Transcripts For CNBC Squawk On The Street 20160606

Prepared is the market for a hike . Financials are the only sector still in the red so far this year. Were going to talk to barclays banking analyst about where theres some opportunity. And our new Digital Series binge launches today. We talk to marquee names in the world of media for an inside look at whats driving our binge culture. Well give you an inside look at what to expect. First up investors focused on speech today set for fed chair janet yell. How the future impact Interest Rate decisions if you listen to some today maybe the chop in the data doesnt necessarily dissuade them from a june move. No, not one month at least doesnt dissuade them. I think the question has to arise exactly how much more data are we going to get before the july meeting that would actually give you assurance that it isnt the beginning of a trend. The fact that markets took it in stride relatively speaking, at least the stock market really just held in there, buying panic and treasuries of course. They really priced out june, largely priced out a july move. I do think i wonder if yellen takes that opportunity of fair markets to say, hey, lets keep our eye on the likelihood or possibility at least of more to come. I mean, i dont think she has a great incentive to sound exce excessively dovish after fridays number because the markets arent really kind of throwing a panic about them. Some suggested on friday it was more about fears that oil would cause some sort of surprise pop. You dont want to get too out there. No, you dont. The fact the dollar repriced lower immediately, but again is firmed up today. So i dont think youve seen the markets get really unhinged by that one number. But obviously raises a lot of questions about the ultimate path. I mean, theyre still talking about multiple rate increases 2017 and into 2018. The market just doesnt want to hear that. 116 over the last three months, in other words jobs added certainly lower. I mean, the idea that things are slowing has to be part of the conversation here. Absolutely. If i were to guess, janet yellen, who never has problems pointing out continued labor market slack, right . Thats been kind of one of her talking points forever, is going to say, well, we expect at this point in the cycle to down shift, a lot of people trying to parse exactly how much of this is just worker shortage on some level contributing to it. Right. People revisiting productivity again, wondering whether weve started to see resurgence in some way because its not been keeping pace. Absolutely. I think what makes people, investors a little uneasy is the fact that its been this unorthodox cycle so that the fed didnt get started until the cycle was already far along. We already had created 12 or 14 million jobs. Thats the key criticism of course is where were they when we were doing over 200 or 220 a month and they didnt move, a year ago this time for example, right . Yeah. I get you on that, for sure. Meanwhile, brexit two new polls showing leave with the lead, 4341 on one, 4541 on the other. People worry about liquidity vacuum ahead of the 23rd. Exactly. The suspense is not going to go away it looks like, so therefore you wonder exactly how markets decided maybe people get to the sidelines and see how this thing shakes out. All that said, the ftse made up of mostly multinational conglomerates, if its a stay everybody rushes back in, what do you do . Thats the question. Whats the price youre going to be buying the ftse at the day after its a leave . We dont really know. I think thats one of those questions and is it really a reassuring thing that the uk is in this position of being that close of deciding . You know, its one of those things half the people are going to be disappointed if its that close a vote on the day after. Mike, you know, when people say to you though in terms of the market at this point that valuations are fairly high, earnings and revenue from the last earnings season didnt look particularly good. We didnt see a great deal of growth. Weve got Profit Margins falling at least to a certain extent and Economic Growth with the prospect being 2 or less, lets call it. What does that mean as we head into a summer by the way where were going to have a president ial election coming in a few months . Yeah, i think what that means is nobody perceives that theres upside risk to this market. Kind of wheres it going to come from. And i do think that you see the kinds of stocks that are supporting the market, and theyre kind of, you know, bonds in disguise. Just on friday again utilities break out one more time. Even though really nobody on the street has a kind word to say about utility valuations. Its one of those things where, you know, sideways makes so much sense to people. But sideways with maybe a little bit of Downside Risk because of those things that you mentioned that are not really scriptable. Yeah. One area of course that has not been doing particularly well, and didnt on friday are banks. China bounced back after suffering what was the worst single decline, i think, in a month on friday. The big jobs miss of course further dampened rate hike expectations. In fact, financials remain the only negative performer in the s p 500 this year. Were now joined by jason goldberg, senior banking analyst at barclays. Jason, people had been hoping wed start to see some interest in interest margin. Where do the banks stand right now in your opinion . Certainly. I think if youre looking at our Economic Forecast continues to have one rate hike in this years numbers and two rate hikes next year. So while margins have, you know, you saw an increase in q1 after decembers hike, seeing more this quarter but still room for margins to expand in the latter part of this year into next year. Weve seen margins contract over the next several years so ability to hire would benefit results. What about the larger picture this idea theres going to be even more Equity Capital needed by what i think 2018 . And that the banks are never going to be able to reach double digit r. O. E. Again given that they look more and more like utilities . A couple points. One, several big banks actually are at double digit r. O. E. , wells fargo, j. P. Morgan, u. S. Bankco bankcorp, theyre already there. Certainly late last week fed governor talked about increasing the stress test requirements on one hand, on the other hand they talked about making modification to the exam which actually make it the little easier. The stress test probably gets a little easier and netnet we dont think its dramatic difference looking out. You know, jason, you anticipate that most of the banks that you cover are going to be able to raise dividends to a significant degree, theyre going to be permitted to, but even if that not as necessarily dramatically as for example they were paying out dividends before the crisis, so i guess what does it leave investors with in terms of expectations for cash return, if thats one way that youre going to be paid to own bank stocks if in fact the Growth Profile doesnt look great . At the end of the month well get the stress test results for the banks. And we think payout ratios and totality will get back to precrisis levels which is around 80 . Which to your point Going Forward more skewed where it was historically more even between dividend and buyback. When we look at coverage we see several banks having dividend yields over 3 . Wells fargo, j. P. Morgan, bbnt we put in that camp, we think the group as a whole could buy back over the next 12 months than the prior months and we think theres a decent return story here and provide support to whenever the fed may raise rates. The political environment and the banks seem to keep getting hit, on both sides by the way. Do you think that is going to figure it all into sort of investors perceptions of their future profitability . Certainly theres a lot of rhetoric out there with the election ongoing. The group certainly has taken on a whole lot of increased Capital Requirements and regulatory requirements. Although we think were coming towards a tail end of that cycle where 80 to 90 through implementing the dodd frank act, governor talked late thursday about the final change, we think, to ccar. I think once those are behind us well know what the new rules are and banks will continue to adapt and play to the new rules. On the Capital Markets front for the banks i tend to focus on, it was not a good quarter the last reported quarter, certainly not in fixed income for virtually any of them, are things improving at all on that front . Or are we seeing more of the same . Good point. We think trading revenues in the Second Quarter can be up 5 to 15 year on year and table to moderately higher typically trading revenues fall from q1 to q2. From an Investment Banking fee standpoint uf seen a pickup in things like ipo and high yield issuance and even in m a where youve seen a lot of deals fall away whether to regulatory concerns or inversions going away, even chatter around m a has picked up as well. So we think trading revenue is improving q2 and hopefully pipelines improve back half and Investment Banking fees. We may see it. Of course we have actually seen some ipos and mention 3. 25 billion junk deal from dell today as well. Thank you as always, jason. Jason goldberg, senior banking analyst at barclays. Meanwhile, walmart rising in the premarket. Jeffries upgrading from hold to buy citing what it calls broadly improved store conditions that should lead to stronger sales. Price target goes from 60 to 82. Actually give ten reasons to own among them better execution, thoughtful price cutting and Institutional Ownership that they say has sort of come out over the years. Yeah, thats actually an interesting one. None of those ten list of reasons to own walmart are necessarily kind of new edgy calls, but i think its interesting to note walmart does arguably seem underowned. Of course the Walton Family because of stock buybacks has gotten ownership back above 50 , so thats one of the reasons maybe institutions its just not that big in their benchmarks anymore. I think 82 is a price target is now the highest priced target on the street. It really argues that, you know, walmarts going to trade at a premium multiple, i think he has it up to Something Like an 18 times 2017 numbers. I mean, its probably a little bit aggressive, but stock traded in the high 80s or close to 90 at the beginning of last year. I think a lot of macro has to go your way for it to come through. But its interesting what walmart was rolling out all last week about kind of their new logistical approach and all the things theyre trying at least has gotten some friendly hearing. Yeah, i mean, hes talking about Inventory Management and u. S. Store momentum driving the bottom line, speaking to your macro points. Without a doubt. And i think its interesting, you also have this barrons bullish story going in one direction and walmart trying to make its grocery business a little higher and kind of meeting in the middle there. So its really a slog. I think thats the takeaway for all these retailers is theres no real magic to it. But at least, you know, it seems like the street is finding a reason to buy, you know, kind of a relatively decent steady dividend stock. Speaking of the dividend, whenever you mention the Walton Family always think about their Quarterly Dividend payments. Theyre quite high. Yes. Yes. It keeps a few of them in the forefront. Yes, it does indeed at a 2 2. 82 dividend yield. Bills to pay. Its true. A number of drug makers move on worout of the worlds bigges research. And Foster Friess Backing Trump in this years president ial market. Nasdaq coming off the first drop in eight sessions about 1 from break even for the year. More squawk on the street from post nine in a minute. Plain to y you recommend synthetic over cedar . Super food . Is that a real thing . Its a great school, but is it the right the 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. Ok. Sure. 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What were seeing at this meeting is it seems to be active across a very, very broad range of tumors. Now, merck is competing with bristolmyers well roche ands a trasen ka is also competing in the space. We talked with ceo pascal this morning about how it plans to compete through combination therapies, take a listen. We do combination and we are going to be first actually in term of getting approval. Of course medication has to work. And that has been the big question, is it going to work . Is it going to work better . But those data give us, you know, good reason to believe it will work. Now, other stocks to watch include johnson and johnson, people pleased with some of its myloma people saying those data are underwhelming and cowen downgraded abbvie this morning. Ariad doesnt seem to boost its stock too much this morning. On halftime report, that will be a great interview. Thanks so much, meg terrell. Always a big deal but this comes on the heels of a big fat New York Times piece of essentially the golden age of research we live in. The payoff seeming out of reach but these new approaches seeming to give more avenues. Its interesting because so much pharma when it comes to the stocks has been consumed with Financial Engineering and inversion and this kind of turns peoples focus to the longterm growth story and what theyre there for, right . Yes, the actual hard work is what theyre intended to do. When we come back this morning, art cashins going to help us kick off this week with the markets as we talk down to the opening bell. Also ahead today simon hobbs at the nyu hospitality conference. Good morning, simon. Hey, good morning to you, carl, yes, the largest Investment Conference overshadowed somewhat by news percentage occupancy contracted in the First Quarter of the year. Big deals going down. Well talk to those locked in namely of course marriott Ceo Arne Sorenson and also ahead in the show talk to hilton which continues to transform itself with a 10 billion spinoff, now we know the name park Hotel Resorts and 69 hotels within that. More after this break on cnbc. What are you doing . Getting faster. Huh . Detecting threats faster, responding faster, recovering faster. When your securitys built in not just bolted on, and you protect the data and not just the perimeter, you get faster. Wow, speed kills. Systems open to all, but closed to intruders. Trusted by 8 of 10 of the Worlds Largest banks. It takesbut stealing itd work to eaonly took a few days. Female announcer protect your money. Find out if youre dealing with a registered investment professional at investor. Gov. Before you invest, investor. Gov. mamost of the show. We missed woman and theres no way to restart it. jon bon jovi with directv there is. You see, weve got the power to turn back time so lets restart the show that started at nine and while were at it, lets give you back your do and give her back the guy she liked before you hey, thats the power to turn back time. vo get the ultimate allincluded bundle. Call 1800directv. Well, the lawsuits and countersuits continue in the fight between Sumner Redstone and his former trustees including Philippe Dauman and abrams, a ceo of company mr. Redstone controls. On friday lawyers representing mr. Redstone filed a lawsuit in Massachusetts Court saying mr. Abrams and mr. Dauman were motivated by selfinterest in asking that court to deny their challenge to be reinstated as trustees on that Irrevocable Trust that will control the stake in national amusements, which then holds 80 of stakes in cbs and viacom. The probate and family court where they originally filed suit to be reinstated as trustees saying mr. Redstone was under the undue influence of his daughter, shari. Mr. Abrams and mr. Dauman file yet again in support of their motion for expedited discovery in trial and request for an immediate hearing saying that the medical report that was submitted on friday by mr. Redstones attorneys from a dr. Spar, a psychiatrist, they claim was a onesided uncross examined and distorted view of mr. Redstones mental condition. By the way, it is worth reading that report from dr. Spar. And of course as ive said previously, a lot of this back and forth while very important to the future of viacom and conceivably cbs is simply the run up to what will be the real battle when mr. Redstone and his daughter shari conceivably submit directors to replace the current board and oust mr. Dauman as the companys ceo. When thats coming i cant tell you, but i can tell you that effort continues to be underway. And i would finally end with something from dr. Spars report where he said of his meeting with mr. Redstone on the 24th of may, i observe that despite the fact mr. Dauman ignored mr. Redstones wishes regarding paramount and had filed suit against mr. Redstone, mr. Redstone had not removed mr. Dauman as chairman and ceo of viacom. Mr. Redstone seemed to ponder the point for a minute, but did not respond. And i did not pursue the issue. Carl, thats where things stand. On the heels of the french open its almost like the ball goes this way, you watch, you watch it that way. Its not going to end any time soon. No, and were waiting for when the big move is made to replace that board and ceo. On that note we got about five and a half minutes until the opening bell. Art cashin joins us here at post nine director of floor operations with ubs. Good morning. Are the feds whistling past the jobs number we got on friday . Well, i think shes in kind of a difficult spot. I dont think she wants to write off the idea there might be a hike. Everybody particularly Stanley Fisher is desperate to keep that up there. So theyve got some of it. I think shes going to leave it as everythings a live meeting. If anything she may say we told you were data dependent, so far the datas been not good. But if it gets better then we will go ahead and hike. I would keep my eye among the currencies. Theyre the most sensitive to what she may or may not do. Volume around the globe, markets all over the world reasonably light. And i think everybodys on hold waiting on janet. Were going to continue this discussion after the break. Ill talk a little bit more about the pound specifically, opening bell a few minutes away. Using 60,000 points from my chase ink card i bought all the fruit. Veggies. And herbs needed to create a popup pickyourown juice bar in the middle of the city, so now everyone knows. We have some of the freshest juice in town. See what the power of points can do for your business. Learn more at chase. Com ink see what the power of points can do for your business. With usaa is awesome. Homeowners insurance Life Insurance automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. Big monday as yellen takes the mike in philadelphia around 12 30, but theres some news ahead of that. Art cashin rejoins us here at post nine ahead of the opening bell. Larry somers, big piece out today about why people are not paying attention, a, to a trump presidency, but also to brexit. So how are you calculating those risks . Hes trying to compare two shocks. The brexit may shake things up and people seem to be aware of that. And he makes the somewhat partisan point that he thinks trump would have a similar effect, but the markets are not discounting it yet. And i think its the proximity thats clearly the difference. People want to wait and see will there be a 2. 0 trump, or will there be a guy somewhat more moderate and looks like hell be working with advisors. In the meantime, the polls moved up on the brexit possibility. That has the pound under real trouble. So well see how that plays out and how the new polls come in. Yeah. What do you make of just the general steadiness of the equity market last week . It was almost exactly flat and we got this sort of shift in fed expectations in the bond market. I think it was intriguing. I think they thought that crude would rally and that might bring them back. If kmomties were not as well behaved as stocks were. Theres the opening bell at the big board today Franklin Templeton celebrating recent launch of Franklin Liberty shares etfs. At the nasdaq bmc stock holdings, provider of Building Products and services for the housing market. Speaking of before you go, im sorry, one more question before you leave. Friday people might have been expecting things to fall apart, but oil you argued early in the day could create a bid. Is that a dynamic that will last . Yeah, i think the relationship of oil and stocks has gone back to center stage and will stay there for a while. So i think the viewers want to keep an eye on that. There may be some elasticity in it, but i think it will be a cause and effect from here on out. Thank you, art cashin joining us here at post nine. We mentioned some of the Research Today upgrade of walmart at jeffreriejefferies, goldman cut to neutral on some of these channel cuts seems like a slow down. Not that many registrations of harleys. What i also found interesting within that report which is general auto Manufacturing Sector report was that they calculate that the automakers, the sector as a whole, has been overearning by like 27 . So in other words earnings have been inflated by this point in the cycle. But that the stocks basically reflect that. So basically thats their answer to this conundrum of record annual rate of car sales and yet the big automakers the stocks have not been able to get out of their own. How worrisome were last weeks auto numbers . Thats the question. Now all the focus on if theres no auto loan, there seems to be no new car sale. I feel like its one of those things weve been worried about for a very long time thats not really gotten traction aside from the big carmakers, plus there are longterm concerns. I think people are actually starting to consider the impact on auto sales of whatever happens with the ride sharing economy and automated driving. Not to mention jamie dimon on that last week as well. Absolutely. Additional news, were still watching alphabet, google on the heels of the announcement made last week that tony fidel is leaving nest. But again, recall that company was bought in 2014 for about 3. 2 billion. They call eed it an aquihire a the time. An awful lot of money to basically hire some talent, some very good talent for whatever it was a 3yearold company at the time. On the other hand 3. 2 billion is well less than 1 of google of alphabets market value. And it was not something that i think from an investor perspective that there was really front and center except, i think, in this general sense of, well, they do try a lot of these things and at least we know how much theyre paying for those things and how much its costing on a run rate basis now that theyve disclosed it. Thiessen foods victim of a downgrade. You started the conversation with some of these names that are dividend plays. Yeah, i think thats one of those Big Questions both the sell side investors are facing right now you had this whole class of stocks considered to be kind of safe, steady, longterm dividend providers. I mean, i have a piece on this today on site that basically says everyone says theyre expensive, everyone kind of knows this craze for supposed low volatility stock investing is probably a bargain you cant really bet on longterm. However, as long as the bond market holds together and global yields stay where they are, i think youre going to have this kind of thing. Tactical selloffs or downgrades of individual names within a general sector that says its okay. I mean, campbells soup had a tough reaction to earnings. Hormel down 20 from its high. Got inflated people buying them not because they love the chicken business but they wanted a Steady Company with a decent yield. Mike, you mentioned of course the global bond market. We talked i reported a couple weeks back about what was dellthen pending sale of debt high yield issue 3. 25 billion out today, but overall another inflexion of incredibly low yields available in this case. Largely theyre going to be able to borrow Investment Grade aside from what is much smaller high yield debt originally anticipated coming in so overall borrowing rates will be below what they anticipated. All of this to back their purchase of course of emc. Its remarkable the appetite for investors almost all corporate paper as you said well n a world where you have over 10 trillion trading in negative yields. Yes, mostly sovereign, but still and the European Central bank buying corporate debt. Its a Global Pricing chain, i guess. And also the fact that oil is held in where it is has really created this roaring recovery in high yield. And really there hasnt been a ton of issuance of high yield. Theres been some spot deals, but its one of those things where people decided to rush back in and supply demand kind of got those things repriced to a decent level. Not to mention youre going to have bonds that are going to be maturing when they were bought actually had a yield but no longer do. And then how do you redeploy the proceeds if youre a bond manager . Exactly. Youre not going to put it into anything that has a negative yield, so you are looking for again these kinds of opportunities. One beneficiary certainly the likes of dell and there are plenty of others. Of course weve had so much Balance Sheet over the last eight years that there may not be that many more, but for acquisition financing certainly its very affordable to say the at least. And theres definitely more attention to the fact that the aggregate level of corporate debt is well above the highs. I mean, its basically as a percentage of gdp basically where it was at the peak of the prior two cycles. Should we be concerned . Well, the majority of it is basically like you say seven years out or something and more. So the entire corporate world got to term out their debt and basically get their costs realigned. As far as yellen goes, what would be the harm in ruling out june if the markets essentially done that for her . I dont think there is much harm in ruling out june. I dont think shell attempt to try to keep june alive. I mean, i think were now its next week, right . So were not at a point where she wants to necessarily be coy about whats going to happen in a week when youre not really having a lot of major data releases. But i do think, you know, theres some talk shes going to talk about its appropriate around mid year or its appropriate in the coming months. I dont know exactly what the language might be, but i dont think shell say anything that the market will directly determine to be eliminating july. Lets put it that way. So goldmans call for instance that june is a zero probability is consensus . It seems to be consensus. This is exactly when the markets pricing of the feds intention seems to be pretty good, when you get within a week or two. Yes. With all that dows up 43, 44 points. Lets get to bob on the floor. Good morning, bob. Good morning, guys. Markets up today after a roller coaster ride yesterday on friday. Ending almost positive in the markets. Right now dow is up 48 points. The big mover is in Energy Stocks. All the big what i call high beta Energy Stocks moving rather nicely today. So devons up a little bit. Devon sold some assets, thats helped them a little bit. Chesapeake, marathon, transocean, conocophillips, some potential disruptions in crude, oil up a very nice move for them. In fact oils been hanging in not far from 50. A lot of people have been noticing this for a while now. Of course we havent had a lot of investment in oil right now, but if you look at the global disruptions that weve had recently in nigeria, canada, venezuela, thats been a factor in propping up oil. And the demand has been relatively stable. I think that surprised a lot of people here. And finally of course fed actions, a lot of people believe that fed actions are likely to keep the dollar weak. Well hear more from janet yellen today, but thats why the spread. And also were starting to make production a little more attractive with oil at 50. Very interesting a wpx energy, which is sort of a smallish oklahoma firm, they announced today 45 million share secondary, thats a 20 increase in the share count. Wow. And they increase their production guidance. So it looks like somebody believes that theyre going to get rewarded for increasing production at least with oil in the 50 range. This is a big change around. Remember, just six months ago nobody would have thought youre going to get rewarded for increasing production at all. So maybe a slight change in mentality. You see that big move from wpx energy essentially a 4 stock a short while ago now a 10 stock. Elsewhere sectors today besides energy, nice move up in materials, consumer staples, banks which had a tough time on friday also banks bouncing back a little. And while the stock market recovered late friday on that disappointing jobs report, bond yields never did. We had very big action in bond etfs on friday, very large volume and very big price moves. I want to show you the core u. S. Aggregate bond fund, the largest bond etf in the United States. Essentially its everything, treasuries, corporates all mixed together here. This is at a new 52week high on very heavy volume. In fact, all the three biggest bond etfs had 52week highs on friday. You can see vanguards total bond, bnd 32 billion fund, that was at a 52week high and then lqd, which is the Investment Grade bond, these are a basket of Corporate Bonds, different than the other two, also at a 52week high. And thats got about 30 billion in it. So obviously a lot of interest here. And i think the main point about this is the relentless hunt for yield. And the yields are not terrible on these. Theres the aggregate bond which includes probably 65 treasuries. Even thats 2. 3 yield. The Corporate Bond which is probably the most popular right now as a 3 yield and theres hyg, i think people are surprised you can get a 5. 7 yield on hyg and that moved down on friday. The hunt for yield the major factor. Finally, elsewhere on friday big moves in gold as well, the gdx, a lot of these etfs have big, big volume here including the gold miner etfs gdx sitting just shy right now of a 52week high. And of course what were seeing is a lot of even professional traders use etfs the way they want to trade because of liqu liquidi liquidity. Yeah, the rise of the etf certainly a key part of this overall Market Dynamic last five years. Lets get to report this morning of course tribune and gannett, remember that fight . It continues. In fact this after the annual meeting of tribune shareholders late last week. But i can tell you this morning gannett not quite ready to hang it up despite what appears no path to try to rescue board of control directors despite what a very heavy withhold or no vote for the directors of tribune. The reports out from tribune itself say roughly 40 against. But when you speak to gannett, and they include the or actually exclude the company chairmans stock, then it rises to more than 50 of what you might call the unaffiliated shareholders of tri 3w50ubune v against the current board of directors as much as i think 58 im told against three of those directors, eddie, dibl and frankl franklin. What this means gannett still doesnt have a path but people close to the situation tell me the companys not ready to just drop its bid yet at 15 a share. You can see tribune shares trading right around 11, lets call it 11. 50. That does not mean at some point gannett is not going to go home. But at least theyre not ready to yet. Theres some litigation already taking place in delaware against the board for doing a deal to sell stock at 15 a share to dr. Patrick. Actually we had him as a guest on friday and asked him about that, he wasnt aware of the litigation when we asked him about i. There may be more litigation yet to come in delaware trying to invalidate the sale of shares to mr. Ferro himself some time back where he bought what gannett claims was essentially ended up being a control position at 8. 50 a share because he was able to, they claim, take control of the board of directors. And on friday you also had gannett shareholder im sorry, tribune shareholder, oak tree, file a 13d in which it said that they would be willing to sell their shares at 15 a share. They say let there be no doubt we would be willing to share at 15 a share. They also say tribunes suggestion that oak tree supports the boards current posture is patently false and misleading. And go onto say they believe all shareholders should be afforded the opportunity to sell their stock at 15 if the only alternative is to rely on the continued leadership of the company being in mr. Ferros hands. Michael ferro was a guest on squawk box this morning. And this is what he had to say about that 15 price and the future of a company he is renaming trunk. Its a 15 price we actually told gannett we had investors to come in at 15 when they were at 12. 25. Thats why they went to 15. We said we have people willing to invest, which is different than a takeover. We have people willing to invest, minority shareholder to Bring Technology to us and we had multiple parties we were talking to. Because people believe that our asset if we bring some technology to it is going to be worth far more money. We will see. The window to nominate board of director slate opens february 2nd of next year. Now for a look at oil prices this morning, lets check in with Jackie Deangelis who joins us from the nymex. Good morning to you, david. Oil Prices Higher on the session, but off their session high of 49. 85. Two main culprits sending us higher here towards that 50 mark first would be the retreat in the dollar and also those concerns about supply disruptions in nigeria. Now, remember, ever since the notion of a june rate hike sort of came off the table, its being discounted a little bit certainly. The dollar index has made its way back and that has been supportive of oil prices even though its slightly in the green today. And of course the nigerian Oil Infrastructure is in focus today. The supply disruptions are a concern globally monitoring canada, monitoring venezuela as well. Remember, the upside right now is a little bit limited because it appears with oil closer to 50 u. S. Supply is going to start to recover. So people are watching these numbers very closely. I will say this, traders are saying they do think we go higher from here, but that upside maybe another dollar or two at this point. Worth mention gas prices 2. 37 according to lundberg up six cents in the last two weeks, carl. Thats when you know its summer. Thanks. When we come back, highlights from binge focusing on the changing media landscape and the players involved in the content you love to watch. Dow up 64 points to start the week. Were back after a break. They t products and services, but they demand the best shopping experiences. Theyre your customers. And by blending physical with digital, cognizant is helping 8 of the 10 largest u. S. Retailers meet their demands with more responsive retail models. Ones that transcend channels and locations, anticipate expectations. Creating new ways to engage at every imaginable touchpoint. Its a new day in retail, and together, were building the store of the future. Digital works for retail. Lets talk about how digital works for your business. Here at the Td Ameritrade they work all the time. 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. 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. A dollar sign looks like an s. When you send financial info through a website, look for a url beginning with https. The s is the difference between an encrypted site and one thats not. S equals secure. [light instrumental music] our new Digital Series, binge, launches today. Its all about the various ways in which we receive movies, television, music, even broadway shows and how its changing through the eyes of the people who are actually in charge of producing that content, not necessarily distributing it looking at it through creative eyes. We talked to a bunch of different people, we spoke with bra bravos aaron cohen said for tv viewers its kind of a frightening time. Im so glad i left when i did because its the wild west right now. Were not only competing with the 500 other cable channels, but netflix and amazon who seem to have unend iing bales of mon. Its like amazon and netflix is like they live in the bank and have all the money and can spend anything. Its kind of a little funnier if bezos just last week hadnt said Amazon Prime Video was one of the fourth pillar of the entire company. Exactly. Hes doing it to sell shoes, right . Yeah. And in a very specific and real way i think he means it. What he was saying is funny but gets at the truth of netflix and amazon and these other Media Players operating by different financial rules than the traditional industry has, right . Because why . Because they dont have to show the same exact margin on every unit of content. Theyre judged by investors if netflix, subscribers, everyone assumes theyre underpricing the product. Amazon of course is part of this other bundle of other stuff that you get. So i think thats kind of very telling. But i also wonder, carl, as you talk to all these different people in navigating this new world do they also just see it as this kind of sort of liberating thing . Youre kind of redefining whats a great sized audience. Well, for a show runner or producer, i mean, you just had 50 new buyers go into the market for your product. I think the most interesting discussion right now is the idea that hulu, amazon, netflix have had the playground maybe three ways for a while. And that that space could get very crowded if apple, facebook, google start really working in content, which we talk about all the time. But its not taken as a silly idea out west. No, dont Forget Verizon and at t remain possibilities and existing companies and hbo its not like theyre not looking for content all the time. It may be a good time to be producing content. It really may. Netflix will do 6 billion this year, carl, as you know. Amazon 4 billion. Right there thats some big money. I wonder if its going to be only people jockeying to be the front door to Everything Else out there and everyone is going to kind of be open architecture and include most of Everything Else, or if its really going to be everyones got their own proprietary piece of this whole thing. I dont know. You can watch binge not just on cnbc. Com but also apple tv, hulu and youtube. We invite you to do that later today were going to go live on facebook at 2 00 with New York Times and carl swanson of new York Magazine talk about the binge culture, what role critics play and what the etiquette should be on spoilers. A bunch of other stuff at 2 00 p. M. Spoiler etiquette. Im looking forward to that, carl. Coming up, we are also going to have an exclusive interview with allergan ceo Brent Saunders. Hell be joining us next hour. Squawk on the street is coming right back. Fortune magazine out with annual fortune 500 list of the largest u. S. Companies ranked by revenue. Walmart taking the top spot for a fourth consecutive year. Exxon number two, apple moving up two spots to number three and microsoft actually cracks the top 25 for the first time. We were just talking about the size of not just walmarts revenue but some of the payments they give some of their large shareholders. Yeah. Only oil above is going to get back up there. If i look at the top ten, one of more striking things about this list is mckes, cvs, shows you health care swallowing huge chunks of the economy. It just sort of shows you thats where the growth is for better or worse. Of course some of this is mergers. Its kind of interesting in terms of where the economy is at. Have we looked at whos been displaced . I havent looked at that. Microsoft just cracking the top 25 after how many years having been the Largest Company in the stock market at times. Right. But of course margins and profitability are different list. And that one when you put air in a box its really profitable. There you go. Exxon would envy that. When we come back, Foster Friess, the megadonor supporting Donald Trumps president ial campaign and Arne Sorenson on the state of the Hotel Industry and what hes calling a new golden age of travel. Markets now up 103. Dow hasnt had a triple digit move in six sessions. Were back in a minute. Its a question we get from some of our largest banking clients. The face of their business was tellers. Then atms. Today its their mobile app running on the ibm cloud. Across every transaction, the hybrid cloud helps their data move quickly and securely. Our clients are building out features and pushing updates faster, on five continents. With the ibm cloud, they can move at the speed of any startup. With the ibm cloud, jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive good monday morning. Welcome back to squawk on the street. Im Carl Quintanilla along with david faber and Kayla Tausche live at post nine of the new york stock exchange. Simon hobbs is at the nyu hospitality conference, going to join us shortly. First, take a look at the markets. Dow up triple digits a moment ago. Hasnt had a triple digit move since the longest stretch since march, so this was not unnoticed today. S p up to 2108. Oil a story as well as it hovers just below 50. Our road map begins with the fed. Janet yellens going to take the podium at 12 30 p. M. Eastern time. Expected to lay out the Economic Outlook and Monetary Policy ahead of the feds blackout period before that meeting june 14, 15. And the countdown underway for a possible brexit vote coming on june 23rd. Our very own willford frost sat down with the leader of the leave campaign, former london mayor bor ris johnson. Finally here, the big launch of our series binge where we sit down and look at whats driving the culture of Binge Watching. Well give you a look at what to expect. First up stocks edge higher as investors await remarks from chair yellen today. In anticipation of those comments clevelands president meser speaking in stockholm over the weekend about possibly raising rates saying the latest disappointing u. S. Jobs number has not changed the Overall Economic picture and gradual rate hike remain appropriate. Joining us is founder of fund strap global advisors, tom, great to see you. Yeah, great to see you guys. When you see that commentary following the number on friday, what goes through your mind . You know, i actually think the markets are probably too concerned about the second fed hike. You know, i think ultimately we published a study on friday, second fed hikes when theyre gradual dont the market takes them in stride. In fact, most of the time the market goes up. We were talking before the show this morning about this summer and how its going to lay out. Yeah. You actually have a view for how june is going to go. Yes, i do. Well, first of all, im shocked to hear this is the first triple digit session since march. Im really surprised because the markets been acting so good. But i think the next two months are going to show improved Global Growth conditions. Because we had the dollar no longer rallying and oils been rallying, Credit Conditions have eased a lot. Financial conditions and these are all setting the stage for, you know, growth to pick up. And i dont think thats what investors are expecting. I dont think everyones worried about brexit and the fed. Yes, i think, you know, by the end of august we could have a big chase underway. A chase . On the condition that what . That brexit is a stay . Well, just that things arent as bad as people are hoping theyre going to be. Because remember people are positioned for downside at the moment. You know, they think theres an earnings recession and they think were entering a slowdown, but energy, industrials, materials rallying is not ever late cycle. Its kind of early cycle. To be fair investors would have done really well if they had been selling stocks throughout the year at the exact levels that were at right now. So what do equities do if the summer is as uneventful as you think it will be . Thats a fair point. Thats the problem is the last year and a half the markets gone nowhere so people feel like the markets died. I think thats where some of the technicians are pretty useful. You know, theres a lot of talk about the advanced decline line hitting an alltime high. I think thats an important point because since 1965 never has advanced decline line made a new high without an alltime high following on the index shortly. So i do think in the summer were going to have new highs. A lot of discussion about layoffs in certain pockets. Retail comes to mind. Yeah. Are you convinced that earnings through the course of the year get better, not worse . Yes. I mean, you have to keep in mind earnings revisions are already positive for the energy, industrials, materials. And in starting for financials as well, but you have to remember thats more than 40 of the profits. I mean, thats a lot of heavy lifting done. And with energy weve written about it the strip, the Oil Futures Market has moved more than earnings have moved. Its like almost 2 of upside still in the s p from just where oil is at the moment. But when oil was collapsing people wanted to strip out energy. So strip it out now. You know, whatever however people adjust to numbers, the fact is is that one of the reasons the market had a lot of problems in the last 18 months is oil was falling. I think oil has decisively bottomed. Every five dollars it moves its more than an dollar in s p earnings. Theres still a catchup. At the end of the day someones fighting the preponderance of facts if theyre saying its not positive oils up. Is there a level in oil that you would consider the allclear . Because the journal had a piece last week where company treasurers and executives were saying maybe its between 50 to 55, maybe its as high as 60 where you say were not going back down from here, we can start producing again, we can start hiring again. Thats a good question. I would say theres one market that has been the best, has called every oil bottom three of three times every major oil bottom and its the Oil Derivatives market. And its the measure on the 24month in english please . Basically on february 11th the spot market was so cheap versus the 24month contract it only happened in december 98, december 08 and both to the day where the lows for oil and february 11th was the low for oil. So three of three times this market said oil bottomed. And now that discount has shrunk to 6 , its never gone from 30 discount to six without oil being clearly back into balance. I havent heard you talk about the market multiple at all in terms of where you think things are fairly valued, tom . Tell me, im looking last earnings season that was not particularly good. Margin improvement was not great. Yeah, thats right. You know, i think anyone who takes earnings at the moment and says this is the new trend st forgetting theyre doing a lot of backwards analysis, right . Because we know what was dragging margins lower, which was dollar and oil and Credit Conditions. So those are all improving, but more importantly the segment of the market that, you know, when we say, oh, the stock markets overvalued. You know, today dividend stocks are trading around 20 times. And Everything Else is playing closer to 15. I dont think dividend stocks are overvalued because theres a search for carry. I think investors should try to find stuff thats trading at 15 and betting its going to 20. So youre longtime thesis of stocks being the new bonds is not to buy the bond like stocks, to buy the things that are cheaper than that. Yes, theres a whole believe it or not dividend stocks theres dividend stocks and then theres a whole class of stocks where their dividend yield is above their bond yield and yet people dont even realize it. Qualcomm, texas instruments, walmart when it was 65, microsoft now, ge, ibm, i mean, a bunch of financials. And theyre not guilty considered dividend stocks yet yielding like 4 . So i think thats why stocks are the new bonds. I mean, these are the companies are better the equity better buy than the bond. Good poin. Always interesting to talk to you, tom. Drives viewers crazy sometimes how stubborn you can be. Well, again, if the market makes a new high, its not a bear market, right . Tom, good to see you. Yeah, good to see you guys. Dont miss our special live coverage of fed chair yellen today speaking at the World Affairs council in philadelphia 12 30 p. M. Eastern time. Meanwhile, the june 23rd brexit vote is quickly approaching. The latest ugov poll giving the leave camp a 4 point lead, meantime the hold of the polls has the remain side leaving by three points. Caught up with former london mayor boris johnson, also the leader of the leave campaign to talk about the polls and the possibility and the uncertainty that a brexit would cause. Well, the only poll that matters is the poll on the day and were obviously working very hard now. I do think the message is definitely getting through to people that this is once in a generation chance to take back control from an institution that is out of control, spending ever growing quantities of british taxpayers money. And its making it impossible for us to do all sorts of things that youd expect a country to be able to do. What has controlled our tax rates, helped our energy companies, all sorts of things. Right yourself in the february 7 telegraph leaving would cause at least some business uncertainty. Can we gauge how much that might be or how long it might last . Just for a year or two . I think whatever uncertainty there might be, i think actually the prognostications of gloom youre hearing now are wildly overdone. I think it would be a massive opportunity for uk business and those who have been who are currently very negative about brexit and there are lots of people if you have a Strong Political motive to be so have been proved wrong in the past. And, you know, i point out so many of the remain camp, lumbering forward to wag their fingers at the british people and say they cannot choose freedom. They are the very same people who in the early 90s, literally the same people who said it would be a disaster if we got out of the erm and the same people who said it would be an Economic Disaster if we failed to join the euro. They were wrong then and theyre wrong now. They were wrong then and they are wrong now. Of course, carl, this is someone who has staked his entire political future from here on out on the uk leaving the eu, or britain leaving the eu. Certainly the polls keep changing day today. Says the only poll that matters is the poll of the day. Last week did seem like stay was getting some momentum. Not the case today. No. Meanwhile we find simon hobbs at the nyu hospitality conference with a lot coming up later in the show, simon. Yes, in fact, weve got some data out today suggesting that the lodging industry in terms of occupancy actually contracted in the First Quarter for the first time in eight years. Again, a shot cross the bow on pricing and raising concerns perhaps about some of the real big deals that are being bedded down, not least of course merits 13 billion acquisition of starwood. Well talk to Arne Sorenson about what hes going to do with 30 brands and two very distinct cultures. Also a man incidentally, guys, who just cut through a fireside chat to warn on nationalism. That and more after the break on cnbc. [woodworker] i live in the fine details. Thats why i run on quickbooks. I use the payments app to accept credit cards. And everything autosyncs. Those sales prove my sustainable designs are better for the environment and my bottom line. Thats how i own it. I could get used to this. Now you can. When you lease the 2016 es 350 for 329 a month for 36 months. See your lexus dealer. Pg i help customerss, how with their bills. Day . Theres different rates to fit different needs, so listening is a huge part of my job. Because customers want to know that you hear them. They have kids, they have families, they have priorities. I definitely understand that. I have three children, i was a stay at home mom, i didnt have money to pay the bills, and so i put myself in their shoes. And im going to do all that i can to lower their bills and to help their situation. To choose the rate plan that works best for your family, visit pge. Com rates. Together, were building a better california. Our new Digital Series binge launches today about the Creative Content you see, movies, television, music and how it gets to you through the eyes of the creators, the people that make the shows we love so much. We talked to bravos andy cohen about how social media is impacting the way producers produce. If you could only have one platform, twitter, facebook or youtube . Twitter. Twitter . You dont sense more traction on facebook than you do twitter . Facebook bugs me. I feel like if i was not well known, i feel like i maybe would have stopped facebook at this point. Why is that . Just irritates me. People irritate me. You mean the ranting, the over sharing . The ranting, the over sharing, the kid you cant post anything without a fight breaking out on its just exhausting. Probably something a lot of people can relate to. You know what hes really into though . Snapchat. Snapchat. Does that surprise you . Not at all. I think a lot of con tenlt creators have had to get into snapchat to give people behind the scenes looks. Its a little easier. Doesnt have to be so well produced, so cue rated, and they like to see the real person behind the personality. Yeah, no artifice behind snapchat. You discovered that this weekend a little bit. Hard to take yourself seriously when youre face swapping with a coanchor. What i found so interesting about the conversation you had with andy is he credits bravo as being the original Binge Watching, creating the marathon years and years ago. And basically giving the consumers, the viewers, the opportunity to sit down for ten hours and watch something. Yeah, at the time it was sort of by necessity. They were going into the christmas holiday, didnt have a whole lot of new episodes of project runway, lauren of bravo at the time said lets run them all every day for two weeks and when they came back ratings for the franchise were higher than when they left for the break. So whether it was that, whether it was box sets of dvds, whether it was the original film festival, weve been watching shows in constant motion for years. But the Technology Just made it something we call binge. When do Networks Like hbo though choose to do it, if ever . I mean, the model clearly still works for them. When they sell back catalogs to amazon when they do it. Thats the only time otherwise the model still holds up i guess for a lot of people to not allow for it. Brian grazer says empire benefits because everyone is watching it at the same time. Thats why its the most tweeted about show on television. So in his view like Binge Watching empire doesnt work. Its just not part of the shows dna. So you have brian grazer, andy cohen jane rosenthal, de niros producing partner, blumhouse is huge is there a house of cards element to it too . Dana will be part of the new season. Thats a tease if ive ever heard one. Season one now available on cnbc. Com, on apple tv, hulu and youtube. And then check out our Facebook Page 2 00 p. M. Eastern time well host a live q a on the phenomenon of bingeing. When we come back, getting a check on the lodging industry. We have an exclusive with marriotts Arne Sorenson and latest from the campaign trail joined by gop superdonor and trump supporter Foster Friess with the dow up 98. Cats. Opening slash closing night it hit me hats for cats. Everyone said i was crazy. When i went online. I got my domain, catswithhats. Com from godaddy. Now these things are feelyin outta here. Got a crazy idea you think you can turn into a success . We know you can and weve got a domain for you. Go you. Godaddy. Every year, the amount of data your enterprise uses goes up. Smart devices are up. Cloud is up. Analytics is up. Seems like everything is up except your budget. Introducing comcast Business Enterprise solutions. With a different kind of network that delivers the bandwidth you need without the high cost. Because you cant build the business of tomorrow on the network of yesterday. Welcome back to squawk on the street. Were live exclusively from the new york hospitality conference. Really i guess the biggest Investment Conference for the lodging industry that occurs every year, the biggest ceos are here. And amongst those of course the guy whos going to be running the biggest business by far, the ceo of marriott, waiting to get his hands of course 13 billion on starwood. Arne sorenson, good morning. Good morning. We are counting down to yellen and theres a huge discussion object where we are in the economy. Today we learn in your industry that occupancy actually shrank last quarter for the first time in about eight years. A lot of that has to do with new supply coming on, but it comes back to this question of Pricing Power and how strong the economy is. What are you seeing . I think the numbers from the First Quarter are really a red herring. In this year compared to last we had significant holidays, think about easter moving from april to march. That is bad for travel. Now, that may be good for leisure travel, but the travel business in the United States is 70 business travel. Easter week people dont travel, and as a consequence you end up with one quarter numbers which look like demand is down, but in fact its really much more about the calendar. Okay. We have performed quarter after quarter now for seven years with demand growing faster than supply. Our demand is driven by gdp growth, which brings me back to janet yellen of course. Whats happening with gdp . If gdp declines, its going to show up in our business. Sure. If gdp grows more modestly, which it did in the First Quarter by the way as well, that will show up in our business too with less robust growth. Youre an optimist. Its your job to be an optimist. You will have half a million employees very soon and youre betting down a very big more expensive deal than you thought. At the same time across the board its clear that the dynamics are slowing in your industry. And some say broadly are you guys going to make your numbers if theres a really fast rebound in the Second Quarter . You are kind of between a rock and a hard place to an extent, are you not . Well, yeah, but lets look at shortterm and medium term as well as longterm. We think right now gdp is growing in the United States, frustratingly slow. You look at the rest of the world and you see actually numbers maybe moving up a little bit in europe notwithstanding the number of the crises they are confronting. In china we see 7, 8, 9 growth because we live in the consumer space in the chinese economy. You roll these things together what do they have in common . It is about the demographics behind travel. Growing global middle class, boomers taking vacations, millennials more interested in collecting an experience than a car. All of those things are good for us. What it might mean in the month of may is one question, what its going to mean longterm i think is going to be very powerful. Longer term clearly betting down starwood is a prize a 30 billion market cap once you achieve that. Closer in i dont think theres anybody at this conference who envies the task that you have. 30 brands, two very distinct cultures, a lot of people who will be very worried within starwood because youve said you want to save 250 million. Yeah. Have you thought i mean, when does the deal close . A months time . Hopefully about a months time. How are you going to tackle this is going to be a textbook example of how to bring two businesses together. How are you going to do it . Well, with trepidation maybe in some respects, but ill argue with you a little bit. I think our competitor who is are here in fact do envy us because we have the power of bringing these two companies together to build something that is very compelling. They will of course because were competitors talk about how much work this is, how well be distracted and try and take advantage. It is a lot of work. Its a ton of work. Its half a million people. These are not like cookie brands, these are distinct businesses with people and aspirations and values and youre going to try to knock them all together. Which is why i say with some trepidation. So this is a massive amount of work. Its going to take us some number of years to complete it. We want to make sure from the getgo were delivering positive attributes of this transaction for our community of associates, for our community of hotel guests and for the community of folks who run our hotels. Whats the source . Lots of consultants . No, no, starts with culture of course. We think weve got to get the Leadership Team right instantly. We think weve got to make decisions about people very, very quickly behind that. We think weve got to make sure we communicate something about our culture of opportunity and our culture of success and our culture of change to this broad organization with lots of communications, lots of presence, lots of handshaking, lots of explanation of why. And that culture piece i think is the thing we have to move more quickly with. I want to change discussion slightly, this is fireside chat where ceos sit around. There were four of you right now, very unusually you cut through and distinctly warned people about the threat of nationalism and asked the travel industry really to rally. Mitt romneys on your board, clearly. Yes. Youre not a Party Political person per se, why did you make that call . What is the role of business here . Well, its obviously relevant to our business. So its easy to talk about it and important to talk about it in this context. Its also very important to me personally. I grew up in japan until i was 7, my father was all around the world, ive traveled all around the world all of my adult life. And i think actually we can accomplish good business, we can create great jobs, we can bring people closer together by being with each other when we travel. So whats going wrong at the moment . What are you specifically identifying as going wrong . The easiest politics and the cheapest politics is to define your enemy and attack them. And too many countries in the world, not just the United States, thats happening today. Where people are turning inward, sometimes theyre using real risks in the world to create the justification for that. But theyre turning inward and basically saying lets not look outside of our borders. Lets make our borders stronger. Lets make it harder for people to come into it. We had a tragic event in brussels not so long ago, obviously. Happened at an airport as well as a train station. Was that about travel . No, it wasnt about travel. Those were about folks living in brussels who did something. And by basically saying were going to shut the airport if that was the response, that doesnt make that place safer. That becomes an excuse. Im not saying thats what they did in belgium, but it is too easy for folks to say we want to pull back and keep everybody else out. So what is the response from business . How do you lead as a leader in this environment perhaps beyond your immediate comfort zone . We need to make sure we are communicating something about the power of jobs and power of improved lives that come from that from travel. And we need to make sure were coming up with Real Solutions for the real risks. So lets use the data that countries have, that airlines have, that hotels have, lets identify the folks that pose real risk and make sure they have a hard time traveling. But lets identify the 99. 9 of other travelers who pose zero risk and who should be allowed to travel where they need to go. Always good to see you, sir. Thank you very much. You too. Arne sorenson. Ceo of marriott. Still ahead on this show at least the ceo of hilton. Sounds good, simon. Coming up, latest comments from trump may be raising some concerns inside the gop. Republican megadonor Foster Friess will join us next. And allergan ceo Brent Saunders, his take on billionaire activist carl icahns big stake when squawk on the street comes back. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Im susan lee, here is your cnbc news update. Ukraine says its foiled a plot to attack soccer championship in france. Theyve announced the arrest of a frenchman on the ukrainian po lish border last month. Says he planned a series of 15 attacks before and during the matches. A passenger train collided with a Freight Train last night in eastern belgium. The accident came hours after a reported lightning strikes and signal disruption. Tropical storm colin making an impact in florida. Hitting just along the gulf of mexico bring the threat of heavy rains to parts of florida today and also tomorrow. An estimated 4,000 fans swarming a small concert venue in new york city early this morning. This is after kanye west announced a surprise performance on twitter, but then the concert was canceled after too many people showed up and caused chaos. Police were left to clear the streets. And thats your cnbc news update for this hour, back to you, kayla. Thanks so much, susan lee back at headquarters. In two hours fed chair janet yellen speaking from the World Affairs council in philadelphia. Steve liesman joins us with what we can expect to hear after fridays jobs report and flood of new fed speak over the weekend. The joke over the weekend was fed chair janet yellen had to rewrite todays speech because of fridays dismal jobs report. Likely some truth to that. A fed chair with a strong jobs report might have signalled rate hike coming this month or next now likely to be much more cautious. Many economists changed their forecast for the next rate hike. Heres a look at who is where, goldmans at 40 for july, 30 for later. Oxford economics j. P. Morgan and the july camp, septembers where the crowd of trade is if you want to zoom in on that see all the folks there bank of america, rbs, a litany of alphabetic letters there. And then just a few out in december, Deutsche Bank and rbc over there on your right. And now heres a look at the probabilities of by month of a rate hike or fed funds rate greater than 50 , just 2. 9 now for june. 33 for july. Getting up to even money in september and over even money just barely at 50. 8 in november. Some of the commentary we got, Goldman Sachs says if the data in the next couple of months are decent or better, a rate hike in q3 is now likely, we see 40 probability the next move in the fund rate is in july. We now think the next move is more likely in september than january, we continue to forecast two quarterpoint rate hikes in total this year. I have to say thats going to be tough. And Deutsche Bank says latest data should be troublesome to the fed hence continue to see december as the most likely meeting for the next fed increase. Listen for yellen not to give up the chance of a rate hike in the next couple months as a result of a single bad jobs report, but expect to suggest the fed will be wary of hiking unless the data backs it up. Kayla, can you imagine the chair taking a quote from the movie saying get me rewrite . Although i rue the person who had to do that late into the weekend. Steve, still interesting to see the odds slim to none of june. Yeah from about a 30 probability more or less maybe a touch 40 at one point. Steve liesman, thanks so much. Dont miss our special live coverage of fed chair janet yellen speaking at the World Affairs council in philadelphia. That takes place 12 30 p. M. Eastern time. As the long and protracted primary fight for the democratic nomination between clinton and sanders slogs on, trump is quickly consolidating his partys support including rallying longtime gop donors to his campaign. Joining us is one such megabacker Foster Friess, great to have you on the show. Good morning. Im glad to be with you. You know, as we watch us graduate from the primary to the general, theres all this talk about does trump need to pivot, does trump need to adjust his tone, adjust his positions, do you believe the donations will be contingent on that kind of change . Well, i believe the donations are going to come in because people realize the dramatic significance of allowing Hillary Clinton to appoint three Supreme Court justices. That overrides probably just every other issue. But donald trump on the tv program when he was with his family openly said that melania, his wife, encouraging him to become more president ial and he says im committed to do that, just have to deal with a couple more people. Well, ted cruz and john kasich are out of the picture now. And i believe hes going to articulate his ideas in a much more president ial way as he did with the americanisraeli Public Affairs committee where he did a 19minute speech off a tell prompter written by his jewish soninlaw and very president ial. You know, we watch him leverage free media probably better than any candidate maybe ever. Its just hard to know. With that in mind, what would donations be used for . What would an ad strategy look like in your view . Well, what donald trump brings to the equation that ive never quite seen before and something ive been very upset about is the republicans dont do a good job of we have a tendency to talk to the brain and intellect and the democrats talk to the heart and emotions. And donald trump has already reflected his ability to excite people and to get the people make our country work, the 70 who dont have college education, the welders, plumbers, hospitality workers, farmers, and hes playing off Rick Santorums play book when Rick Santorum wrote the book blue collar conservative. Youre absolutely right. He has the ability to excite people and generate news. Sometimes i think he purposely is controversial in his comments in order to generate that. Its a new dynamic that i think we ought to be excited about in terms of his ability to articulate these ideas more emotionally. You say excitement, mr. Friess, but we just had the ceo of marriott saying donald trump is using cheap politics, going after real fears that exist for people and not laying out very clear policies to that effect. What would you say to that . Well, id say the fella hasnt spent much time looking at what his policies are. I mean, donald trump basically said hes going to vet incoming refugees more significantly. Thats a pretty significant policy. Lets give president obama a great big bowl of m ms and tell him theres only ten poisonous ones and he can help himself. I think thats a very strong policy of vetting these people properly. Secondly, donald trump has said lets leave minimum wage to the states rather than why should people in idaho have a different cost structure pay the same minimum wage as someone in San Francisco and los angeles . Hes also articulated and even given a list of his judges. Again, thats probably the most important issue are the three judges. To say he has any policies, i think, there are going to be policy. You go on the website and see some, but i believe some of them can be revised and tweaked and were going to be in a lot better shape with donald trump as president than Hillary Clinton. Well, on the issue of judges one of the primary jobs of the president is to nominate the judges to the federal court system. And im wondering what you think Donald Trumps slate of nominees to the federal courts would look like given his comments in recent days about biases inherent in judges with hispanic last names or over the weekend he said he didnt think a muslim judge would be able to give him a fair opinion. Well, i havent heard his comment, but the issue of islam and muslim they have a different kind of world view. And i believe, if i understand islam correctly, they would prefer to have the koran be the dominant Guiding Force for our country versus the constitution. So that does make it difficult. And im surprised that a lot of his statements perhaps people hear something that he does have in his heart. I was troubled by the way people jumped on donaldson said, well, disney world has lines also. Well, he wasnt saying he didnt care about the veterans, but yet they dont cut him a little space to say look, he was saying the department of Motor Vehicles has lines, private Sector Health care, my wife has to wait three weeks for an appointment. So i think we have to be able to cut people a little more space in terms of whats in their heart. What are they trying to express . And i think donald trump has got a good heart. Hes hired 1,100 hispanics in florida alone. Hes indicated through his generosity on a personal level someone should listen to the lynn patten video, its very touching how she talked about who the man really is and what his heart is like. Foster, when you say you think sometimes hes intentionally controversial, why . Whats the motivation there . Well, its a little like World Wrestling federation, how do you get people all geared up to watch the thing when they pretty well know its a fake . So they come out disguised with a great big belt about three inches across and he trash mouths his opponent, so i think its something that has got him a lot of earned media. And i think thats part of his strategy. Hes a very, very savvy guy when it comes to marketing. In fact, i love the fact when you go to these Upscale Hotels see this little car says now if you want to help us partner with preserving the special resources of our planet, consider hanging up your towels. Youre going to trump places, hang up your dang towel so you dont cut into my Profit Margins. Yeah. Foster, its fascinating to watch. Obviously something everybodys invested in. We hope youll come back throughout the general. Oh, ill be delighted to be back. And i think what people have to remember theres three Supreme Court judges at stake, and also people in idaho and wyoming who probably go republican, they have to spend their time talking to their College Mates living in ohio and pennsylvania, and they have to extend themselves to make sure we have the kind of commitment to electing donald trump. Now, someone say, well, im not a trump supporter, i just think its going im going to stay home. Well, remember if you stay home or if youre one of these conscience voters you feel youre above the rest of the fray because you didnt hold your nose like some people have to do in their opinion. Youre electing Hillary Clinton. So you cant stay on the sidelines or you cant be a conscience voter. Youre just voting for Hillary Clinton if you dont get on the team. Certainly everybody should vote. We know that. Foster, thank you very much. Well, yeah, but everybody should vote for trump. Okay. Glad you made that clarification. Foster friess joining us talking about the election. When we come back, allergan ceo Brent Saunders will join us with an update on the teva deal. Youre watching cnbc, first in business worldwide. The call just came in. Shes about to arrive. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Gold prices surged on the heels of that weaker than expected jobs number, and thats taking gold mining stocks up along for the ride. But will it last . That and more on tradingnation. Cnbc. Com. More squawk on the street coming right up. Using 60,000 points from my chase ink card i bought all the framework. Wire. And plants needed to give my shop. A face. No one will forget. See what the power of points can do for your business. Learn more at chase. Com ink welcome back. Sharings of allergan have soared since early may. The companys 40. 5 billion sale expected to close in the coming weeks. Last week billionaire investor carl icahn jumped in on the name saying hes confident in the ceos ability to increase value for allergan shareholders. That ceo, Brent Saunders, joins us now on cnbc. Brent, always nice to have you. Thanks for taking a bit of time. Since i mentioned icahn there, why dont we just start there. Have you had a chance to talk to mr. Icahn and find out what it is he thinks about the company, or what it is he wants . I did. I got a chance to speak with him friday afternoon before he announced the his investment. I think it was the holiday weekend, so tuesday morning. And we had a very nice conversation. Obviously we know each other from the days at forrest labs, he was a very constructive investor back then. And he voiced his support for our strategy, he voiced his support for our pipeline, and i asked him did he have something he wanted us to do differently. And he said, no, that he was confident in our strategy and looked forward to being an investor for the longer term. Right. Any sense as to how large his position is given its not a filing position so we dont know . Yeah, we dont know exactly either. He did say it was a very large position but well have to wait to get the shareholder trades for the month. I dont know at this point. You mentioned of course you dealt with him when you were at forrest labs, i mean, he can be a pain, to put it mildly. Its not your expectation though that this is going to go that way, is it . It isnt. Look, i think carl was a constructive part of the forrest store. I think he is a shrewd investor. And i think he saw what we saw when we announced our 10 billion buyback, which is that allergan is a compelling investment and that we have a very strong strategy and portfolio of drugs and our growth is sustainable. Yeah, you mentioned the 10 billion buyback, partially at least connected to the sale of the generics business. Lets start off there. Teva cfo said about a week and a half ago he expected it would close next month, meaning this month, june. Are you still on target for a close of that deal this month, brent . Yeah, i do believe that to be the case. I think the ceo of teva has made a sound strategic move in terms of bolstering their Global Presence and leadership in generics. And theyve been working very constructively and diligently with the regulatory agencies around the world. Theyve got an approval in every jurisdiction but the United States. And in the u. S. Were in the final stages of review, and hope to get this deal done this month. And you mentioned of course the 10 billion buyback. You cannot undertake what we call immediate buyback because of irish law, stook, or accelerated reshare purchase is what we call it, but how quickly do you see allergan buying back that amount of stock . Yes, so we cant do an asr or accelerated buyback like you mentioned because of some restrictions in irish law, but thats okay. We will begin to buy the stock back immediately upon the close of the teva deal which we expect later this month. We will go into the open market probably in a 10b5 type program or structure so we can buy continuously despite blackouts and the like. And we will buy probably in increments of 4 billion to 5 billion and then renew the program until we exhaust the full 10 billion. So my sense is it will take us several months to do the whole thing, but we will get it done. Right. I mean, youre going to be Investment Grade, youre taking in 40 billion from this sale. Are you going to be levered to the extent youd like to be . I mean, are you going to be happy with your capital structure or look to deploy more capital in other ways great question. So we have always been an Investment Grade credit. I have always viewed that as a strategic imperfectiative for allergan. We will remain committed to that rating, we will pay down 8 billion in debt immediately upon close of the teva deal, pay down roughly another 2 billion over the next 18 months as natural maturities of bonds occur. That should get us into a stronger capital position. That will leave us net round number about 20 billion including cash flow from operations to invest for growth. We will be out looking to bolster our pipeline, looking to bolster our leading therapeutic position in the categories in which we compete, but we will use a portion for buybacks, a portion for debt repay down and about 20 billion round number to invest for growth. Speaking of investing for growth, a few weeks ago, pfizer, your onetime merger partner, announced a deal to acquire a company that seemingly has a Product Portfolio that lines up quite well with allergans. Did you consider a bid and if not, why not . So obviously, we look at everything in the space, anacor being a company we kept tabs on. It does have a very attractive asset thats being filed with the tda for atopic dermatitis. Thats an area of large unmet need. I think pfizer made a good deal in going after it. There are other assets in that space. We continue to evaluate all of them as a leader in medical dermatology around the world. So thats not one that you would that you would participate in in an auction for or would consider in the future, competing with pfizer to try to buy . No. I think thats not really our style. We keep an open mind around every possible outcome but there are so many options. Atopic dermatitis and other dermatological conditions have a huge market with unmet needs and theres an evolving science so were looking for ways to compete in that space by looking at all the r d and the assets in the space. Finally, [ inaudible ] will continue to be a key point as the president ial Campaign Continues to move towards election day. Are you concerned at all, your stock got hit when valiant was going down, clearly you are a Different Company in many ways, but under that overall umbrella about can you keep increasing price, what is the answer and what are your concerns when it comes to that front . I think drug pricing is an issue our industry has to take incredibly seriously. Its something we at allergan have always taken seriously and look to price our drugs based on the value that they provide to patients and society. We have always been very focused in terms of the price increases we take and in fact, if you look at most of our growth drivers, they are predominantly growing from volume and only a bit from price. That being said, i do think we are moving into a golden age of science here. I know one of your colleagues is at a Cancer Society meeting today, and if you just look whats happening there, while prices may be high initially for some of these breakthrough therapies to really impact patients lives, over time, so much money and so much r d has moved into that space that prices will drop. At the same time the value of these drugs and therapies will provide to patients will go up. So in a few years, i think that will look like an incredible bargain given the impact those drugs will have on peoples lives. Well, we will be checking in with you throughout but certainly appreciate you joining us today. Brent saunders, ceo of allergan. Take a look at the markets right now. Repricing that june rate hike after fridays jobs report. Dow currently up 100 points or just shy of that. The s p is on pace for its best close since november 3rd. Well be right back. Squawk alley will be on the other side of this break. [phone buzzing] some things are simply impossible to ignore. The strikingly designed lexus nx turbo and hybrid. The suv that dares to go beyond utility. This is the pursuit of perfection. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive good morning. It is 8 00 a. M. At facebook headquarters in menlo park, 11 00 a. M. On wall street. Squawk alley is live. Good monday morning. Jon fortt is out