo. Okay. Appreciate your time here today. Thank you. Cant settle it all right now i dont think. But appreciate your time. Thanks. Coming up when we return were going to get back to our guest host. Well sound off on tesla, automation and tech. The trump bump. The trump bump. D, 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. When we return when we return, jim cramer live from the new york stock exchange. Well get his take on todays top stories. We all wish we were chamath, based on you know, youre doing pretty well. For a millennial. Or a millen. Your muscles look good, but we should be seeing more range of motion. Im fine. Okay, well lets see you get up from the couch. Im sorry, what . Grandpa come. At cognizant, were uniting doctors, insurers and patients on a collaborative care platform, making it easier to do whats best for everyones health, every step of the way. You may need more physical therapy. Ugh. Am i covered for that . Yep. Look. Grandpa catch grandpa duck woah ha there you go grandpa. Keep doing that. Get ready, because were helping leading Companies Lead with digital. 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. Lets get down to the new york stock exchange. Jim cramer join us now. Yet at the sohn conference, he said hes investing in tesla convertibility. He says you need to be on psych dellic drugs to understand the plan. You have to believe its not a car stock, but a tech stock. If they can do what tony says they can do, they would say, wait a second they could produce a lot of cars and make money per them, but i think what is so difficult well listen to this and say, wait a second, no real rigor involved, theres a lot of sure, we can do it, we can do it, we can do it. Amazon always had great cash flow, this one accident, but they get the model 3, do the million in 2020, it will go higher. I wish he would not be so hyperbolic, more circumspect and take it more cecily. Jeffrey gunlock saying you think outside the u. S. Is better . We have commerce bank, Second Largest Bank in germany reported a great number last night. If bank the america blew up the numbers, we would be excited. Like the call. I dont know if you want to do the short side, ive got to tell you on ibm, watson, very hard call, were going differently from other guys, let me tell you why, it would be less susceptible to the idea that it is kind of a ki. Thank, jim. Well see you in a few minutes. Later on cnbc adopt mitt an interview with bob iger, on closing bell, 4 00 eastern time. We will be. We will be. Our app. Or that you could book them right from your phone. A few weeks ago, you still didnt know if you were gonna go. Now the only thing you dont know, is why it took you so long to come here. Expedia. Everything in one place, so you can travel the world better. E trades powerful trading tools, give you access to indepth analysis, and a team of experienced traders ready to help if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade ltry align probiotic. N your digestive system . For a nonstop, sweet treat goodness, hold on to your tiara kind of day. Get 24 7 digestive support, with align. The 1 doctor recommended probiotic brand. Now in kids chewables. Im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. On our guest is also coowner of the Golden State Warriors. We want to get to tesla, is that like a backhanded compliment . Tesla is great, but i do want the Downside Protection . I think the specific thing and jim cramer just talked about, theyre in a period they have to generate cash flow. Why the convertible is beautiful, in this transition from consuming cash to generating it, the bonds gives you the Downside Protection you want, with 90 of upside of the the way we think about it is now you buy huge amounts the convertibilities. When they chart to show that then you start to bulk up and build up a huge stock position. The point is theres a lot of people shot this company, and the reason is because the amount of consumer demand this company has is unimaginable. In in four quarters, they have captured 10 of every luxury suv. Bmw saw 25 decrease in the 3 seri series, so this is a dangerous stock to be short. Theres clearly a desire by consumers to have this company within. So from our pet spect tiff as an equity allocator, the right way to play this right now how much more capital do you think they me . Management thinking its 10 to 15 billion, we think the worstCase Scenario is 20. We think this creates just complete Downside Protection. Its only an shall at every step they have tapped the capital market. Its a great point. The reason is because the consumer demand is there. Frankly its just unmitigated. Thats a runaway freight train. Every time we use a Financial Model to true to get in front of consumer demand, you lose, right in misunderstood amazon, google, misunderstood apple, facebook. And i think this company is very similar to that ilk. You own the Golden State Warriors. Part of them. Would you good i have it all up if you could dunk a basketball. I used to be able to. Honestly . He has it all. He can do everything. I used to be able to touch the bottom of the net, when i turned 40, and i tried to pull my hamstring. Im like andrew, wire skinny guys. I can touch the rim. With a tennis ball maybe i could dunk. Back in the day. I would hurt myself. You hurt yourself getting out of the chair. I did. I did. I admit. Thank you, sir, always aish mr. Its going to be a great series if it happens. Wait until we see hopefully us versus san antonio. That would be incredible too. We wish you love. Great to see you. Come back. Weep go to apple and and melissa, thank you. My pleasure. Make sure you join us tomorrow. Squawk on the street starts right now. You could dunk . This is how we do it this is how we do it good tuesday morning. Welcome to squawk on the street. Eye karl quintanilla. Pretty steady premarket opening. For, the dow has moved less than two tenths of a point. We get three more fed speakers today. We begin with president ales record run, the company w