Transcripts For CNBC Squawk On The Street 20160404

Teslas model 3 orders topped 10 billion in the first 36 hours. And that data leak of more than 11 million documents making its way around the globe. Why the Panama Papers have more than a few World Leaders under the microscope. Futures inching higher. Oil prices hitting some onemonth lows. Investors are waiting comments from fed president kashkari, and robert cap lylin. Talking about q1 earnings, whether the bar has been lowered enough where they have a nice p e going. Theres so many downgrades today, its daunting. These stocks have moved too much ahead of earnings. I think its true if the dollar starts getting strong again. Right now we see a lot of xraens where the numbers are too low. Im not buying into its over. I will buy into the idea that the fed governors will send the market down and buy. We heard from janet yellen. They said nothing will happen yet. That was the most sal yent thing that could probably occur. She said if the company is doing good, buy them. So companies that you think are undervalued example. Okay. Lets pick j j. Its been stuck here. You could say its stuck at the high of the range, but this company has been clobbered by the euro. Clobbered. Numbers go up. Alphabet, 60 of their biz as soon as from overseas. These are companies where you can raise numbers by saying we have easy comparisons. Nobody thought that could happen. Its the story of the quarter. The dollar turned out to be weak versus everybody. That makes it easy for the cfos to raise numbers. Thats the theme. Okay. Although nobody knows what the dollar will do for the remainder of the year. For the extent were going to look to the second half and wonder whether we will get another increase and have that divergence and see about 1. 10 again on the euro. Lets say youre ibm, which had a terrible currency hit. You no longer have to give okay, if we had done this. If the currency had done this. Those things have made it so its hard to value. You get one quarter, whether its procter, ibh, they dont talk about the dollar. They focus on the numbers. Apple. When youre on these conference calls, its all about the dollar. That narrative will disappear. Carl made the point, and well talk about ge in a moment. 20 multiple. Multiples have moved up to a certain extent on some of these stocks and names. Ge had been down much of the first part of this year. Now up 2. 5 . Youre right. I dont like to buy into a multiple. Hey, you want to pay this, i pay 1. 2 was you want to pay. If the dollar really and truly has peaked, and its been a long run, then i might be paying a shade less if janet yellen doesnt raise, the opportunities are so meager. Take a look at you know whats been screaming is utilities what does that say . Not that strong of an economy, good yields, better than treasuries. Consumer products goods. Most of these companies, good yields, Real Estate Investment trust. I can go on and on. And then a couple of high growth stocks. Thats enough do the job. Yes, some industrials seem overstretched unless the currency has peaked. I see s p earnings estimates through the course of the quarter are down 9 . That would be classic about why you shouldnt buy. I would tell you the groups people dont like, the drug stocks, not healthcare. Drug stocks and banks, you have had yes, bobby, lets call it 30 of the s p. Nobody wants this. Nobody. Theyre so hated you see all these faux bank stocks, like morningstar, faux drug companies, device companies, boston scientific, edward science, people are graph tating aw gravitating to the core names. I went over caterpillar this weekend. If you get any pickup, if you think theres any pickup in asia, you have to buy caterpillar even though it doesnt look like you should, or cummins. You have to buy those. Nobody wants to buy them but the end markets are doing better. Oil, 38 bucks. 26 was the bottom. Remember we used to fret every minute about oil . Now its fret some oil, not worry about others. Tesla once again rising in the premarket. Elon musk over the weekend treating that weekend preorders for the mod 38 have hit 276,000 as of the end of saturday. Thats about 11 billion worth of sales. The car goes for 35,000, though it options at 42,000. Some people tweeting their confirmation order as they made that 1,000 deposit. I have to echo phil lebeau. He was on vacation, everybody was bothering him about it. This is a phenomenon. I find that the phenomena crosses all bounds. So you go lets say youre going on interstate 95. You stop at a gas station. There they are. Your tesla chargers. This is becoming integrated into society. I know so many people, so many younger people who either want to have uber or tesla. One or the other. One you still have to drive though. At least for now. Autonomous cars are something tesla is focused on. You cant charge as easily in the city. Uber in the city. Tesla i think its not realistic that everyone will get a tesla in terms of timing. How about those deposits. Do we have sense as to their able to meet this potential demand . Whats that Company Going to have to do . I i mean, i dont know. I think its a high quality problem. Its a high quality problem. Its a high class problem. Yeah. Can you imagine if youre ford or gm, youre gm and you got your electric car. Wow. Eh. Audi has one coming out. They didnt think audi did not think there would be such rapid acceptance. Yeah. You have been saying to me over and over again, hes been telling us the Auto Industry is going bonkers. No. I think the longterm ramifications of autonomous driving are going to have a negative effect on demand eventually. The wall street journal does a story on china and their autonomous driving. You know thats the Growth Engine for sales. Theyre pushing hard with support from the government in a significant way. You have to discount some of this stuff. I know its ten years out maybe. Weve had one of the greatest rallies of all time. Ford was at 18 in 2011. Right. Look at that. Gm gives money to anybody that has some sort of new technology. They spent a lot of money on some of that. Nobody cares. They just dont care. Weird to hear rubenstein saying this morning that brazil is an interesting investment opportunity. The real. The real has been on fire. It was a universal hedge fund short. If the government changes hand, could be a growth youll know firsthand. Well see what it looks like in august. Might be a little early for brazil. Looks early for venezuela. Early for speaking of foreign countries, this massive leak of documents has revealed the offshore holdings of dozens of politicians and public figures around the world. Eamon javers has more. Theyre already comparing this one to the Edward Snowden leaks or the wikileak situation this is called the Panama Papers. Heres what we know so far. More than 11 million documents now stolen from a panama based law firm. Those documents detailing how wealthy people around the world hid their assets globally. So youre looking at data coming from the panamabased Firm Mossack Fonseca is the name of the firm. The reports are in the media that 12 current or former World Leaders maintain offshore shell companies, vladimir putin, the russian leader, his name does not appear in the data. But the data does detail the holdings of some of his close friends. We have a statement from Mossack Fonseca responding. We have not once in nearly 40 years of operation been charged with criminal wrongdoing. Were proud of the work we do, not withstanding recent and willful attempts by some to mischaracterize it. The department of justice in washington says theyre aware of media reports but dont have comment on this. All of this will set up a fascinating amount of speculation. Exactly who leaked this information to the german newspaper that was the source for all of this and why did that person leak the information . Well see story after story after story coming now. There are other shoes clearly to drop. This will go on for weeks. Eamon javers, thank you very much. That will shine a light on offshore activity overall. I remember when ubs got remember the swiss 5 kouaccount people were using to avoid taxes . This is i think this will show that there are so many rich people around the world. Put a backlash against the rich. Again, the rich are just under fire everywhere. And one of them is running for president. Im not getting out my violin. No. No. No. Tiny. I think its interesting that we are that cuba, which was always against the rich, right . Theres no statement theres no one against the rich anymore. In the countries that used to be against the rich. Then there marx, lenin, theyre struggling right now. Wherever they are, theyre confused. Remember when they said the world turns upside down. When we get back, the ge downgrade, also some calls on apple. Later this morning, a conversation with steven chazen, as his industry deals with challenges posed in the slump in oil prices. Another look at the premarket. The d music plays throughout the first stock index was created over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Man 1 man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Ge is getting a downgrade from bernstein. They say its been a great ride but time to move on. The stock is up 27 in the last year. Well talk to the analyst in the next hour. Basically they argue that alstons success, the exit on capital is embedded in the price. Risks to healthcare, diminishing returns and cost cuts. I think this is the downgrade to watch. Why . Because this stock, this company is changing rather radically. And i believe that even though the multiple is certainly stretched, if the Company Delivers on the worldwide growth, then you will say, woushwow, all i did was buy it. It has done nothing in years. It hasnt done anything, though its been a good year for it. Its almost a year ago exactly that ge announced its intention to essentially divest almost all the assets to ge capital. Thats moved at a fairly rapid pace. Yes. Now expected to applying to dosesifi itself. It wasnt until october when y triant put out the white paper i thought it was a realistic program. Buybacks, dividends. Were so dividend starved, high quality dividends, because theres so many low quality dividends out there. If you look at the kimber lees, the altrias, those have moved up. People want industrial. A lot of this is the way Portfolio Managers work. Give me an industrial yield with good growth. Bernstein says we think a lot of new catalysts that have moved it are done. Theres an eaton downgrade this morning. A lot of people feel this cant be sustainable. I look and see how many times did ge get beaten by Companies Just based in europe . Look at what happened with boeing. I know planes are purchased in dollars. Airbus has been killing it. That could be ending. I think there is a question as to their cost cutting at ge. Theyve been aggressive, but even a sense they could be more so. You think so . Yeah. And there may be more they can do. Trian is going to be focused on that. You know it. They also will. Theyre there. Its all friendly, kumbaya, but theyre still there. Percentage wise as a shareholder, its small. But as a voice its a big one. You have to admit, the endless selling of assets. They got another one down while you were away. Remember when they were like a leading bulgarian Credit Card Company . Remember those days . Never really as true as the market might have believed. But yes. King, i think polish mortgages. Huge. Large mexican real estate holder. Yeah. I always wanted to know what they used to have an ad about hungary. Hungary. There you go. You wanted them to be in hungary building new towers. Yeah. But not not at middle marquette hungary lender. Some of these im using. But i remember trying to get a handle on everything. It was hard. You couldnt be as smart with that portfolio. Maybe watson could handle that portfolio. You alwa you always bring it back to watson. Watson moved that stock from 120 to 150. You have to keep an eye on the artificial intelligence. We are in trouble. There was a time when a. I. Meant allen iverson, now it means ibm goes higher. The clock is ticking on us. Youre a simulation. I may be. Youre my own simulation. I would be a lot better if i was a simulation. Elon musk once suggested that a tableful of people were a simulation in his world. After those numbers, i think its true. When we come back, cramers mad dash, count down to the opening bell. More from the nyse in a minute. All right. Its the mad dash. We hahave about eight minutes before the opening bell. Here we are in april. Ive missed you. Last nights game is not indicative of the mets season. Lets hope not. You played a tough team. Edwards life science. Sometimes someone comes along with a truly revolutionary device. I remember about six years ago when my father needed a procedure. And they were for a heart. They talked about the idea of having to crack his chest cavity open in order to do it, open heart surgery. How that is the statistics are bad. What we saw this weekend is there were statusics reviewed for their valve, which doesnt require chest cracking. People say its working. A lot of people thought it was working. Doctors knew it was working for a long time. You have go through fda approval. This is not done going higher. This changes everything. The odds are so much greater for living, getting out of the hospital, doing incredible things. Lower death, lower stroke risk. Congratulations to Edwards Life Sciences for creating this device. An advancement in medical devices, advantages this company and will help people who no longer have to have their chest cavity cracked. Right here, the doctors all knew. The street was slow. Unless you had someone actually involved in facing the dynamic of chest cavity break versus some other method, you didnt know how amazing this was. This is a device not fully reflected. There will be profit taking. But someone should have bought these guys. 19 billion, 20 billion market cap. Someone should have bought them. This is it. This will change the world. It will save a lot of lives. I point this out because these have been public enemy number one. Healthcare, along comes something thats so fabulous for anyone who has a loved one who knows they dont want to give open heart surgery, it leads to death. Theyre not doing it for older people, this one. That test is to come. This is a remarkable device. Opening bell in about five and a half minutes. Ce ocean of Occidental Petroleum will join us after ringing that bell. More squawk on the street after this. In new york state, we believe tomorrow starts today. All across the state, the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in buffalo, where the largest solar gigafactory in the western hemisphere will soon energize the world. And in syracuse, where imagination is in production. Let us help grow your companys tomorrow today at business. Ny. Gov youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in just about two minutes. What a week in store. Some airline m a this morning. Seven fed speakers through the course of the week, including yellen on thursday. Baseballs back among other things. Though the yankee game getting rained out. Of course we got villanova. Not a school you went to. No, philadelphia, we have little to cheer for. But you have a team located a few miles from your house, you root for them. Especially a team about teamwork. I have to tell you, jay wright, not to do this, but hes built a team thats of players who individually would not be anything nba draftable first round. Together, its a Team Building contest. A very good team. Well see what happens. Thats what is great about march madness in general. Yeah. Even though its april. For someone like me, flyers, sixers, phillies nothing much. No. No. We have not gotten to alaska Virgin America. David cush talking about why branson is selling, and also the problems. Some are shocked that a company is as well run as alaska. Have you seen their Balance Sheet . Thats why they can balance what they need to borrow for the all dash decash deal. That put them in front of jetblue, and it seems like there was heated competition. Have you ever flown them . I think i have. To go to alaska. And seattle. They go seattle new york. I think its a major move by them. The Airline Stocks are six, seven times earnings. Well see what happens. Theres the opening bell. S p at the bottom of the screen. At the big boards, Occidental Petroleum honoring retiring ceo steve chazen. At the nasdaq, regeneron doing the honors. What a what a drug they have for atopic dermatitis. Sent the stock up 50 bucks. That drug is i dont want to call it lifesaving. What it really is is makes it so what is it. When you have that kind of dermatitis, its painful, visible. This is a shot. Again, regeneron has so many products. People just regard it as one company. I cant say enough about how good that company is. Cholesterol drug is good, too. Very smart company. Stock still down 22 . Biotech. Biotech. Valeant. While you were away, valeant went down. Really . It went down. Day one of my vacation it was mike pearson, see you later. Then we had mario coming back for starwood. You missed nothing. I missed nothing. You have to take your vacations. Its like a city bus, there will be another. There will be one more. One question to ask in the fallout from starwood what do you do next time theres an incoming bid from a Chinese Company . How do you approach it as a potential seller . Anbangs decision and lack of transparency as to why they chose to walk away after bidding, bidding again, seemingly having a deal yet again, is giving people pause in the m a community, its fair to say. That may be the important we can talk about marriott, the virtues of the deal, the billion more they have to pay. Next time theres an inbound offer from a Chinese Company, people will think long and hard about taking it or making them have the money in escrow. We still dont know. Theres been a lot of columns written. The journal had a good story today. But we dont know what happened. Let me ask you. The first deal looked like they had financing. Second one they did. The first deal they had financing all guaranteed. Right. If you want to call it that. They also had some guarantees on regulatory that made starwood comfortable. But the second time, the second higher bid than the marriott rebid they were not yet there. And then they withdrew. We dont know if it was somebody in the government who said this is speculation anbang youre done. If youre a serl and you get an incoming bid from a Chinese Company in the future, what are you willing to do or not do in terms of being sure that theyll have the ability to close. I dont know. I think you have to do a just say no situation. Or put the money in escrow. Given how much has come from china, how many deals have been done, this is not an unimportant thing to keep an eye on. Not at all. Ive been waiting for the chinese to come in and buy some of these low dollar oil companies. Maybe steel companies. Especially now that we put tariffs on. I think its a unical moment. Just the lack of transparency. We dont know the real reason. The day it happened, it came out, no one could believe it. It was like the chinese, arent they so rich . Cant they pay whatever price they want . What was the reason . We dont know. Claimed it was market market considerations. Made me think about primavera again, and what a good restaurant it was. Was a good restaurant. Maybe we would have been better off. What do you have today . You have anything special . I got nothing. This gap upgrade yes. Theyre talking about a more benign 4x environment. Thats what im talking about. Theres a low multiple stock that i i happen to like the company. They are talking about stabilization of gap. Talking about old navy doing better if thats the case, that stock is very cheap. Its a cheap stock. Theres a lot of retailers that are cheap. The ones that are expensive, but the others are very cheap because others have given up on them because of amazon. Target is 36 on gap. Speaking of amazon, well talk later this morning about what a puzzle thats been this year. Down 11 for the year after 118 up last year. F. A. N. G. , f. A. N. G. Facebook today, we got a negative note. Deutsche saying, look, maybe cant make the quarter. What a bummer note. The stock has been powering higher. We also know that theres some shortages in the oculus, whatever oculus and tesla. Theres not enough of those. A lot of printers. What will stop facebook . Nothing. Deutsche makes the point that the weakness historically, even on a miss is bought. Yes. You know, i hate to talk about 2018 numbers, but its not expensive on 2018 numbers. What number are you working with . Huge numbers out there. The main thing about facebook, it has become i dont know if you got to see the Facebook Article in the new york times, this is we used it after mad money, we do facebook live. This versus periscope, the adoption levels of this thing are incredible. People stop you on the street and watch you on facebook. Wow, you have a show. That facebook show is fabulous. Yeah, i have a show. Its 11 years old. That happens. Villanova last week, wow, you did a whole show on villanova. I loved that show. Its good you switched up from stocks. No, that was my facebook show that im not paid for and i give away. Thats the beauty of facebook, isnt it . Keep it coming, were not paying for any of it, but great. Thanks for the programming. What happened to periscope . Down periscope . Runs silent . What is it. Still kicking. Groupon is on a bounce. The investment arm of our parent, comcast, has agreed to buy 250 million of sixyear convertible notes. Wow. Its a separate fund run by the ceo of comcast, its a separate fun run to make money. If theres a joint interest, great. He can go anywhere he wants. The main they gave him 4 billion in capital, which is not bad. No. He can invest wherever he likes. The goal is to make money. Everything else that comes from it is also great. There is technology out there red shirt technology. Its very good. Keeps you up about how youre doing. You get depressed when you have cold weather. Not a lot of people coming in. Am i hearing you say positive things about groupon . I like the technology we use. What do you mean when you say the technology . You know, when youre doing red shirts, you want to know how youre doing at any given time. How is the night going versus previous nights. Its got the its what people use, groupons technology. Interesting. Under this deal, comcast will work with groupon to identify and implement potential Strategic Partnership opportunities. Its not too early. Still too early to buy zynga. I was going to ask you about that earlier. A little early on zynga. Keep us honest on that. By the way, definitely too early to buy sunedison. I havent taken a look at sune. You cant find it. 28 down. 28 cents. That didnt work out well for mr. Einhorn. Easy come, easy go, david. Its the way hemg fundge funds. Its only some of their money. Trade sunedison for the mets, can you imagine . Thats like trading babe ruth. Dow is down 33 or so. Lets get to bob on the floor. Good morning. Quiet open. A quiet session overseas. China has been closed because of a holiday. Europe is on the mixed side. Lets look at the sectors. We see a bit of weakness in materials, a bit of weakness in industrials. Alcoa, freeport, dow down a bit. Energy also a bit down. Oil is down. Oil has been trending downward for the last week. Still around 36, 37. Elsewhere, ive been asked a lot over the weekend what does the Panama Papers mean for the stock market . Its still too early to tell. I cant quite scrutinize what it means. On the surface that seems to be clearly implications for this a lot more Bank Regulatory scrutiny. That seems obvious. I dont know about the foreign banks. A number had subsidiaries named in these papers for setting up these offshore accounts. At the very least, more scrutiny by u. S. Prosecutors, specifically if there are breaches of the sanctions found there. Just generically t would make it easier for people who want to be more hawkish on this to argue for more regulation and more taxation. The answer to the question what does it mean for the markets, its too soon. You can see theres some clear implications. If you look at whats going on with the european banks, a number of them were mentioned in the papers as having subsidiaries. Theres been no allegations of wrongdoing. We should make that clear. Very small to the down side there. Europe is split today. But most of the banks are slightly to the down side. Same situation for bank of america, citi, jpmorgan, goldman sachs, fairly quiet open. Slightly do the down side. As for the generics of the market, a lot of debate about which way were going. I said at the end of last week, the market seems a solid hold. People were arguing over the weekend that we are overbought. Were 17 1 2 times forward earnings. The risk is to the down side. Were about 120 for the year for the s p 500. You do the math there you get about 17. 2, 17. 3. Not a lot of people are arguing that the earnings situation could get better. The risk is to the down side. I was surprised a lot of people feel the pain trade is higher. The biggest amount of pain they could have in the markets is the markets moving to the upside. The fed put a floor under the market. This was a major topic last week. Oil in china has been more stable. A lot of questions about whether the dollar is peaking or not. A lot more seem to be arguing, better than 50 , that the dollar has peaked. All of that would be for a higher market. Many are still underperforming. A small rise in the market will force more back ends. You can argue the market is a solid hold, but it seems the pain trade is higher. Is the ipo drought finally ending . We have been talking about this for two weeks. Where is everybody with the markets Getting Better . B. A. T. S. Global markets did announce that it whad terms for its ipo. 11. 2 million shares, 17 to 19. Thats small compared to 28 billion, 29 billion for nasdaq. Still a nice start for them. They will list on the bats exchange. Reason what happened in 2012, they did attempt to list. Didnt happen. They had a technical snafu. Finally i want to know, we have a new designated marketmaker on the floor, gts in the background, they have bought the marketmaking operations of barklbar barclays. This is a good indication that global banks like barclays are pulling back from marketmake in. Guys, back to you. Bob, thank you very much. Lets get to the bond pits, Rick Santelli at the cme in chicago. Good morning, rick. Good morning, carl. If youre looking at Interest Rates what youll walk away with is some subtle changes with higher yields on short maturi maturities. As you go to the long end, virtually unchanged. Yes. We could call that flattening, also consolidation, especially the long end post the employment report. If you look at a twoday of tens, you can see it looks like a downward drift. We are unchanged at 177. If you want to see whats going on, open the chart up to july of 2012. Thats the closing time of the yield, a bit under 1. 40. Yes, were off the yields but bouncing along the bottom when you get a macro view. If you look at a oneyear chart of bund yields which are hovering around 14 basis points or so, theyre alltime low yield close was in april of 15. Just about a year ago. It was seven basis points. You can see if you use the long end to garner exactly what type of Economic Activity is baked into the cake, it is excessive. Foreign exchange seems to be the whole game. Listen, if youre an average person, a stronger dollar and very low pricing pressures is about as good as it gets. If youre an investor you would rather have the dollar weaker to help multinationals. Its kind of which side of the fence youre on. Dollar yen, the dollar is at the worst levels since halloween of 2014. I like opening this chart up to a tenyear chart. You can clearly see how significant that 120 reversal was. On that big chart, 110 110 is what most traders are looking for. Considering were at 111 and change, were getting ever so close. On the dollar index, oneyear chart, october since we were here, but right around 94 on this chart, also very, very big technical level. Less than a half cent from where were trading. Carl, back to you. Rick, thank you very much. When we come back, Occidental Petroleum ceo steve chazen live at the big board. The dow down about 18 points. Back after a short break. Free wifi is nice but also risky. An open network isnt encrypted, which means your personal information isnt safe. Movie times . Great. Online banking . Use a secure network. Protect yourself from prying eyes. The more you know. Just rang the opening bell. Joining us now is steve chazen, ceo of occidental. Retiring later this month. You have a fabulous Balance Sheet, you have amazing prices. Is it time to start buying the guys who are in trouble . Well, you know, people wonder why theres no activity. I come up with four reasons. One, the asset qualities of most of the companies in trouble is poor. They have break evens, maybe 80 in oil. They have lousy Balance Sheets, if you buy them, youre stuck with lousy Balance Sheets. Third reason is that a lot of optimism still by the management that it will be okay in six months if they can just make it. Finally, unlike other industries, the synergies and combination of bnps is real low. If you buy a packaged goods company, you close the factories, close the pipelines, fire the salesmen, have a lot of synergies. Maybe 3 bucks a barrel, not enough for the breakage. The money made in the business and in the old mergers were integrated to integrated, they could do the same thing a manufacturinging business could do. Very tough to see the synergies. When you explain why youre doing it to your shareholders which presumably you have to do, you have a lot going against you. I always make myself write three reasons why im doing this. If i cant come up with three, i throw the paper away. When i look at what youve done with the Balance Sheet, how you stopped buying stock back. You seemed to have a great call on lower and longer. Is it still going to be lower and longer . When we hit that 40 level, oil came to the markets. Somebody years ago once told me i could forecast when or how much but never both. Ultimately the price will recover. Probably longer than people think. In any case, doesnt matter what i think. You have to manage your business to make it through this. All the money made in the oil business is made in the downturn. The 100 oil stuff, it gets wasted. I have a strong word, but wasted well use. In the downturn is when you have to make the right decisions. Thats when you come out stronger in the end. Most importantly thats the thing a manager can do in this downturn, manage your way through it, pick up stuff that makes sense, adds to your business. But in the the industry peaked in 2011 on a cash flow basis. Right. It started to turn negative after that. Everybody was spending a lot of money like a sure thing. In answer to your question to jim about consolidation or the lack of it, do you then expect well see those bankruptcies that we keep waiting for . Is that the time that other companies then come around . Where does it all play out for these guys . The problem in bankruptcies is these are the Weaker Companies with poor quality assets. Nobody wants to make their portfolio worse. Not delibetely. You might by accident. Ive done it by accident. So, you know, the you really need to figure asset quality is everything in this business. Everything. Its not a financial business first, technical business. We are focused on the permian basis, largest producer by a factor of two over anybody else. We did that deliberately because theres so many other zones to produce. You always want to buy get the option for free. You pay for the base production and get free options. When we went into it 15 years ago, that was the purpose. A lot of oil. You could see it. Didnt know how you would get it out of the ground, mind you. I sure didnt. I think thats the key to success in this industry. When you buy, you have to buy a lot of optionality. If youre just buying production or buying whats known, you have to rely on Product Price, and there isnt anybody ive ever met who is any good at Product Price over time. Really quick, im curious how you digest headlines about doha, saudis, freezes, iran. Is that all madness . What makes sense . I actually know those guys. I had a guess. I think americans forget that a lot of what they say is for internal consumption. Not for your consumption or mine or anybody else. This is for their local consumption. An iranian for example cant say my production i have to spend a zillion dollars to get production at 2 Million Barrels a day. He says well get to 2 Million Barrels a day. You have to break out whats for internal consumption versus whats for your use. I think the same thing is going on in all these people. All right. Thank you. Your humility is unbelievable, sir. You have this one right. Thank you. Thank you so much. Thank you. When we come back, stop trading with jim. Sup jj, working hard . Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. And to help you accelerate,ast. Weve created a new company. One totally focused on whats next for your business. A True Partnership where people, technology and ideas push everyone forward. Accelerating innovation. Accelerating transformation. Accelerating next. Hewlett packard enterprise. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Time for cramer and stop trading. Not just opening day, not just finals. Apple. Credit suisse talking about the service revenues. They may even double. Thats the story. 14 billion, maybe close to 30 billion as more and more people part of the apple ecosystem. Whats on mad tonight. We have korn ferry. I wanted to hear about what is the deal with why people are so glum and yet business is good. Glad to be back with you. Guys, i missed you. Well see tonight. Well see tonight and go wildcats. When we come back, breaking data on factory orders. And can you explain why you recommend synthetic over cedar . Super food . Is that a real thing . Its a great school, but is it the right one for her . Is this really any better than the one you got last year . If we consolidate suppliers, whats the savings there . So should we go with the 467 horsepower . Or is a 423 enough . Good question. You ask a lot of good questions. I think we should move you into our new fund. Sure. Ok. But are you asking enough about how your wealth is managed . Wealth management at charles schwab. Good monday morning. Welcome back to squawk on the street. Im Carl Quintanilla with simon hobbs, david faber, sara eisen is off today. Lets get to Rick Santelli. We have the february read on factory orders. Down 1. 7. We were expecting a number right in that ballpark. Down 1. 7 is the weakest since the last read of the year, which was minus 2. 9. There was a subtle revision from up 1. 6 to only up 1. 2. If you take out transportation, it was down 0. 02. Durable goods orders, down 3 . Thats definitely a little bit more aggressive than we were expecting. We were expecting 2. 8, so its close. The last time we were down 3 , would have to go back to its quite a ways, you will have to go back all the way to two years, march of 2013, we were down 3. 4 . When luke at x transportation, that was down 1. 3. Nondefense orders, thats nonaircraft, thats down 2. 5. Thats a Capital Investment proxy. Thats also a weak number. Shipments versus orders, down 1. 7. Neither were revised. Both were negative last month as well. If this is the first major set of indices after the labor report, theyre a bit on the weak side. Simon, back to you. Interesting, thank you very much. Market essentially, of course, hanging on to last weeks almost 2 gain, which takes the s p 500 twomonth rally to 8 . Donald trump is telling the Washington Post that a recession is near. Economic conditions are so perilous, he says, that the country is headed for very massive recession, and that its a terrible time to invest in the stock market. Lets bring in the chief Market Strategist from oppenheimer, and oil analyst from cowen and company. John, what mr. Trump said, the back drop for the stock market looks sound given you have a dovish janet yellen and at the same time relatively robust data coming through on friday. How then do we weigh what donald trump is saying . Simon, with all respect to mr. Trump, he has not shown to be very accurate. I think calling the for a recession is certainly premature if anything. And we continue on in this expansion mode. Its intere its Interest Rates are cooperative. We have a stabilization commodity prices. Stabilization overall and particularly in the price of oil of late. And jobs keep growing. Thats a good thing. Not inflating terribly. If anything, the fed has good space here to work to reflate the economy. Nonetheless, john, well see what happens with the fed minutes on wednesday after janet yellen basically damps down that hawkish talk. We still do have Interest Rates close to zero. Thats what janet yellen did last week. She said theyll stay down there. That would indicate that the economy is certainly to the Strong Enough for the fed to be raising rates. Simon, i think its less the economy is not doing great but more reflecting on the International Economies around the world which are still in recovery. Were in a modest expansion. The real problem is wage growth. We would think its about algorithms, the offices robotics on the factory floor. And technology, lowering barriers of entry for many businesses whether its a mom and pop operation or a multinational cooperation. Make it a tough slow growth environment but not recessionary. We think political rhetoric needs to be separated from the real economy. Sam, where are we now on oil prices . Clearly way below 40 a barrel. In fairness to mr. Trump, can you argue thats a demand phenomenon, an indication of where we may be going or still about supply and an International Factor . Demand is a mixed bag. I think gasoline data shows a strong consumer which is tied to payrolls which are going up. The data has been weak. A big piece of the move from the bottom in oil to here did have to do with the fact that an expectation that Interest Rate also stay low and the dollar might be weakening. So some momentum has come back into commodities. It does seem to have stagnated because demand is not quite Strong Enough to get us over a hump. What do you think the landscape looks to the end of the year, sam . The next data point the next data point is this opec meeting in doha, qatar. I think expectations are muted for that. Saudi has some commentary that they may not be willing to participate in a freeze if iran doesnt. Expectations are leaning bearish for that meeting. Before that, theres not going to be data. I would expect volatility in a range. Until then, it will come down to how fast the u. S. Cuts production, which is, itself, a function of price. The longer prices are down here, the more supplies will fall in the u. S. , that will lead to International Producers responding. I would say until april 14th, dont expect to see too much activity. Okay. John, i want to mark out that we have janet yellen not only the fed minutes on wednesday, we have janet yellen on thursday in a discussion with ben bernanke, volcker and greenspan. Everybody will have to watch that. As an investor, where do you think the stock market goes . I think people are concerned about Earnings Growth in the First Quarter with consensus analytics looking for a drop that woulden even more than it was last time. In the First Quarter we were dealing with headwinds, uncertainty. The headwinds primarily coming from questions related to currency, economic growth, where the price of oil was going. Of course the dollar, which is moderated significantly. If you consider that the dollar has deprecated versus nine out of ten g10 currencies, and 24 emerging market current sis, cy have appreciated since last friday. Just a quick question to wrap this up. What are we at, heights for the year now on the stock market . When you say for the earnings season it will be poor, people are revising down estimates, is that in the price we have on the board now . Do we have to work our way through that . I think we may trim a little bit from the levels that we are currently at going into earnings season. But i think as we go into earnings season, well begin to see the market once again strengthen as a result of likely better guidance with prospects that the dollar will remain in moderation to weaker mode which would be good for u. S. Multinationals. Good to see you both. Thank you for sparing the time. John stoltzfus and sam margolin. When we come back, results from the allamerica economic survey. And Alaska Airlines buying bransons Virgin America. A lot more on that deal in a moment. My name is melissa snyder, im a Customer Relationship manager with pg e. Ive helped customers like plantronics meet their Energy Efficiency goals. So you save energy and you can save money. Energy efficiency and the environment go hand in hand. And i love how pg es commitment to the environment helps a Community Like santa cruz be a better place to live. And being able to pass that along to my family is really important to me. Just being together and appreciating what we have right here in santa cruz. See how you can save energy at pge. Com. Together, were building a better california. Amazon was one of last years performers, but the socalled f. A. N. G. Stock is trading its peers, down 11 . Does this make it an opportunity or should you avoid it . Here with us is bob tech and Aaron Kessler. Aaron, why did yo think they wo be a downgrade . We expect the pace of Market Expansion to grow, then q4 was a disappointment because margins were slow. Fulfillment expenses were higher than expected. We think some of that is onetime. That got us a bit worried. But the prospect of increasing also amazon web basing competition. You still think its going to rise, the price target is 655 . Correct. 655, that was down from a previous target of 760. So less upside we expect. Gentlemen, let me interrupt briefly. Getting some news on some fed officials from the fed president. Steve liesman has that. Boston Bank President eric ros rosengrin saying markets may be too slow in pricing in rate hikes. He says the market path of rate hikes is too low. I believe it will likely be appropriate to resume the path of gradual tightening sooner than is implied by Financial Market futures. Eric rosengren one of the most dovish voting members of the fed open market committee. He says the u. S. Has weathered foreign shocks well and risks from abroad are easing. He expects a Strong Economy this year and full employment along with rising inflation. He says it will rise gradually. The big problem is this market is priced from zero to one hire this year. He says that is too low, but he does not give a number for the number of hikes he think is appropriate. The probability of a june rate hike is 20 , 25 . The fed hes not contradicting the other fed members, is he . Hes saying watch the dots. I think he is contradicting a bit in the sense that first of all he has to know hes perceived as a dove. When a dove comeses forward and says the market has this price too low, you have to stand up in your chair and Pay Attention in the sense that it puts june more on the table here. It make s me think hes thinkin two, possibly three hikes this year, especially if the economy does better than its currently doing. You had a bunch of guys say april. I dont think thats what rosengren is talking about i think hes pointing towards a possible june hike. As you said that percentage of probability is very low right now. Steve, thank you very much. Markets still relatively flat overall, though some other instruments may be moving. Lets return to the conversation we were having about amazon. We had Aaron Kessler joining us on the phone. He was suggesting 655 might perhaps where would go on amazon. Bob peck, you are more pessimistic. We think amazon is a phenomenal company. Our two concerns is that jeff bezos has lowered the bottom line. Investors love to see that. Then he tends to reinvest. You can see margins under pressure as we go forward here. You tie that together with more of the valuation, precash flow multiple of 35 times or so for a top line grower of 25 . So a peg of 1. 5. I dont think its cheap, given youre about to go into investment mode. Its never been cheap, bob. Never. Yeah. 35 times pre cash flow is a high multiple. For those who say you can never buy it, if you think youre waiting for it to get cheap. Yeah. A lot of investors tend only to look at ebita. But you get a pull back here, and expectations get readjusted particularly on the margin Going Forward. It gets more interesting. Do you believe aws has met its match. We put out a 50 page piece today, you have google and microsoft going much stronger, you have diane green come in over at google. You will see more competition. But the big takeaway from speaking to experts, amazon is positioned well. Aaron, how would react to that analysis . Yeah. We would agree with some of that. We will see more competition, so the perception of more competition will be a concern. In terms of revenue growth, thats slow. Margins around 5. 5 . Longer term we think operating margins can double. Part of that high valuation is the valuation that the margins are still under pressure. What do you like at the moment, bob . What do you think will weather well . Our top two picks are google and facebook. We think both have strong fundamentals, improving margins, accelerating revenue growth. Those are our top two out of the f. A. N. G. S. Aaron what is your main area of interest. Google we like now from a valuation and risk reward standpoint. Bob, just come back to your valuation of aws, you said 100 billion. Correct. Give me a sense of how you come up with that number. Sure, youre talking around 12 billion, 13 billion of revenue. You look at comparables of 6, 7, 8 times multiple, its fair given youre growing 60 , 70 . That equates to a 12, 13 times ebita multiple. Amazing to think. It wasnt that long ago they were not breaking out aws, so we didnt have is a sense for the business. Is that responsible for what has been that incredible move last year in the stock . It is. Also the operating Margin Expansion people are excited about. We had four quarters of that. I would expect them to start reinve reinvesting. Thank you both. Bob peck and Aaron Kessler joining us. Coming up on the program, a big call on ge. One analyst is suggesting that the run is over. More on that after this break. Eligibility . Oe you may think you can put off checking out your Medicare Options until youre sixtyfive, but now is a good time to get the ball rolling. Keep in mind, medicare only covers about eighty percent of part b medical costs. The rest is up to you. Thats where aarp Medicare Supplement insurance plans insured by Unitedhealthcare Insurance Company come in. Like all standardized Medicare Supplement insurance plans, they could help pay some of what medicare doesnt, saving you in outofpocket medical costs. Youve learned that taking informed steps along the way really makes a difference later. Thats what it means to go long™. Call now and request this free decision guide. Its full of information on medicare and the range of aarp Medicare Supplement plans to choose from based on your needs and budget. All plans like these let you choose any doctor or hospital that accepts medicare patients, and there are no network restrictions. Unitedhealthcare Insurance Company has over thirty Years Experience and the commitment to roll along with you, keeping you on course. So call now and discover how an aarp Medicare Supplement plan could go long™ for you. These are the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Plus, nine out of ten plan members surveyed say they would recommend their plan to a friend. Remember, medicare doesnt cover everything. The rest is up to you. Call now, request your free decision guide and start gathering the information you need to help you keep rolling with confidence. Go long™. We built our factories here because of a huge natural resource. Not the land. The water. Or power sources. Its the people. American workers. They build worldclass products. And that builds communities. And a better future. For all of us. Because making something in america means so much, to so many. Weathertech. Proudly made in america. Dow coming off the highest close of the year. Just about 200 points from 18,000, where it has not traded since july 20th. More squawk on the street continues in just a moment. Breakthrough. This morning i read over 4000 articles on leukemia. In less than a second. speaking japanese i can understand euphemisms, idiosyncrasy and complex metaphors. I know every detail of every public Quarterly Report in the last 20 years. And im just getting warmed up. Hello. My name is watson. Together we can outthink the limits of whats possible. Welcome to the cognitive era. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Keep your eye on shares of general electric. The Company Getting a downgrade from bernstein this morning. Joining us is the Senior Analyst at bernstein who analyzed that report. Steven, good to see you. Thanks for having me on. You walk us through all the catalysts. You say its been eventful to say the least, then you talk about this sort of it sounds like a lack of faith that theyll be able to excuse on some of these moves. Why is that . I think its more the stock is up over 30 the last 12 months. Trading at 21 times. Theres no margin for error from here. The catalysts to happen are already baked in, whether its the fed desifiing, spending new capital as they raise new money. Oil and gas coming back. Aviation working perfectly. Austin integration going well. A number of things have to be executed flawlessly. On a risk reward basis you have these risk while the stock has risen. We look at it and think its more equalized now. And that, to us, spells more in line performance rather than significant believe that your go from the low 30s to the mid 30s or higher you have to count on additional catalysts, bigger inflection on growth and margin. Count on the Digitalization Initiative getting traction early. We have to see that get monetized sooner. A lot of things have to go right for this stock to work and outperform. In a way, is it a call on Global Growth and a lack of faith that it will accelerate . No, its a premium multiple company. Its a call a lot of that Global Growth is already baked into the stock. As a premium multiple. What it means is you start to look at some of the companies at lower multiples who could also benefit from that Global Growth but who dont have that baked into their share prices. We had a discussion this morning about investors being dividend starved, especially high quality dividends. On the list of things where you could be wrong, is one of them investor appetite for dividends that appear safer than others . We can always be wrong on a lot of things. Were constantly thinking about that the dividend at ge is certainly well known. Market risk sentiment could veer that way. Weve seen the dividends play out at ge. Its already increased dramatically. We expect that to continue. This year its flat, but Going Forward its well broadcast that it will go up. If you have an incremental dollar to spend, i would put it over to honeywell, a stock trading more like 15 1 2 2017. They Just Announced a new president and coo today, a phenomenal choice to take over for my cote once he goes. You talk about some of the risks in healthcare which is going to be a bigger issue as we get closer to the election season. Can you walk me through the internals with things like ultrasound. Youre seeing year after year of price reductions. Thats typical in that industry. Ge has been dealing with that where they have to take the costs down faster than they take the pricing down. Pricing is coming down on the order of 10 . In an industry like that thats demanding, you better come up with new products at higher growth margins and better cost dynamics. Healthcare has turned into a margin and cash story for ge instead of a growth story. Im looking here at some notes that trian put out last october when they entered the stock. Theyve done fairly well since then. They talked about them committing to 20 billion of incremental net leverage. I wonder if thats something they might do that would enhance the buy back and just use the Balance Sheet a bit better, that might be something that could move the stock from here. I think its interesting that trian, after putting out that presentation, sold down part of their position earlier this year. The point about incremental leverage is right. There are between 20 billion we think north of 20 billion, 25 billion, once they are desifid they will take on that incremental leverage and apply it to m a and buyback. From our perspective, this has been well broadcast for at least six months, and shoulding expected. We could expect that to provide a support for the stock on the downside, but dont see that as incremental news. Your downgrade was not just of ge, but you seem to be having a tougher time with valuation across the board at least for some of these names in the sector. Thats right. Thats more a statement that, again, the premium multiple companies we think have limited multiple expansion from here. Youre already paying north of 20 time force these names. We think theres more opportunity and more likelihood of seeing some multiples expand for stocks that are trading more in the mid teens or low teens, 12 to 15 times, those stocks, rather than the ones trading at 18 to 22 times. You mentioned some digital efforts not gaining traction perhaps for a while. Are you implying a are we being oversold some of these digital promises down the road . Almost every one of my companies has a major d digitalization them. The question remains is that just the cost of doing business, the same way your iphone adds functions and features every year but you pay the same amount, will that happen in digital or will Companies Get paid more and sell more and gain marketshare . I think ge is one of the leading efforts. They have done great work. But it takes years for this to actually make a material difference to the company. Theyre starting from a good position. They have exciting things to play out. Its a question how long it takes to show up on the bottom line for those initiatives and something that moves the needle for the company. Steven, appreciate you coming on, talking about the call. Thank you very much. Thank you. Lets get to sue herera for a cnbc news update. Good to see you. Heres whats happening. A suicide bomber rammed his car into a security checkpoint in baghdads northeast suburb killing six troops and injuring 13 others. Another Suicide Attack 200 miles southeast of the capital killed at least 14 more. The attacks come as isis has lost ground on a number of fronts in both syria and iraq. The amtrak train that derailed near philadelphia sunday killing two and injuring dozens more was removed from the scene overnight. The train hit a backhoe which was on the tracks. Authorities say the train was traveling twice the speed limit. The northeast being battered by snow for the second consecutive day. Up to four inches of snow falling in the hartford, connecticut area. Up to 10 inches of snow is possible in some western parts of new york state. And a 20yearold woman suffered serious injuries after her car plunged down an iconic cliff on canadas east coast. The vehicle breached the gate at the popular signal hill in st. Johns. The driver either jumped or was ejected just before her car crashed down the cliff. That is the cnbc news update. Simon, back down to you. Thank you. Top gainer on the stock market today, Virgin America. Alaska air winning a bidding war for Richard Bransons stake against jetblue. Alaska paying 57 a share in cash, 4 billion in total if you include the debt and aircraft leases. For that, alaskas ceo gets slots at san francisco, jfk, laguardia and washington reagan. Their network perfectly compliments alaska. Were strong in seattle, portland, anchorage. Good strength in california. But theyre extraordinarily strong in california. They have a solid base in san francisco, a solid base in l. A. We think together we will be the airline on the west coast with the largest market share. We think the deal makes all the sense in the world. Its only 15 months since Richard Branson took Virgin America public at the nasdaq. Stocks were riding high then on low oil prices and because the new giant four would restrict capacity. Inju virgin did warn investors about the risk of predatory pricing from bigger rivals in februarys earnings call, david cush called the current pricing in the dallas market as nothing short of toxic. Now he and branson are sellers. It came down to price certainly. That we have a fiduciary duty. We take that seriously. Secondly, this is not about today. Its about down the road when maybe the industry is not as strong or oil prices go up. What happens when you have a 2 billion airline like Virgin America competing with 40 billion airlines. Its a good time do it when carriers are strong rather than when carriers are weak. Up next on the program, more than 275,000 people are ordering teslas new model 3, a car that wont start production until late next year. More on the elon musk big weekend in a moment. Im val, the orange money retirement squirrel from voya. Val from voya . Yeah, val from voya. Quick question, what are voya retirement squirrels doing in my house . Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . No, im more like a metaphor. Okay, a spokesmetaphor. No, im. Youre a spokesmetaphor. Yeah. Ok. See how voya can help you get organized at voya. Com. Lelts send it over to dominic chu. Brocade agreeing to buy ruckus wireless. Shares of ruckus sharing about 40 on the news. Brocade losing almost 15 . Pacing for its worst day since august of 2011. Still big moves today in terms of Wireless Networking and computer networking overall. Ahead of tomorrows wisconsin primary a major warning from gop frontrunner, donald trump in a wideranging Washington Post interview published this weekend, trump said i think were sitting on an economic bubble. A financial bubble. He goes on to say im talking about a bubble where you go into a massive recession, hopefully not worse than that, but a massive recession. His advice for wall street . This is a bad time to invest. You have a situation where you have an inflated stock market, it started to deflate, but then went back up again. Usually thats a bad sign. Joining us is rick tyler, former National Spokesman for ted cruz, and a surrogate for the trump campaign. Good morning. Good morning. Can you walk us through what you think he is seeing about the stock market that he maybe didnt go into detail with with the post . Is this about asset valuations . Is this about Global Growth slowing downton abbedown down . I think its both. Were seeing a low growth rate and continuing to pile up a National Debt thats unsustainable. Youre seeing trade deficits coming in. All of those factors, and a genuine mistrust of the numbers. While the president goes on air and touts this wonder. Economy we have, people are still hurting on main street. As incomes continue to basically stay the same, were seeing the cost of living continue to escalate. History has shown us every five to seven years we go through some form of recession, sometimes more dramatic than others. This is basically the continuing loop we have now. Our economy is not back like the president continues to tout. Rick, trumps career has been based on assessing value of various assets and properties. Do you see a problem with the candidate saying this . Look at the statement itself, its a contradiction. Hes saying were in an economic bubble. Where is this economic bubble. As scottie said we are in slow growth and we need to break out, but where is this economic bubble . Only 20 of economists today think well go back to recession. He has not pointed to that, which suggests he sort of made it up. I dont know what hes pointing to. I guess hes trying to scare his base into voting for him because of some impending recession. There doesnt appear to be signs of impending recession. Maybe he gets a hedge. Scottie, does his answer to some of these problems, mainly renegotiating trade deals, going to be enough when you talk about such massive bubbles in debt . I think it is a big part of it. We allowed our companies and industries to benefit by moving outside our borders which hurts our workers at home. I think the Commerce Department Just Announced factory orders are dropping. Youre seeing this reduction. Factories are still shutting down and moving outside the country. Thats part of the problem. We cant complain about things internationally unless were willing to keep them at home. Mr. Trumps whole idea is talking about jobs, making sure jobs go to american workers. Those are things like ttp and tpa that cassoka kasich passed. Senator cruz, when asked about recession what would his answer be . Its clear we can do better, but when mr. Trump talks about undoing trade deals which trade dealsundo, and he talks everything he talks about points to trade wars. That wont help american jobs. That wont help the american consumer. That will create trade wars, and its just a contradiction. At the same time he predicts a massive recession he says he will pay off the debt in eight years, when the National Tax Foundation looks at his own economic plan, he creates debts and deficits as far as the eye can see. More so than any other candidate has proposed in any economic plan. I dont its just a series of contradictions. Scottie, if you take what donald trump is saying literally, that were going into a massive recession, if he has there are notably two paths, one is the repatriation of undocumented migrants, the other is he will impose very large trade tar writ iffs on go coming from china. Would you be able to go forward with those policies or say this is way too disruptive given whats already happened . We have a trade imbalance now of 400 billion. Something has to happen in order to correct that whether thats encouraging you dont take the idea of saying youre not going to encourage tariffs off the table. Thats like going in to play poker but showing all your cards on the table. I think sitting there, between the two options you gave me there, you have to assess what is best for the economy at that point. That is what mr. Trump is proposing. Hes not taking anything off the table when it comes to business and economy. Obviously its changing. If we do head into recession, you never know what sort of dramatic steps might need to be taken to protect the american worker. One thing im guessing you two might be able to agree on is whether or not this piece in barrons arguing that john kasich is the only candidate that can beat Hillary Clinton and work with the congress is kasich is that misguided, rick. Kasich won one state, hes done well there, hes never been defeated in ohio. But he cant win anywhere else. If he cant win anywhere else, that means other supporters dont want to support him. Hes using the old line weve heard over and over again, elect a moderate, well win. Except we always nominate mo moderates over and over again, and we lose. Scottie, thoughts on snl . It was very cute, very funny. Its an honor to be played by sicily strong. Thats a badge of honor that people have taken on. Im kind of grateful for it at this point. There is no higher compliment. Youre part of the zeitgeist now. Thank you very much. Good to be here. Lets get to the cme group. Rick santelli with the santelli exchange. Great topics. I think well stick with those. I would like to welcome my special guest. Peter, youre my type of high yield junk corporate guy. The conversation we had between the guests and carl was about economic bubble, recession. One thing we know the bounce in this postrecession recovery has not been good. How do you think the economy would act should we eventually, and you have to eventually slip into a recession, is it going to be a tougher recession . A deeper recession given how weak the economy was in your opinion . I think it will be a shallow recession. I do think were seeing this globally coordinated policy from central banks. Whether it can get us out of recession and into liftoff, i highly doubt that. They will act much more aggressively and quickly. You see it already in the ecb. Theyre acting to help the banks sooner than we would have in the prior attempts of avoiding recession. Youll see Aggressive Central Bank policy. That will make anything shallow probably longer but definitely shallower. We have a quandary here then. Youre telling me that test tubes inform Central Bank Policy around the globe can affect the outcome, duration, severity of a recession. On the other hand what we know is that we never really reach escape velocity in the u. S. , the u. S. Is the best of the bunch. How is it you can believe that without reaching escape velocity, once we go the other way, rates never normalize high enough, how is the fed possibly going to deal with that when they never took the opportunity to the upside to reverse some of the policy . I would have liked to see us go through more creative destruction. At first it looked like they were doing the good thing by letting volatility take place. We need to get off zero rates, that would be a good longterm curement instead they keep putting bandaids on this. Draghi is right, they will not cut rates anymore. Negative rates are harmful to banks and the economy as a whole. Well see more q e, more attempts at ltros, financing programs. Ways to get money feeding into the economy. Thats all theyll keep doing. Thats a more ef fengtive effe tool. While all this liquidity is not going to be drained out, how will the highyield market respond given the market is small, liquidity is less, should any glitches occur, isnt everybody going to hedge highyield portfolios with treasuries . Is that going to be overzealous . Your final answer. I think youre supposed to be letting go some of the highyield position now. Its been a trade thats worked well. You are not seeing oil rising. Definitely seeing slowdowns in parts of the economy. I would be taking advantage of this, selling into the rally, becoming more defensively. Same on the equity side. Ive been calling for 2100 on the s p 500. Sell into the rally, be prepared for a pullback. Im much more comfortable in this lack of liquidity than sell on strength so we can buy in weakness. Peter, thank you for your answers. Carl, back to you. When we come back, keeping an eye on tesla shares rallying after more than 275,000 people preordered the new model 3 car. And baseball season is now officially underway. David will talk to a couple of baseball legends, Keith Hernandez and ron darling in just a moment. Jake reese, day to feel alive jake reese, day to feel alive great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Tesla shares rallying after people preordered its new model 3 car. Phil lebeau is live in chicago. If people dont cancel, what is it, 10 billion in orders . Well, if everybody follows through with this reservation and actually orders a car, youre looking at at least 11 billion at about 42,000. Thats what they have been configured at, according to elon musk at this point. 276,000 reservations through saturday night. We did the math, between thursday night and saturday night, they were averaging about 3354 reservations per hour. Of by the way, at 1,000 peres elevation, theyre holding 276 million in deposits. Delivers start in late 2017. And will model 3 buyers be able to get the 7. 500 federal tax credit when you buy an electric vehicle . Remember, that tax credit, it starts to get faced out for different manufacturers after they produce and sell 200,000 electric vehicles here in the united states. Elon musk tweeting, look, our production ramp should enable large numbers of non x s customers to receive the credit. So as you take a look at tesla shares, remember, were still waiting on their q1 delivery rate to be released any day now. Probably coming up sometime in the next couple days. The thing to focus on, guys, when you look at that federal tax credit, is what happens lets say were late 2018, early 2019 and theyre due to phase it out. Will they be extended by the federal government, say look, lets extend this beyond 200,000 vehicles . You know there are going to be lobbyists for the traditional automakers, as well as for the oil industry who will say, uhuh, dont extend that tax credit. One of the interesting developments, we have seen this model 3 mania kick up. All right. Thank you, phil. Phil lebeau. Its opening day actually, cubs fan. Sorry about that. Opening day for the baseball teams, last night as well. I recently caught up with baseball legends, ran darling and Keith Hernandez. We talked about their accomplishments and what to expect from the Hometown Team mets this year. Take a listen. Yes. We what, 2006 was the first year . Thats right. And we have been together for ten years, going on 11. So we feel very fortunate. And our team is on the up. So more exciting ball games to cover. Do you expect they will follow through on what are Higher Expectations than i can remember in quite some time for the mets . The most difficult thing, theyre in a position where its world series or bust now. Everyone just it will be a disastrous year if theyre not in the world series. A lot of pressure put on any team. They have got the talent and when you have the talent, you have a chance. But its an incredible scrum, not only to get to the playoffs but get through it. So i know that met fans are as happy as they have been in quite some time. Yeah. Although there is no shortage of competition, keith. Obviously, st. Louis or the cubs or the nationals in their own division. I guess theyre probably going to beat up on atlanta and first of all this year. You are up on your baseball. Theyll have a tough time. Theyre rebuilding and miami is going to be kind of just not quite there, but competitive. Theyre going to be a team you have to come to the ballpark and play to beat. But its going to be between i always think in terms of the division first. One step at a time. Its going to be between the mets and nationals. And i really feel the mets, with their pitching starting pitching in particular. And in the bullpen saving them. If they dont have any injuries, i think theyre going to have the leg up on washington. Have you seen increases in interest, given the success of the team . Yeah, just huge. The ratings last year, especially after cespedes came in august and september, through the roof. Im sure people are going to be so excited to watch every single game this year. Its going to be a great year. Not only for the guys on the field, for guys in the booth. Because, you know, i didnt know anything about the business side of tv. And until you start working in the booth and the guy who is your boss comes in and goes, boy, our nielsen ratings werent great. What do you want me to do about it . The game dictates and the team dictates how well you do. And the team is great. From my money to the best announcers in baseball, of course. And members of our 1986 World Championship team, still waiting for another championship to come, hoping for the best this year. Although we didnt get a great start last night. In kansas city. Brought back some bad memories. Yep. Well see how it goes. I was mazed by some of the salary figures. Average, 4. 4 million and 127 players getting 10plus. We talked about Wage Inflation in baseball. Thats really the sweet spot. And it continues. And, of course, a lot of that, as you know, comes from the tv contracts. As the world changes, we get back to sort of a business conversation. The world changes in terms of cable and everything else. You do have oh to wonder about the abilities of companies to bid up rights and whether that will translate to higher salaries in the future. For now, good to be a baseball player. Okay. Lets send it over to jon fortt and a look at whats coming up on alley. If you wanted that tesla model 3, i hope you put your 1,000 down, because those expensive spots in line filling up fast. Well talk about that and the implications for tesla and the electric vehicle market. Also, oculus. That shipping. Not on time in all cases. What is next for Virtual Reality . What impact will it have on society . Were going to talk to an expert. And, of course, it is baseball season as we were just talking about. We are going to talk stubhub and some changes in how you even get tickets to the game. All that and more, coming up on squawk alley. Good morning, 8 00 a. M. In tesla headquarters in palo alto, 11 00 on wall street. And squawk alley is live. Welcome to squawk alley for a monday morning. Jon fortt, Kayla Tausche and myself back at post nine. Also joining us, the founder and editor in chief at the information. Jessica lessen. Good to have you back. Thanks. A lot to talk about. Lets start with tesla. Shares seeing a nice gain after more than 275,000 people preordered the new model 3. Those preorders for a