Transcripts For CNBC Squawk On The Street 20170329

There. The price going up a little bit and the yield coming down ever so slowly. Road map this morning starts with the historic day for the eu. U. S. Markets as you just say are mixed at the premarket. The uk formally begins brexit negotiations to which britains Prime Minister said theres no turning back. Plus, betting on robots. The largest money manager blackrock changes the ways it picks stocks. And President Trump expected to sign a bill that clears the way for providers, your isp providers, to sell your browsing history. Well, one day after the dow snapped the eight session losing streak and the s p posted the best daily pormdz erformance in weeks, history is being made in uk. Theresa may has triggered the twoyear process or what could be the proyear process of britains depart chur from the eu. And this is how theyll approach trade. We will no longer be members of the single market. We are going to make sure we are going to make sure that we can strike trade agreements with countries from outside the European Union too. Because important to our trade with eu is and will remain, it is clear that the uk needs to increase significantly its trade with the Fastest Growing export markets in the world. All right. Were here. We finally got here. Where are we . Well, i tend to i attended a Panel Last Week in london on this issue and my take was this. First, if youre interested in british stocks they have been the hottest among the hottest around the world. Dont chase those. Thats a mistake. Second, i think theres a lot of business as usual. We can speculate on what banks may move some people to europe. This has been so far that you have heard the rhetoric is punishment of the uk out of the continent so that nobody else does it. I question whether there is a cinny on the continent that will be the right place to do the business with. Im not saying business as usual necessarily, but the uk has had a big run. Maybe take profits there. And of course people will be focused on the pound. Yes. The uk economy has perform performed well since june. And the surprising vote they have inflation there. Here we are finally nine months later and they are they finally exercised article 50. Many thought it would be sooner than that. Right. Its a new story that you must cover. Its not a new story thats news relevant unless you have the real surcise come on. This was a separate country in having its own unit. Again, i think that the motion important thing to think about is which banks will it be jpmorgan or credit suisse, will they move more out of london . A story details the decisions jpmorgan is trying to make about where. Because theyre going to move. You have to a significant amount of jobs out of london. I think it will hurt your franchise if you dont move a lot of jobs. I know there are two banks i warmed up to, both are very troubled. Deutsche bank and they are winners. Keep in mind that the spanish situation was supposed to be horrible, its gotten strong. Some of the swiss banks obviously and Deutsche Bank are winners out of this. I dont think that lloyds, rbs particular, barclays are necessarily winners out of this. I think they could be loser. S spain, for such a long spain is doing quite well. The overall unemployment rate, things have gotten better. Ten year yields in spain will get you 3. 6 . Better here in the good old usa. You bet it is. Were 2. 4. I think a lot of 350epeople rea didnt understand how it was, so easy. Just journal it by u. S. Paper. Especially after the excellent interview with Stanley Fischer where you feel quite confident that the two rate hikes are on, which then cause the banks to do quite well yesterday. We had a nice rally across every single segment. This is an interesting story this morning, jim. Actually, kind of hit late yesterday. Blackrock announcing the significant revamp of its equities business. Its going to slash fees, cut some jobs. Its going to increase the use of computers to pick stocks. Theyre trying to boost the active management business. This is a small portion of the overall 5 trillion at the world that the Worlds Largest money manager runs. Legacy businesses from the old Merrill Lynch investment management, were talking what about somewhere 300 billion in terms of overall assets. They have underperformed their peer group for quite some time, but interesting to see quantitatively driven strategies that are largely based on gra algorithms, taking over an asset base to a certain extent that has been focused on picking stocks and trying to outperform the market rates and the larger question is is that day just over . Are we going to be indexed . No, i dont think so. I think i want to do a contrary approach on this. Individuals are the winners if you think about it. The winners, well go back to what Warren Buffett was saying. Winners beget too much money. They just get a huge amount of money. So whatever they were doing right is then almost made into the index fund because they get so much money. You cant outperform the market the larger you get. Yes. Thats my experience following the hedge funds that have success. They get large and then they move out of the area where they have true expertise and start to invest in other areas. They drift. Thats when they start losing again. Warren buffett did not into that style drift. Style drift. Its like a salary cap. If you want to win in a diversified mutual fund, people are looking at it whos got the lowest fee . Right. And larry fink is not someone he did not do this idly. A brilliant guy who made a determination. Lets have the lowest fee, well do fine. If you look at how were doing versus everyone else our fees are lower. You should be in our funds. Again, as a percentage of the overall assets under management its very small. Its been the actively managed portfolio that has lagged. People will use this as an example of whats the robots if you want to call it, taking over the management of the money t t that i mean, we have so many quantitatively driven funds at this point. So many hedge funds as well deploying and more and more rocket scientists and physicists and look at renaissance and the success they have had for so many years. Whats thats meant for their founders and their ability to influence the process glad that you mentioned that. Theres so called homeland him i thinks that. Were still going there. Yes, absolutely. They may have pioneers at the renaissance james simons i met him at the charity event. I dont know how he does anything other than Charity Events because hes so charitable. I will say this. When people ask why do you say that the ten year went up this much and then you say oh, the banks sold, when it went down thats just the algorithms speaking. You will see this morning that Restoration Hardware is up. Thats not algorithmic. When you look at bank of america its algorithm. Should we never say another word . Just the opposite. People at home can control when they commit capital so theyll be in the index fund and then capital to be individual stocks. Do we say no the facebook no, i cant pick a facebook . I cant pick an amazon . I think people at home have much better horse sense than we think and theyre trying to convince them at home, theyre on facebook all the time, but dont you dare pull the trigger because youre too stupid. Im saying the opposite. I say, look around, do a little homework. If you like it. If you have the temperament then you should own some individual stocks because you can choose when you want to take when you want to take capital gain. You can watch it. Be much more empowered. Know your money and for executives who watch the show, i think that they are bob iger is not saying all of my efforts are for naught. Because blackrock is going indexed. No of course not. By the way, its a great hes a great american. Double great. Super great american. Do you think for a minute that you i mean, i remember sitting down with some of the people who are 60 saying this could be an unbelievable stock but i never said, but you know what . The algos dont like it. I think we can go a lot of work here. There are so few actively managed funds that beat the benchmark. Hedge funds, eat n park wrapping it up last week. Guys who had good years, but they it was the early years where they had smaller amounts of money under management. Then they give you this idea that they have got well long term track record, but so much of it was the early years where they had 1 billion or less. Look. Thats what happened to me. I compounded 24 . Fees after 8 over a 14 year period but you have to be nominated in the fund. I never took it north of 500 million. Because i knew id have to be starting to do the stuff that everybody does which is oh, i have to have this much health care and this much bank. Management is greatly exaggerated . I think it is. I think theres plenty of people coming up and theyre doing the right thing. Just that were not hearing about it. A whole new generation who know the social mobile cloud, internet of things, making your money. Theyre not on tv. Theyre quietly going about the work. We wont hear t r. Roe or the guys. Therefore youre going to scott walker has a series of Money Managers on. I remember when he had will which my kids have. Fidelity of course. I look at what hes done over his body of work and i say thank heavens that i had the instincts to put my kids the uniform gift to minors in there. My ira which was originally with peter lynch at magellan. Again, im not giving up on stock picking either for individuals or for Money Managers but i understand if youre going to underperform, why not cut the costs out and go algorithmic. Still to come, Westinghouse Electric files for bankruptcy protection. I heard that from a guy on my left yesterday. Well see what it means for Companies Investing in on the Nuclear Power and the stocks that go along with that. Take another look at futures this morning. Setting up for kind of a mixed open. We have a lot more squawk on the street. Were live from post 9 when we come back. Call his agent. Im coming over right now. The newly advanced gle can see in your blind spot. [ dinosaur roar ] onboard cameras and radar detect danger all around you. Driver assist systems pull you back into your lane if drifting. Bye chief. Bye bobby. And will even help you brake, if necessary. It makes driving less of a production. Lease the gle350 for 579 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. What . Pony neighing] hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. A set back for the Nuclear Power industry. Westinghouse Power Electric which is a toshiba unit has filed for bankruptcy protection. They suffered heavy losses from the Nuclear Construction projects in the southern united states. The Southern Company in factnary ceo w in fact their was on yesterday. You expected news in the near term. This wiped them out. Not a big surprise that westinghouse is filing. As you said yesterday, toshiba certainly in trouble although this actually protects their balance sheet. Yeah. But toshiba has to raise money. Theres a subtle option for the flash business which i think there are a couple of businesses, cypress semiata they said that flash is very tight. I dont know if you can put it together, some said 7 billion. Some said more than that but theyre selling assets. That auction is tonight. I think what the southern overrun has been a true disaster. And it says to just how complex these plants are to build. Lets not forget natural gas passed this year, coal, 33 versus 32 at the end of last year. Nuclear has been constant but nuclear is decommissioned. It aint going to be a new Nuclear Plant coming in. Decided to embark on building new plants. Big mistake. It was a mistake. Big mistake. People make mistakes. Nuclear is still responsible for 20 22 . Its the cleanest. But there are ever since fukushima, that was the death nell. Y death knell. Be aware that westinghouse storied company by the way. I once remember you interviewing michael jordan. Michael jordan, number 23 no, a different michael jordan. We used to make that joke all the time. T never got old. You remember my interview with michael jordan. Remember they owned cbs. I said to myself, this asset is worth a great deal. Well, this asset has been destroyed. Its been destroyed. Destroyed. I mean, lock, stock and barrel. What do you do with Southern Company if youre a holder there look, southern i think is somewhat insulated from this. But lets just understand that you could go into firstenergy which hitherto was the worst. And do fine. You can go into dominion which has got a very big liquefied natural gas operation in maryland thats about to start. It makes a lot of sense. So i just think you do swap out. Theres some the liability is not big, but southern has demonstrated a lack of horse sense. Southern is a long, storied company. We know that they have got a great history but utilities are somewhat interchangeable. And you probably dont want to want to interchange that one. A story well keep a close eye on. Perhaps not that large of a stock market ramifications but one of importance with westinghouse, people know well. Flash is big. Dont forget toshiba as you said. Man, theyre having a rough go of it. This is a huge, huge company. I think they couldnt see their way out of this. But they are not done selling assets. That could be the benefit okay. Getting ready for the mad dash . I have some stuff that will blow your head off. Dont do that. Okay. Thats not pg. Just kidding. Keep it right here. I want to set my stocks to music. Okay. We have a mad dash from jim coming up after this. Stay with us. Stay with us. Uly of 98. Our 18 year old was in an accident. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family, and we will be with usaa for life. The power of the nasdaq market. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. bell chimes nice work brother dominic. Now we just need 500 more. Translated into 35 languages, personalized oh and shared across the 7 continents. other languages spoken look abbot, i got it. Its a miracle. The markets change. At t. Rowe price. Our disciplined approach remains. Global markets may be uncertain. But you can feel confident in our investment experience around the world. Call us or your advisor. T. Rowe price. Invest with confidence. Breaking news from chicago. Fed chairman charles edmonds. Yeah. Charles evans who is a voter this year saying that fis kecal policies risk upward pressure on inflation and if there are policies that could more hikes. Now hes saying hes looking for one or two more this year. I want to walk through the fiscal policies because its something that investors should be aware of. It could boost growth for a time. But the odds of 3 to 4 growth write the which the president is talking about seems to be pretty low. He sees a 1. 75 potential and a little upside. Lets talk about what he sees when it comes to tax reform. Well designed tax reform can help potential growth but not by much because the overall effects on productivity which is the key not likely to be large according to charles lee evans. He says there are more notable upside growth scenarios out there including bring the way foreign economic prospects looking better. He still sees a gradual rate hike path and he supports one or two more rate hikes this year as his base case. But david, important to think that the fed is very skeptical about the fiscal policies coming and b very skeptical about the fiscal policies. I think its something that investors need to be aware of and how much the fed thinks about it. They ought to internalize it into their own outlooks. Thank you, steve. We have jims mad dash and we have the opening bell. Thats coming up. Im not sure what youre doing that. Is your tie getting stuck . Im playing the music when you do the mad dash. Beautiful. Looking forward to it. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Our customer is a our 21yearold female. Heavily into basketball. Wait. Data just changed. Now shes into disc sports. Ah, no shes not. Since when . Since now. Shes into tai chi. She found disc sports too stressful. Hold on. Let me ask you this. Whats she gonna like six months from now . Who do we have on aerial karate . Steve. Steve. Steve. And alexis. Uh, no. Just steve. Just steve. Just steve. Live business, powered by sap. When you run live, you run simple. Please repeat the objective. Thrivent mutual funds. Managed by humans, not robots. Before investing, carefully read and consider fund objectives, risks, charges and expenses in the prospectus at thriventfunds. Com. We plan to unveil the second edition this spring featuring 38 new lighting collections across 400 pages. Heres what jim has been referring to. From the Restoration Hardware Conference Call and that music. Were a few minutes before the opening bell. Well get to our mad dash which is Restoration Hardware. The whole thing was set to the tune. May i suggest beethoven third concerto. Gary friedman just delivered, okay. He bought a lot of stocks in the 20s. That was the tip. Hes the ceo. And now youre seeing both maybe a short squeeze on all the recognition hes cutting the numbers and hes going for free cash flow. Hes getting rid of promotions. Hes got 300,000 members. Were a member of the Restoration Hardware club. And hes opening hospitality. Thats a big theme. Kind of like abc, but in chicago they have it where theres wine and coffee bars and hes going for hes going for roi, david. Hes xgoing to hit the 5 billin target he believes. Restoration hardware deserves this comeback. Theyll have a good year in 2017. I dont know how much you buy from there. Very little. We just bought some pots and i never heard my wife say you know what, were only going to buy two theyre so darn expensive. They were doing a lot of stuff wrong and now they started to do stuff right. Yeah. Last year as the selfeffacing gary said, last year, he said vision is everything. You have to think until it hurts. You have to have courage to destroy todays reality to create tomorrows future, david. I dont know if you realize that. And you have to have the courage to march into hell as they did in 2016 in order to have a heavenly cause of positive cash flow. All on this i have to start listening to this Conference Call. Like a tony robbins seminar. Yes, its tony robbins meets belichick because they have the cfo later. Theres your mad dash. Change the music. Gary, i love you, but honestly. The piano concertos. Im sort of its nice though. I like it. Its set to nordstrom music. There you go, the old piano player. Do they have the player . Yeah, but no sales. I would have the sales over the piano player. Were a minute and a half away from the bell. Lets get back to the broader market, jim. Time to ask you what do you think the key is to this morning to the market as we like to say, how trade willing go. What attracted your attention beyond Restoration Hardware. Im going to say vertex because were still in a world, david, if you can come up with a break through drug as vertex did for one incredibly horrible disease, cystic fibrosis. Dan wood is the ceo of the federal realty whos gotten me involved to try to cure this horrible disease. But vertex has a second drug to go which reducing the lung clogging mucus which is causing so much infection and has taken so many lives. 70,000 people suffer from this. Its a reminder, david, that we must pay for break through drugs no matter what we do with medicaid, with medicare, with ryan care. It doesnt matter. This is remember that you go you own biotech because of this kind of thing. Not because of me too drugs. Theres another one named this morning that you know well. Well talk about it after we get the bell. Regeneron yes, exactly. What i want to discuss. Pricing their key drug on the market. You hear the applause building here. Take a look at the realtime exchange. Back in our headquarters in englewood cliffs, new jersey. Were right here at the nyse where well get the opening bell. Over at the nasdaq, cnbcs new primetime series the deed chicago. Kind of like the law order franchise. Theres the guy from the deed. Hes leek the worlds expert and someone says you dont know what youre talking about. You really enjoyed that. I happen to love real estate. And my wife and i do a lot of real estate. We watch the show. We have that guy come in with us. Were look at some properties we really need help. We need the deed asbury. Were spreading the franchise around the country. There they are, congrats to them. Looking forward to that. 10 00 p. M. Now i have done my part for the Parent Company. Lets move on to the markets themselves. Jim, we had a decent day yesterday. Nice turn around in the s p. This morning we start down a bit. But my eyes go to the banks. Look at where we are on the yield. 2. 4. Here we go again. With seven ticks of decline. Youve got you must have Interest Rates at least stabilized to not lose 20 of this market. And i do like look, i do want tech to get the bid underneath, but there were no tech earnings last nightal. Davi be xr got but xr got a bid. Its a mixed signal, integrated circuit company. And i believe they will be in the apple 8. So look for tech to be our leaders and look for biotech to be our leaders. Speaking of 8s, samsung is coming out with an 8. How do you like that . The fire phone has been put to rest. I wish them the best of luck. I mean, apple was able to go from 93 to 143 during the samsungs respite. You know, i remember one of the reasons i said own dont trade, apple was because i had a stewardess come up to me individually, thats not a samsung, thats not a samsung. I felt like that was a great ad pitch, cook should have kind of like steve jobs had the thing that you swing it, 198 1984 ad that ran is that a samsung ran once. I gave that to tim. You did. I gave him a lot of things. You gave him the idea of doing something on a plane. Play up to samsung. Did not do the stewardess aisle thing. That would have been fabulous. The apples market cap is 753 billion. Where was the high on that . Im curious. Even though the stock is at a high they bought back so much stock its had the impact of not as being as large of a market cap but were getting close to it now. The stock is not up today. Also 14 times yeah. Not bad. Repatriation we have forgotten about because of the debacle of the health care. They need repatriation, they need the Virtual Reality product to go well. They need the service revenue. I paid my ten bucks the other night. Just automatic, you paid your money. What are you paying ten bucks for . I want a huge amount of stosh storage. I pay 2. 99. Oh, i do music. I mean, its supplanted me. The dogs and im number four. But thats okay. I dont mind. I dont take it personally at all. I dont mind being number four in the house. At least you have a number. The kids have grown up and left. Im back in the queue. But im not high enough yet. If that apple 7 like the samsung, i would have stuck right behind bug and everest. Yes. Yesterday, after you left us, jim, we were dealing with this gm story. David einhorn of course owning almost 5 of the company, and may go after board seats around proposing this idea to create two classes of stock. As i reported almost immediately after we got news of that, gm had studied it. Brought in a number of investment banks both with iron ho einhorn and without him. He talked to the board and he said no way. Did you see how fast the s p was out there . Both s p and moodys put releases out yesterday that indicated this could conceivably lead them to reassess their rating of the company. Yeah. From a Capital Allocation standpoint having one stock based on the dividend yield and on the Capital Appreciation of the core business in terms of the performance from the board of directors point of view, how you allocate capital when you have two distinct classes of shareholders brought up significant concerns for gms board. They basically told einhorn to go pound sand. Well, he tried to come up with the complicated way to be able to divide. Kind of an iopo. Hes had this primed since scores years ago. To me, this was listen, earnings plus buy back plus growth equals higher stock price. Growth being the key arbiter. You have been frustrated with gm for some time. The multiple remains very low. The yield its the lowest pe but david secular trends. Secular trends. Tesla the bear story ended yesterday. Ten centc coming in there they have so much capital they can fund every time elon musk runs out of money. Ten cent will beat it. That was a bear kill. Important story. We did cover it yesterday, but todays teslas stock is down a bit. It was up yesterday on that. Yeah. That made the bears took 5 of the company, took it down from the stock offering. You believe theyll be there as a future future pool of capital. The bears went from being grizzlies to being koalas. Koalas might i dont know. Koala bears never hurt a soul. Never . No. Theyre kind of helpless. Theyre like cats without claws. Stay up in the trees i guess. Yes. And theyre easy targets for musk and for ten cent. I saw some sloths in costa rica. Talking about things. How many . Two. Two. Good enough to do the job. Yeah. Very cute. Very cute. Im surprised. Apples up again, david. No, its not. I got it down one cent. Sonic is up even though they didnt report a great quarter. The stlaurestaurants are making come back. Ever since popeyes and one of the best ceos out there had to resign because burger king Restaurant Brands bought them. But theres consolidation coming in this restaurant business, that cheddar deal was very important. Really . The Conference Call was so bullish. I mean, darden by the way picked up steam yesterday. Because of the costco it was a thing of beauty. Now, remember, david, i want to make one thing clear to go back on koalas. Theyre mammals. Theyre not bears. More like teddy bears. Okay. I dont want to refuse you. Its not a bear. The point is that tesla has turned anybody against it into a defenseless animal. How about the plush bears like when you win at dave busters. There you go. Theyre down 4 . How did you know that we were going to go to dave dubusters . I have a sixth sense. You did. They came in above estimates. Revenue in line, but comp store comp restaurant sales like 0. 3 . The Conference Company was beautiful. The company is run by a guy who also in the name of the greatest author of our lifetime is also the name of the ceo. Guess . Philip roth. Stephen king. Oh. All right, i like philip roth. One day well look back and say hes the dickens of our time. Really . Really. These are the best of times the best of writers. I thought that was a beautiful quarter. Find me another company that had its experienceal. People go to dave busters. They take pictures and instagram flash, used to do snapchat fashion shows. Just kidding, snap is more powerful than ever. How many beautiful Conference Calls did you listen to or read . I have to emphasize i have no life. Restoration hardware lulled you i was in the catalog last year. Im a full service guy. I have no life. Thats probably why im after bug and everest and, you know, in terms of the pecking order there and the apple 7 large size. Youre in the corner, just reading and listening to your conference kacalls . I had to listen because of the music. I urge gary again, like maybe maybe even go make it a little bit of atonal. How about stravinsky, rite of spring isnt that stravinsky . Beautiful. Can we end on oil . We have the 10 30 look bad no matter what because they have 10 30 inventories. People missed what President Trump did yesterday. He made it so the epa is not going to crack down on the methane. The independents are no longer looking over their shoulders. Can can you not film the flaring, because thats methane. Its a pollutant. The epa may not be as interested. Thats very bullish for independent Oil Companies and our country. I think theyll have another leg up unless the inventories are so high we have to swim in it. I dont want to swim in it. Im hoping that the lax epa regulations wont have me swimming in it either in the ocean. It will be the hunchback of notre dame the only thing to do is dump it over the cathedral. An interesting thought. Sanctuary. Another interesting book. We have to think about politics today. I wanted to end with the hospitals which have had quite a run since the inability of the Republican Led Congress to repeal and replace obamacare. You know, interesting now we have the prospect of a number of states opting into medicaid. I know. Under the aca, and it was pointed out to twothirds of the for profit hospitals are in states that did not expand. Think texas and florida. Think how many beds are there. So that could be beneficial even more, even beyond the move that we have already seen in this sector which is obviously responded quite positively since friday. This stock went from worst to first. Hca, its well run and so depende dependent. I dont want to go down the food chain to tenant. Maybe community health. I like hca. I never thought that the repeal and replace would you know, speaker ryan was talking about taking another bite at the apple on the repeal and replace. Thats what we call have a shop. I dont have a shop. But mad money is a shop. Restoration hardware is my shop. All right. David, is your wife a member . No. 100 bucks. Its very stirk i ccky. Im not a club. Lets go to bob pisani. He has more on whats moving. Happy wednesday. Mixed open right now. I want to point out whats going on in europe. Important day because has may has triggered the article 50 on brexit. Look at europe here. London stocks, slightly to the upside right now. They were negative earlier. Germany and france also to the upside. We have our First Casualty you can argue from brexit. Thats the merger between the deutsche boards and the London Stock Exchange. Its dead. It was formally blocked today, competition grounds they said. Dont kid yourself this was a political decision. London would have been the main office of this and the European Union was incomfortable having uncomfortable having them control the deutsche boards. So you can see both of those stocks trading to the upside. Look at the u. S. , mixed markets. Its intriguing that banks arent down much even though the ten year is down 2. 4. Thats a worrisome spot here. Banks were positive at the open. Industrials were strong. Fractionally to the downside here. You heard the guys talking about blackrock the biggest asset manager out there. Picking business using computers to pick stocks these days. Asset managers take a look. Slightly to the down side. This is typical of whats going on for the whole year. Look at the whole year. They have had a horrible time this year because active management has been losing. Etfs and indexing very strong. Blackrock they have the ishare business. That was a great investment they made seven or eight years ago. Theyre having a tough time of it. Most closely associated with active management. I think its important to note its good for a company like blackrock to go ahead and say theyre doing this, but the trend is going on for a long time. You can get these kinds of quantitative managed funds already in the etf business. Etfs that uses rules based quantitative strategy. Theyre very low cost. Folks thats like an s p 500 fund. Thats as low as you can get. So you can get semiactively managed strategies at very, very low costs. This is where the business is going right now. So important moves going on overall. So the advantages of going to computerized trading are low cost and you get access to high end data crunching. We use kencho and ten years ago it was the secret sauce. We have it, we give it to you. So democratizing data crunching is an important part of this and consumers are beneficiaries of that. We havent figured out if this is outperforming. Talk about the computers picking things, we havent got a long history of this and see how well it does in the long run. Were going to april. The first two weeks of april, seasonably a weak time of the year. And again, this is that access to the information nobody had ten years ago except the citadels of the world. First two weeks of april tend to be down for the s p and the last two weeks tend to be up. Most of the time this is attributable to tax selling and of course being having to pay your taxes overall. Some of this may be due of course to earnings season that starts roughly at the time that the tax season ends on the 15th. Tech stocks for example, generally down the first two weeks of april. Tend to be up the second two weeks. Thats pretty notable. Three percentage point swing in a month here. You can see the same thing happening with the s p financial sectors. Flat in the first two weeks. And remember financials are among the first to report. That will be april 13th. It will be jpmorgan. You can see the industrials flat and then up 2 . Its noticeable, and because we have firms like henshow we can show you the data that citadels had ten years ago. Democratizing data. More to come as we get more and more artificial intelligence. Thank you. Still to come, well talk about the future of the trump agenda. Well have steve ratner and larry kudlow join us at the same time apparently. As we head to break a look at the movers and the traders. Pimco report. Where we are on yields for the 2, the 5 and the 10 year note. Ive spent my life planting a sizesix, nonslip shoe into that door. This side, i want my customers to relax and enjoy emselves. But these days its phones before forks. They want fi out here. But behind tt door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Know you have a dedited advisor and team who understand where you come from knowou can craft an Investment Plan as strong as your values know that together, you can establish a meaningful legacy with the guidance and support of your dedicated pnc wealth management® team. From engineering and manufacturing. To stealth bombers. To ntgeneration fighters. To landing an unmanned vehicle on a carrier for the first time in history. Just wait till youee whats next. Thats the value of performance. Northrop grumman its been over 100 years since the fit stock index was created, as a benchmark for arage. Yet a lot of people still build portfolios with strategies that just track the benchmarks. Buinsting isnt out achieving average. Its abo achieving goals. D invesco believes doing that today requires the art and expertise of highconviction investing. Translion . Why invest in average . Congress has voted to overturn the fccs broadband privacy rules which were set to go into effect later this year. The rules which were issued during the final months of the Obama Administration would have required Internet Service providers to get consumer consent before using their data for advertising or marketing. President trump supporting the repeal of that measure. There was this disparity, jim. The ftc regulates the likes of google and facebook which of course build up a business in part on that. And so the isps our Parent Company amongst them, comcast, charter, at t, arguing hey, wait a second. You know, why are we being treated differently . Well, because youre being treated under tigtle 2 under a Telecommunications Charter and that and the privacy rules, special interests dominating the donald trump team. Some of the Silicon Valley specialists were powerful. I think this my Charitable Trust owns comcast. This is a big victory for verizon and at t and theyll be able to place the ads theoretically how at the point of sale the way that google does. A big win for them. And its not a surprising one because whats happened is that if you do equalize everybody, then the guys who have been penalized the whole team, the isps are starting to do better. As we have said many times of course, so far the deregulatory approach from the fcc has been very beneficial to those who provide broadband services. Our Parent Company amongst them. You get tax reform even more so. Holy cow. Some are domestic tax pairs and benefit from the tax reform thats unlikely it seems at this point to occur in its full form. But even just the roll back at the fcc something you mentioned the of privacy, of title 2. Of cable set top boxes all beneficial. Deregulation is what business really wanted, okay . Gravy is tax reform. Gravy is repatriation. The idea that theyre not that we have level Playing Field which is by the way that that does. That is not a gift to the isps. Its finally leveling the Playing Field. I think 1999 privacy is dead, get over it already. Its a lot more dead than them. Theres a pen up bra of laws that protect you. I know what that is. We have more with jim after this. Is. Is. Trades powerful trading tools, give you access to indth analysis, and a team of experienced traders ready to help if you need it. Its likeaving the wer of a trading floor, wherever you are. s your trade. E trade ron the move. Hey rick, good . Oh yh, were gd. Were good terminix. Defenders of home. Alpha seems more go after it the same way . S it by asing after short term returns. Instead if getting caught up with the crowd, the vestment managers at pgim take a lg term vw, teaming specialized active investing wito seeout globalnt rigor, opportunities. We mane over a trillion dollars th way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential all right. We have jim. We have our top trading. Ed may maybe this is a gary cohn moment. They want tax reform and standing in the way is paul ryan. He wants a border tax, yes. Im calling this border ryan or ryan border which ever you want to do. Ryan border tax. These stocks are all companies that have just probably 90 of their goods are going to be hurt and their earnings challenged by the ryan tax. And leave it to ryan to fail on this one. I think he probably will. Wow. Been rough on ryan today. What did you call him earlier . Einstein. Einstein. The selfproclaimed smartest man in congress, david. Smartest man in congress, david. What am i going to do . What do you call him mozart . Ill calm him mozart. Looking like the border tax is going to fail and that means that something gets done. But remember, ryan is a powerful person when it comes to doing nothing. Will, we have a lot well, we have a lot more on tax reform to come. Believe me. Well be talking about niit in e days ahead. What are you talking about tonight on the show . Paychex. We dont talk about Small Business and medium sized businesses enough because theyre the ones who have been hurt by regulation and i think marty is going to tell a great tale tonight. Remember, he benefits from the float of rates going higher. So if we get another two rate hikes thats easy money for him. Maybe all the companies that Research Firms that have a sell on him will realize 20 points later, that was a mistake. All right. I may see you back in jersey today. I think im headed back. And congratulations on the quarter. But we need to vary the piano music. Maybe our music too. Coming up, Steven Rattner and larry kudlow on the president s agenda. But well talk about tax reform. Oh. Not the smooch method come on. What going on here . You know how Ge Technology allows us to fix proems before they. Theylow production, yeah. Well, no more catchy business acronyms. Wait, we dont need to smooch . Im sure we can smooch a solution we just need to hover over the candice, problem until. St let it go. Hey, sorry im late for team building. Smoooooooch that felt right. Whats wrong with you . Hes so trusting. Good morning. Welcome back to squawk on the street. Im sara eisen with david faber and mike santoli. We are live at post 9 at the new york stock exchange. Carl has the day off. Let a check in on markets at this hour. After the strong bounce from stock yesterday, stocks here are searching for direction. About half an hour into trade. The dow is lower by about 33 points. The nasdaq though is positive by almost 0. 2 . Crude oil is higher and the british pound is weaker as the uk makes history triggering article 50. Thats where our road map starts. The Prime Minister triggers the twoyear brexit process. And stocks taking a pause here with the dow lower for the ninth time in ten sessions. Well have some Market Analysis for you straight ahead. And the tax trade. A breakdown of what stocks you should be investing in as tax reform gets ready to come down the pike. But first, british Prime Minister theresa may signed a letter invoked article 50. Our vila marks joins us with more. Good morning. So essentially that triggering of brexit happened with a delivery of a letter. That was written by theresa may, signed by her in london yesterday. It arrived here in brussels earlier this morning and it was delivered to the Eu Council President , tusk. His reaction was not entirely positive. Lets take a listen. Most europeans including almost half the british voters wish that we would stay together, not drift apart. For me, i will not pretend that this is that im happy today. Now, the british Prime Minister theresa mayba back in westminster in london tried to put a slightly more positive spin on this process. Lets take a listen to that. A few minutes ago in brussels the permanent representative to the eu handed a letter to the president of the European Council on my behalf confirming the governments decision to invoke article 50 on behalf of the treaty. The article 50 process is under way and in accordance with the british people the eu is leaving the union. This is an historic moment from which there can be no turning back. Now, she talks about there being no turning back. Theres a two year countdown during which negotiations must be completed under the eu treaty. Whats really interesting is that the brits have an idea they want both the departure from the European Union and a new trading agreement to be decided in the two year time line and theyre saying they want one to come before the other. Thats why the first stumbling blocks could occur. Sara . Investors will be watching that closely. Thank you, willem marks. The ftse 100 is remaining firmer and the pound though is weaker. For me, lets bring the global head of Investment Strategy and barclays chief u. S. Economist. For a stock investor, we have this divorce talk beginning over the next two years. Right. What is the important market implication here . Here at home . Here at home. I think for u. S. Investors the beginning of brexit which is essentially what this is is pretty much a nonevent. Brexit is not going to be resolved in the two year time frame that article 50 postulates. It took the europeans what seven years to do a deal with the canadians. The uk economy is 70 bigger than the canadian economy. This is going to be a multiyear thing. Its not a big deal although theyll be out of the eu officially in two years by april 2019 because of these rules of the lisbon treaty. I wonder if you put the eu together thats the second biggest economy in the world. The uk is number five. Germany is number four and italy and france are in the top ten. This is a huge deal. Yeah. They can draw this out. Article 50 says its two years but they can extend under the terms of the treaty, so i would expect that theyre going to extend. This thing is going to roll on. But coming back to the u. S. Investors not a big deal. The bigger issue for u. S. Investors is the reality that we are back into interest normalization. You have to pair that with where earnings are going to be with or without tax reform. We have to pause briefly in this conversation and go to washington right now. Our Kayla Tausche has some breaking news from capitol hill. What can you tell us . Well, sara, i want to give you some more information according to the Law Enforcement official about the shots fired. It began around 9 30 with Law Enforcement officials saying Capital Police fired at the driver of a vehicle that hit a police car around that time. It took place near the u. S. Botanical gardens on the mall side of capitol hill. About the 100 block of independence avenue southwest near the capital. It says the initial report is that no one was wounded in this incident. As the driver drove toward Police Officers and rammed the car, that is when the shots were fired. Law enforcement officials saying no one was wounded. Well bring you more information as we have it. Thank you for the update. Kayla tausche in washington. Back to our conversation now on the markets. Hans, you were just saying that you expect these article 50 talks to be postponed and therefore, see little risk. Its going to be messy. Are you surprised to see how strong the british economy and the european economy has held up . No, if they did file under article 50, if they did elect to brexit, the currency would get hit. The export side of the economy would take off and you would start to see it feed into the earnings expectations stream of their big cap companies. Thats exact my whly what happe when the brexit vote hit, there were a lot of big picture concerns. One was about a systemic financial risk, that didnt develop. And then maybe a wave of populist elections that would break through. Maybe those have been forestalled in europe now. What to you are the Major Economic implications, whether it be trade flows or any other inflation and growth expectations that have been adjusted since prex brexit . The way i would frame it, it says something about global trade, it says something about protectionist policy. I think thats already baked into the view. Its a slow Growth Outlook globely. Things have gotten better and theres been a cyclical improvement in the u. S. Around and the world. The two main takeaways we had her conciliatory tone, her measured tone. Her statesman like delivery. It was a continuation of her january speech. If you recall all the way back to last october she had a much more combative speech then. But shes shifted her tone. Its been more conciliatory and i think it reduces at least some of the concerns about a hard brexit. Then the second thing i would say is she mentioned security 11 times in her speech today versus only six mentions of trade. Saying that theres a lot of commonality on that security front, but more than just trade issues and Economic Issues are wrapped up into this. So those were the two main takeaways i had from today. Thats sort of interesting. Just to bring it back to the u. S. , michael. The Common Thread here is obviously the voters have spoken. Both in the uk and the u. S. The question is, are we going to actually start to see this populist policies and how do investors take to them and what do they mean for the markets and for economies and it feels like with both cases theres still a lot of unknown, michael. There really is. Theres this ongoing kind of tension between the soft data and the hard data. That sentiment both consumers and businesses has really improved markedly and thats held up. But that must be based on the expectation that something good is coming. And right now we dont have a lot of clarity on that. The actual incoming data has been modest to somewhat disappointing. We havent seen a market acceleration in consumption or investment. So were in a period of limbo where we need some of these policy details to come forward. Otherwise, you risk a reversal in sentiment and asset prices which we have kind of been seeing in the last say 10 or 150 trading days. So hans, health check on the trump trade right now. What did we say, ninth loss for the dow in the last ten sessions, got a strong bounce yesterday, but wondering where the legislative agenda goes from here. I think its all about tax reform. The Health Care Reform while its 18 of gdp thats secondary to the market. Its all about tax reform and the reality there is i think we have getting tax reform this year we have a greater chance of breaking the speed of light than we do getting tax reform in 2007. Material tax reform on the order of which we saw in 1986. That type of systemic, profound tax reform. Not going to happen this year. Do you think that will be a setback for the market . Absolutely. Markets are pricing in the 20 Corporate Tax. Most believe youre right, but well end up with some sort of tax cut perhaps in the high 20s to mid 20s and repatriation deal. Is that not enough to sustain those stock market . You need a border adjustable tax. You could do a deal that you know, that expires after ten years that is not necessarily budget neutral. You could be then youd have to do it through reconciliation. Yes. Time will tell. The politics dominate in markets and the economics. Guys, well leave it. There thank you for joining us, hans olsen and martin gainen. Lets get to dianale onickd numbers and analysis. Hi, the number is based on contracts signed in february. People out shopping and it was the warmest february in several decades. That said, sales could be higher if they were simply more homes for sale and you can see it right here in denver. The supply of homes for sale continues to drop as demand rises. Houses are going up on this site. Barely 15 minutes from downtown denver, but they should be going up at 50 more than they are today. There is just not enough labor here. Builders are having to pay workers twice as much, but its still taking about two months longer to build the average home because of the slim staff. The workforce here is mostly mexican, some undocumented. Many of them are going back to mexico because theyre afraid of new immigration policies and that is leaving no one to build these homes. Lets just be honest. The back bone of the industry in denver is hispanic labor. Because americans wont do the work . Exactly right. Sometimes im confused about this concern about immigrants taking jobs away from americans. And meyers said hes concerned about the rising cost of materials, the lumber, the cement, the gypsum, everything, a lot of it comes from overseas. Hes concerned like you were talking about an additional tax coming on the products. A lot more of this online. Hey, its david. Yesterday, we had the owner of kb home on and i asked about him getting roofers and he did not indicate there was a labor shortage. Is he outlier . He may be. Some of the big public buildings and kb actually has some homes on this lot. Some of the big larger public builders do have larger staffs they mpay on the annual basis, but you may have three or four builders here. Some public, some private. Its the mid sized to smaller and america has 30,000 builders in this nation. Theyre the ones having the hardest time getting the labor to build those homes. The big guys only make up 20, 25 of the building in the country. Thank you very much. Well, when we come back, the white houses preparing two executive orders that would put the president s trade agenda in motion. Steven rattner and larry kudlow will join us to discuss that. And vote proofing your portfolio ahead of the potential for tax reform. Were going to break down which stocks you may want to take a look at. Y nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at td ameritrade. Ltry align probiotic. N your digestive system . For a nonstop, sweet treat goodness, hold on to your tiara kind of day. Get 24 7 digestive support, with align. The 1 doctor recommended probiotic brand. Now in kids chewables. Thank you so much for that down home welcome. Show me female vocalist of the year. Thank you so much. Thank you so much acms, i appreciate it. Show me acm best moments. I could never have wished for, asked for and dreamt of anything more than this. Catch your favorite moments from the acm awards and an exclusive encore performance by Kelsea Ballerini following the show on xfinity x1. The acm awards. Live on sunday, april 2nd 8 7 central on cbs. President trump is moving forward after last weeks health care setback. Shifting focus to tax and infrastructure reform and of course his America First policy with two new executive orders expected dealing with trade later this week. Joining us now, steve rattner, chairman of willett advisers with us here at post 9 and larry kudlow. Guys, i want to start with tax reform. Steve, let me start with you. What do you think the chances are at this point that we actually get meaningful tax reform this year . I think actually contrary to maybe what some people think, i think that first of all, this year is going to be hard. Tax reform takes a long time. I dont know why theyre saying august. I think really a year or more is what it normally takes. But secondly, i do think that the failure to deal with the Health Care Bill puts more pressure on the republicans and on the Trump Administration to get a win on the board and while there are significant divisions within the republican camp for example over the border adjustment tax, over how much deficit they can tolerate i think theres enormous pressure to get something done. Actually, i agree with that. I agree with most of that. You know its interesting you talk about tax reform. Youve got to ends to this. Two sides. Youve got the business side, which is basically repatriation, lower Corporate Tax rates on large and Small Businesses and immediate expensing for new investment. Okay, thats nice and simple and, you know, youre going to put a steel stick into the v. A. T. Tax. You hate the border adjustment tax. Youve made that clear. But you seem willing to put up with blowing up the deficit. Always. It will pay for itself. Dynamic scoring. Business side. Not the whole thing. It will pay for itself in four or five years. I built a crypt for the v. A. T. To put it in there. Very hard to see how it passes in congress and you have two guys who represent walmart, and not the only ones. Heres the thought for bipartisanship. Because i agree with steve. Republicans need a w here. There was talk two years ago about linking repatriation, right, to infrastructure. Thats right. To infrastructure. I dont want that to be the deal. I want the corporate rates do come down and that could be a big part of the deal. That kind of thing could bring in, i dont know, three, four, five, six democrats and hold the personal stuff to later. Till later. Steve, we hear that the Trump Administration is working on its own plan that may be different from what ryan and brady have out of the house ways and means. Do you have any expectations in terms of what we will see from Steve Mnuchin and wilbur ross . I think youll see Something Different from them, because there are reservations about a border adjustment tax and thats what the house side wants to have. First, larry may be willing to tolerate a fair amount of deficits in the short run for more revenue in the long run. I dont know how much an hit there is for that within the caucus. Mulvaney has voted for a balanced budget amendment, massive deficit reduction and that would be a big change. Secondly, while theres the possibility of some smaller deal about overrepatriation again against over repatriation and the Corporate Tax rates you cant reduce the Corporate Tax rates by very much without dealing with the personal side because of the problem of the pass throughs. Thats the rubiks cube they have to unscramble to get something done. Pass throughs 80 of the Small Business. We went through this during the campaign when we wrote the first draft for the tax plan. You can separate out business income from personal income. You have hundreds of lawyers down there. Tax lawyers you can do that. Thats why i would like to see them try to do that. I think the trump people they go back and forth on it. I dont think they have resolved it up until now. The individual side needs simplification as much as rate reduction. The thing is a mess, okay . Loopholes and credits and you dont know. The business side could use some simplification. But its really about rate reduction. Its really about making us more competitive and bringing capital in back to the united states. So i would like to see them distinguish between the two. S i may lose this battle. I get that. But to me theres two different points of views here. Id wait until 2018 for the simplification on the personal side. Get the business stuff done. It will help the economy. We havent had Business Investment in 20 years, its a bipartisan critique im making. Go for the gold. There are other issues being floated that affect business. We havent talked about them a lot because the border adjustment tax is front and center but how about corporate interest thats dead. Its still in the plan. In the grave and we are building a crypt for it. What about corporate Interest Deduction, what about carried interest, do they go away . Yes, i would like carried interest to go away. Larry, youre not going to get tax reform. Come on, you wont get the other stuff that you want. Why do you keep insisting we have to have some deficit reduction the b. A. T. Is in a crypt. You wont get the expensing of the i wanted to answer saras very good question here. Sara is very important here. The answer is i favor eliminating the Interest Deduction on corporations. I do. During the campaign a lot of industries are going to fight that. You betcha. Energy. I did not win that during the campaign i might add. Steve moore and i did not win that. We wanted it in. The Tax Foundation wanted it in. Its my opinion, its good policy. It will get steve well get Steve Rattners take on it. Get rid of it because if you have immediate expensing you dont need it. You cant have both because then you have a negative tax rate. Its part of the house ways and means blue print. Yes, it is. To their credit. Brady yes. Steve, do you get individual . Is there a chance for that, that actually it comes together as you indicated perhaps it needs to as a result of the pass through issue . Look, i think the border adjustment tax is dead for any number of reasons. I think the corporate interest Tax Deduction may be a good idea in theory, but its not going to happen either. It will unscramble the system thats existed for too long and create too much commotion. Thats at 1 trillion of tax saving right there. I understand. This is the conundrum theyll find themselves in. Lots of great ideas how to cut taxes or reform taxes in the short term is less revenue, but in the but not a lot of ways to generate revenue that i think are going to get through this process. So this is exactly the place to come to. I think it will affect the personal side as well because thats when it gets expensive when you try to reduce the personal rates. Im a broken record, but the business tax is so important. Okay . We are on the wrong side of the laffer curve on the business tax and if we can drop it from roughly half, from 40 to 20 lets say, okay most corporations dont pay 40. All right. Thats a different conversation. But i would debate that. But anyway, putting that aside, just drop the thing. Whats a your working number, did you say 20 . Trump was at 15. The house is at 20. The house is at 25 for the Small Businesses. Trump stayed at 15. That was something we all agreed on during the campaign. The Small Business thing is really important. Really, we have never done this before. And my last point besides the laffer curve point, middle income wage earners, a smart guy from the American Enterprise project showed the bigger beneficiaries of lowering the tax rates are lower and middle income wage earners who have lost in large measure because Companies Either left or theres just not enough to be left over. Its an important point, steve. You know, we focus a lot on the public on the stock market because we watch the trades on this tax reform, but could have some far reaching economic benefits. Im sorry, somebody was talking in my ear. Could you repeat it for me . Larry made a good point that cutting the Corporate Tax rate can really help middle income and lower income people who are in Small Business. Okay. I understand that argument. I understand that argument. I think its a bit of a trickle down argument quite frankly. I think if you want to help lower and middle income people theres a lot of other ways to do it more directly. I would say while i would say lets not minimize the problem of the pass throughs. I understand that larry may have ways to solve it. But im not so sure about that. Every Hedge Fund Manager has paid through a pass through. If we do that, the first thing im going to do is incorporate myself and create income for myself as a Small Business owner rather than as w2 income. I think you have to address the individual side to lower the corporate rate by any meaningful amount. Hey, steve, are you going to move out of new york if they dont allow the deductibility of state and local income taxes . This is a key portion of the individual tax reform . I pay an unbelievable amount and because new york to put me in amt and i pay that tax. I raise that issue because it is a it is a life ore death struggle for some of these high tax states if that actually happens. Isnt it . I think it would be a disaster and given the political balance in the congress and the fact that the people who are controlling this thing are not from high tax states, i think theres a high possibility youll see the state and local income Tax Deduction will go away and thats a disaster for new york. At least a partial repeal. It is in kevin bradys bill and my hats off to me. That and the Interest Deduction, you know, the lobbyists will line you up and shoot you for that stuff. That needs to be changed. Thats part of the simplification and heaven forbid the phafairness. Why should we subsidize new york states outrageous spending levels thats all youre doing. Pay more into the federal government than they get back fine. Listen, that was pat moynihans argument. We could have that discussion, id like at that. To do that across the country, i think thats part of the simplification and reform. Thats not a discussion, larry, respectfully, thats a fact. New york does pay in much more than it gets it and there are many, many low tax states in the south and elsewhere that get back a lot more than they pay in. The medicare plan, our basic medicaid plan, the states get subsidized for providing medicaid to the residents. These kinds of cross subsidizations have been part of the system as long as ref been around. I know that. But the federal government doesnt have to subsidize this stuff. Fine. Then lets then lets hang on a second. Lets unwind them all and then we can be like europe. We can be europe where every country goes its own way and deals with its own problems. Actually, i do want European Countries to go their own way. I was all for brexit. Maybe we need some brexit here the united states. All this stuff should be on the table for reform but its long e er term reform. Business taxes is the key, im going to show you the crypts for the b. A. T. Tax. Thank you so much. Great questions today. And sara she asked the great questions. Okay, guys, we have breaking news. Lets get out to Hampton Pearson in washington, d. C. Im live here at the Supreme Court where essentially some new york businesses that were challenging the new york state law regarding whether or not they can charge surcharges for credit card use, well, those merchants have won a marshapart victory. The Supreme Court says that portion that prohibit those primarily Small Businesses from putting surcharges on credit card use is unconstitutional because it violates the merchants right to speech and from chief Justice Roberts unusually vague. Because its a court victory, the case will go back to the lower court to argue why the bigger issues in the case regarding the whole statute. But again, a bit of a victory for at least five new york Small Businesses and owners that challenged the new york portion of the state law that allows that says it is illegal to put credit card surcharges on customers for using the cards. Back to you. All right. Thanks for that development and the context there. Hampton pearson outside of the Supreme Court. Quick check on markets. The dow is down about a quarter of a percent and the nasdaq is up 0. 2 . The pound is weaker and most european stocks are higher. Much more on the markets when we come back to squawk on the street. Yes . Please repeat the objective. Thrivent mutual funds. Managed by humans, not robots. Before investing, carefully read and consider fund objectives, risks, charges and expenses in the prospectus at thriventfunds. Com. Good morning, everybody. Im sue herera and heres your cnbc news update at this hour. The European Union has officially received the letter from britain formally triggering two years of negotiations for the exit from the bloc. Donald tusk was handed the formal notice from the u. S. Permanent representative to the u. N. Rescuers have been dispatched to the russias region to assess the damage from the strong earthquake that hit the area today. The epicenter of the 6. 9 magnitude quake was 25 miles from the coastline. No immediate reports of victims. A line of powerful storms here at home rolling through Central Texas this morning bringing heavy rain, lightning and hail. It knocked out power to some 200,000 people. Several homes were damaged as winds reached 70 miles per hour. The u. S. Womens hockey team has a new deal to end their boycott and play in the upcoming world championships. The team signing a four Year Contract with the usa hockey. Money and support were the key issues there. The team has won six of the last eight world championships. We wish them good luck. Thats the news update this hour. Back downtown to you, mike. Yes. Something thats sweeping womens sports. Thats historic. They are way overdue for that raise. Well, the inventory is report is out. Good morning to you, thats right the department of Energy Reporting we saw an increase in the crude inventories of about 867,000 barrels. Normally that would be bearish but you see a spike here today over 49 a barrel. I think its because of the gasoline number, a draw down of about 3. 75 million. This is a positive sign here. We are seeing the inventory increases in crude start to become smaller. Start to shrink as we head into april. We are seeing the draw downs in gas start to increase. Thats what youd expect seasonably for this time of the year. So its falling into line. We have two more reasons to be bullish today. Some onptism and a production i libya is triggering this a bit. Back to you. Thank you, jackie deangelis. What stocks should you be thinking about investing in based on the possibility of tax reform . Squawk on the street will be right back. Right back. Far, far away. Feel less hungry with the natural fiber in clinically. Proven meta appetite control. From metamucil. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. With e trades powerful trading tools, right at your fingertips, you have access to indepth analysis, level 2 data, and a team of experienced traders ready to help you if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade. Start trading today at etrade. Com welcome back to squawk on the street. So over the course of the month of march we have seen favorable stocks sectors and Industry Group show some signs of weakness. Many trump rally related. Don chu has a by the dip shopping list. So as were talking about whats happening with the overall market, guys, look at the beaten down sectors out there. The s p 500 over the course of the last six months has been up 10 , but we have rolled over a little bit during the course of the last month or so. So we wanted to take a look at where in the market people are starting to take nibbles or buy in the marketplace. So we put a screen together. We wanted to take a look at s p 500 member stocks and among those how many have negative performance so far month to date and then among those stocks how many have seen some real signs of life. Positive returns over the course of the last week. A number of stocks came up, but some broader themes have developed. Take a look at this. Among the best performers so far in this past week, big banks. Also regional banks but citigroup stands out as one of the examples up by about 3 . Some of the beaten down retailers like nordstrom, up about 4 . Just over the past week. Kansas city southern on the rail side of things, trucking and rail companies, transportation stocks overall. Bigger losers relatively speaking and now starting to see a little bit of buying activity. Then new field exploration, up 7. 1 . This is oil and gas. So that beaten down energy sector. So as we talk about where the barometers are in the marketplace overall, take a look at some of the buying thats been happening over the last week. It may be short covering, or it could be some signs of fundamental buying by certain investors out there, guys. Back to you. Well continue to watch the internals. Try to monitor the trump trade. Thank you, dom. With the turn to tax reform how should you by trading. Well bring in daniel skelly, and Morgan Stanley wealth management. Good morning to both of you. Thanks for joining us. Clearly we are all focused on up potential Corporate Tax reform after the failure of the Health Care Bill. What do your models tell you about where investors shouk look should be looking . Is it as simple as buying the high taxpayer small cap stocks that worked so well after the election . You know, i dont think so. I think its more about making idiosyncratic stock calls at this point. When you look at the tax reform we think it gets done in the Fourth Quarter. Delayed but not doomed. Beyond that, we think the time to make bold sector calls based on policy was really last year. You saw some pretty big disconnects in terms of valuations and spreads. As an example, utilities were trading at very rich levels and they had really become momentum stocks last year. This year we think the big take away or the key consideration for positioning your portfolio is being more stock specific. One of the big benefits to that is frankly the drop we have had in correlations. Correlations have really dramatically declined since the election. And thats giving us an opportunity to pick some stocks. I guess, you know, the big question here is just exactly how much of an expectation of help from policy in the form of tax cuts is baked into various earnings forecasts for the different sectors. Is there a way you have of teasing that out, if the market is overplaying that hand or not acknowledging quit . It is baked into some areas of the market. Much like the other guest i believe this is the stock by stock analysis that has to be done to determine where you can find attractive names. We use a process that is more like a private market value process to value the companies we invest in to determine good opportunities. And we look at where theres outliers, stocks that have lagged. And havent appreciated with the potential for tax reform. So thats one area of the market we look at. We are looking at industries that have lagged much like energy. Yeah, can you give us some specifics there when it comes to games that youre looking at, that you see as outliers . Yes, id be happy to. On the fax reform side on the tax reform side, we think starbucks sets up really well. It has one of the strongest brands available that we know of. Certainly theyre a leader in innovation and everything from coffee to technology. And i really mean that because their Loyalty Program and their mobile apps are far ahead of any other retailer, consupmer discretionary company we have seen. So theres opportunity for many growths in many segments. Coffee, international growth, et cetera. But this is a company that pays an average Corporate Tax rate of mid 30s. So certainly with tax reform we think that this will give the company more fuel for the growth potential. It is growing in the mid its a Fast Growing Company for its size certainly. Its trading at a discount too to its peers. The other company that we like is in the energy space. Much to what you were talking about earlier on this show, we believe that inventory levels will decline. And that will be good for the energy space. Oil prices will rise. We think the best positioned Company Really is eog. Again, some of the same themes. Strong technology which is which has led them to lower well costs and a real focus on shareholder return. And daniel, i mean, if youre looking toward perhaps a Fourth Quarter event for some kind of pass saage of a tax bill, a lot things are affecting the market between now and then and individual stocks. Where is your work taking you on that stock by stock process that you were talking about before . What particular names would you highlight here . Sure. One thing i would add on the sector bias is that we do like energy and financials broadly because now i think the attention from a policy perspective is going to turn back to regulation. Right . We dont have to find the complicated ways to pay for that, like the tax cuts. So i think Energy Financials are two areas that benefit. Beyond that my team is very focused on idiosyncratic catalyst driven 12stocks. We are focused on kraftheinz i. Has a solid 3 yield. These like the Management Team we think management will be more inquisitive going forward. So we like that idiosyncratic story. Beyond that i like financials. So we dont like the regulatory beneficiaries but we like some idiosyncratic financials such as chubb. Chubb continues to integrate the ace deal they did over about a year ago. We have seen some really solid execution on that front. And we think thats a quality compounder to own in a volatile market. Thanks for sharing some ideas, guys, as we await more details on the trump tax plan for now. Good to talk to you. Dan skelly and ann miletti. Thank you. Data driven fields and fitbits for cows. How tech is shaking up the agriculture industry. A live look at the galaxy event. Well bring you the products being unveiled there. Much more ahead on squawk on the street. upstate new york is a good place to pursue your dreams. At vicarious visions, i get to be creative, work with awesome people, and we get to make great games. what i like about the area, feels like Everybody Knows each other. And i can go to my local coffee shop and they know who i am. Its really cool. New york state is filled with bright minds like lisas. To find the companies and talent of tomorrow, search for our page, jobsinnewyorkstate on linkedin. Are commodities flashing a big warning sign for stocks . Find out at trading nation. More squawk on the street coming up. Coming up. My business was built with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Which adds fuel to my bottom line. Whats in your wallet . Well, look at the markets here. Holding on to most of yesterdays bounce, up 150 yesterday, now down 30 of that. But weve got the Energy Inventory report, Energy Stocks popped to the upside and up 1 . You see the nasdaq also resuming that outperforming trend which had been whats been going on for several weeks now. So as of right now, looks like mixed markets, but kind of a tilt to the upside in the last half hour or so no. Now over to jon fortt with a look at whats coming up. Samsung is releasing in moments the galaxy s8. Big important a major challenger to apple. Technology upending once again. And well dig in and look at what this means, and also internet privacy rules changing in a major way. What ripple effects is this likely to have . All that and more coming up on squawk alley. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade fixodent plus adhesives. Theres a denture adhesive that holds strong until evening. Just one application gives you superior hold even at the end of the day fixodent. Strong more like natural teeth. Please repeat the objective. Thrivent mutual funds. Managed by humans, not robots. Before investing, carefully read and consider fund objectives, risks, charges and expenses in the prospectus at thriventfunds. Com. The world agretech is in town. A look at what they are investing and why. The conference is just set to get under way. They are setting up right now. The ad tech market is booming. Take this product, called cool tera. It promises to disrupt dirt by allowing soil to hold on to nutrients. Cool planet is backed by Google Ventures and has raised 30 million in the last 18 months. Livestock is being disrupted. Two companies, conatera and another company are called themselves fitbit for cows, help Dairy Farmers track the animals activities and increase their productivity. Both companies are in the early stages. There is potential to attract a lot of capital. Agritech companies raised 284 million in 2016 and 2017 is tracking to be yet another recordbreaking year according to cb insights. Big ago is tapping into the market. Companies like monsanto and dow have their own inhouse vc arms to track emerging technology. John is the managing director. They are going to be nimble, fast, change direction quickly. They are not going to be sitting in meetings. It is exciting to work with those entrepreneurs. They dont have to have the whole answer before they get going. Even tradition vcs are taking notice. Kleiner perkins is among the vc firms here at the conference. They have invested in Companies Like farmers business networks, cofounded by one of the partners, a digital coop for farmers, raised nearly 80 million for farmers and backed by Google Ventures. The fitbit for cows. What are they tracking and what does it help a dairy or beef farmer do . They are able to track their health and activity. A lot of times they say they can actually pinpoint disease that can be deadly for cows before it gets to a point where it is life threatening and saving a cow can save hundreds to thousands of dollars. They track of view lation cycles for cows so they know when they are at the best point for breeding or getting in the window as fast and efficiently as possible to help save hundreds of dollars per cow. I wonder how fast the farmers are to pick up on these new technologies. They will have to be the clients, right . Thats a great point. A ton of money is going into these deals and a lot of innovation and emerging technologies. The barrier is bringing all of this Great Technology to market. One is the fact that farmers are all spread out across the country. They have their own way of doing things. That adoption rate, getting that up higher is the big challenge. I wonder if it would benefit more the very large agri businesses, the large farms, first. An example, tiller farms down in salinas, they use these lettuce pods which help them harvest lettuce made by Blue River Technology and backed by monsanto growth ventures. They are a huge op per raugs and th and invest a lot in salinas, not far from Silicon Valley. They are a big operation that sees the benefit of technology. Who knew agritech could be so exciting. We are going to get david a cow fitbit for his birthday. When we come back, take a look, a merger between London Stock Exchange and deutsche sha boerse. The woman behind that Margrethe Vestager will be joining us. You wont want to miss that. The dow is down 39. Thgreatestopulation shift in Human History is happening before our eyes. Sixty to seventy Million People are moving to cities everyear. At pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure anemerging markets partner with pgim the Global Investment management businesses of prudential. Experience exceptionffers on sales event isere. Get up to 2,500 ctomer cash on select 2017 mel for these terms. Experience amazing at your lexus dealer. Welcome back to squawk on the streets. I am kate rogers. Stocks for Consumer Discretionary are the top so far. They include nordstrom, khols, target and gap and check out amazon trading at an alltime high. Consumer discretionary just after tech. Down nor squawk alley. It is 8 00 a. M. In san jose, california. 11 00 a. M. Here on wall street and squawk alley is live