tv Squawk on the Street CNBC February 17, 2017 9:00am-11:01am EST
>> i absolutely was, yes. >> you know what happened? >> yeah. biggest one day -- i don't think we're going to have that magnitude of boom, joe. >> that's good. >> but that's what we're going through. >> all right. >> we'll see. >> thanks so much. >> thanks for having me. it's always fun. >> thanks, jim. make sure you join us on tuesday. monday's a holiday. >> good to be here. "squawk on the street" is coming up right now. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber, sara eisen, mike san tolltoll e -- santoli. cramer has the day off. more retail downgrades, the president goes to boeing for the new dreamliner unveiling, futures are red, so is europe on a very weak retail sales number. ten-year's back to 2.41. roadmap begins with offer
decline but negotiations continue between two food industry giants. unilever rebuffing merger proposal from kraft heinz in what would be one of the biggest deals ever. >> plus stocks pull back. was the record run for the dow and u.s. markets overly bullish? >> and four weeks since taking the oath of office, president trump tries to focus on jobs and manufacturing. he'll visit a boeing plant in south carolina later this morning. >> first up though, kraft heinz looking to create a consumer powerhouse confirming it has made a takeover proposal to unilever. the initial proposal's been rejected unilever saying it undervalues the company. but kraft says it looks forward to reaching an agreement with unilever, adds of course there's no guarantee one will be reached. we finally have some numbers to work with, david, and i'm sure you got so color behind that. >> yeah, luckily able to speak to some people who, you know, at least are familiar with what's going on here. why are we learning about this? well, stock started moving in the uk where if you follow at all they have very stringent rules in the uk takeover panel
in terms of if there is something actually going on that's material involving a company and its stock has moved a certain amount. you're obligated to come out and say something. and so we did see that initial statement from kraft heinz. and then not too long ago we got a much more specific statement from unilever describing in some detail the offer. what i can tell you at this point is the conversation that took place between the two companies was very recent. perhaps only last couple of weeks. and of course the proposal was made. here it is, would value unilever at $143 billion. they said $50, that's u.s. 30.23 in cash. tough to pull a deal like that off when you're exchanging u.s. shares for an international share base. that can be problematic sometimes. there's another problem there, 18% premium. and i'll get to that in a minute. and then you've got uk takeover law that seems to be the key here. and i say seems to because of
course unilever is an anglo dutch company. everybody i've spoken to expects that uk takeover law will take precedence here, but i do want to at least leave the caveat out there for more reporting to be done on whether or not you could somehow find them seeking defense in dutch takeover law and hear me starting to say the word stikting again. i doubt it. that doesn't seem to be the expectation, but i want to put that out there nonetheless. the question of course will be what does unilever think. and when it comes to 18% premium, well, what i think you're going to hear is more or less the following, that is a food multiple they want to pay for what really is a innovative packaged goods company. only about 38% of the ebitda that is produced from unilever comes from food. you can look at some of the brands there that we're talking about. when it comes to food, breyers, lipton. >> ben & jerry's.
>> ben & jerry's. sara, you know the other side of the business is the one that's growing more quickly. so in their defense unilever may say things as such as why would we want to be owned by or be part of a company, remember a lot of this will be shares so unilever shareholders will be owning a decent amount of the combined company, by a company that is going to be focused on cost cutting when our business depends on innovation. now, that doesn't mean that they can just say no. because under uk takeover law they got 28 days, as we said march 17th, to make a formal offer. that is kraft heinz does. and then it will be up to shareholders based on the timelines specifically set out under again the uk takeover code as to whether they want to stake it or not. you will get a recommendation from the board, but you will also get shareholders in the ability to make up their own mind. there are some though, sara, who believe that kraft heinz is real ambition here perhaps is much more focused on the food part of the business. is there a way you could figure out a way to separate that out, would that perhaps take you down
that road towards a separation and you still get an enormous business that you can add to your strategy that you've been following. >> right. >> which as we know involves cutting costs, involves active m&a almost every year. remember first it was kraft, then it was heinz. now of course they're going after even bigger product. >> and you're talking about 3g potentially financed by warren buffett here because this would be a massive deal. do we know anything about that piece? >> well, yesterday i was reporting on the fact that 3g was focused on a new vertical and the money they had recently raised for a new fund was not necessarily something they would be throwing in behind or with kraft heinz. so it's not clear to me at all that you can assume there would be 3g, their management team is the one at kraft heinz, but kraft heinz is a public company. obviously controlled by them and buffett has a significant stake as well through the preferred, i think that he took. but you can't make that
assumption. it would be though, michael, incredibly highly levered. >> yeah. >> we're talking about enormous debt load that would be needed to pull this off given the cash component which is fairly significant. >> close to $90 billion just on the offer that's out there now which unilever said is insufficient. so that obviously is a tremendous amount of incremental debt if of course you don't get some other backer. >> just a few things here about the industry because you know i covered these companies. first of all, i think it comes a little as a surprise that unilever is the target here. and i think you can see that in the reaction of shares of mondelez this morning. the oreo maker, which is getting slammed. that was considered the number one target ahead of today for the next potential kraft heinz 3g deal. it has the international exposure. so does unilever. >> yes. >> unilever also has consumer products arm, ax exdeodorant. last year paid more than $1 billion to get shave club. >> q-tips, who knew?
>> yeah. they're also heavily exposed to emerging markets like mondelez i would say for unilever almost 60% of sales come from the emerging markets world. they have 168,000 people who work for unilever. and i think that's going to be another question when it comes to the culture fit here. 3g, known for its cost cuts includes cuts of employees. >> without a doubt. >> it's hard to tabulate how much that's been. i went back and did a search for it. kraft heinz laid off about 200 workers including in chicago last year. year before 2,500 jobs had been cut. >> and they're always of course we know zero base budgeting what they refer to now as zbb rules the day when it comes to a 3g run company or kraft heinz in particular where every year you go in making no assumptions about what your costs were last year but simply saying where are we this year. and so that does result oftentimes in head count reduction. something else that's interesting here of course is this would be a foreign
acquisition. and so wouldn't really seem to be tangled up in what's going to happen with tax reform here in the u.s. not as crucial an item as you would expect it to be for a deal of this size and magnitude were it for a u.s. company. >> the british pound -- >> presuming we have to presume they're not going to redomicile out there. this is not intended, necessarily, as an inversion, presumably. >> no, i don't believe it is. i mean, of course kraft heinz think about the ownership and who actually controls the company even though where it's domiciled, it gets to be somewhat complex. >> chicago based company with brazilians in charge. >> correct. >> by the way, sara, in addition to mondelez it's interesting to see indicated lower some of the other food companies. >> is general mills lower also? >> general mills, kellogg, perhaps campbell. so you kind of have this little bit of an exposure of where there was a shadow 3g bid in a lot of these stock -- >> i will tell you one similarity between the food companies and consumer household products companies like unilever and p&g, there's one common
theme and slower top line growth. these companies have all struggled to grow after the recession. they've all been in cost cutting mode. it's one reason, david, why you've seen maybe potentially trian taking a stake recently in proctor & gamble. i mean these are all companies that have struggled to get their groove back as emerging markets have slowed down. that was the source of growth for so long for proctor and for unilever. >> one question here of course will be if in fact kraft heinz is chooses not to go forward with the formal offer or is unsuccessful, where else would they turn? and/or would unilever of course consider being aggressive on its own to also be defensive? in other words, would unilever make an approach to another company? and, sara, there were no shortage of rumors some time back that unilever had interest in colgate , for example. you never know how this is all going to go. this is all speculation at this point. there had been some speculation
that perhaps 3g and we don't know what the next vertical there is going to be or whether there's going to be some alliance here between them and kraft heinz in terms of how they approach, and i got to find out more about this so hopefully i will, unilever. but, you know, you can play a lot of different games here. and some even would say, well, maybe they're just trying to actually get mondelez's price down so they can circle back. who knows. i doubt that. that's not typically the way these things play out. again, it's only been a couple of weeks, really. very recent approach. things seem to leak quickly, carl, in the uk. that is known. it's just a different environment in terms of the way people treat secrets. >> bloomberg had an item this morning call trading on the 15th highest since 2011. so obviously this was on someone's radar. >> and that's -- >> by the way good time to mention becky's going to talk to buffett on the 27th. this will obviously be one of the many topics she covers with w.b. and to sara's point on top line
growth, we got revenue misses from vf corp. today. talked about the general mills warning, so that continues to be challenged across consumer based industries. >> and guess what, we've got the mondelez ceo on tuesday. there's a big consumer conference and there's going to be a lot of news there. and we're going to sit down exclusively with irene rosen feld. the stock this morning last i checked down nearly 6% in the premarket on the idea that 3g heinz might be looking somewhere else in fact they are at unilever. >> when we come back we'll look at this record setting week in the markets and the road ahead. it's been four weeks in the white house for the president as he gets ready to go to boeing in north charleston, south carolina today. talk about jobs and manufacturing. take another look at the premarket down after six days in a row of concurrent intraday highs for all the major indices. first time since 1987. we're back in a moment.
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busy morning. u.s. equity futures are moving lower here as we get ready to cap another historic week on wall street. the dow coming off another record high, that is the sixth in a row. it's now up 12.5% since the close on election day. for more we're joined by alan ruskin of deutsche bank and peter, canter fitzgerald chief market strategist. alan, we were just talking about the potential for a kraft heinz
unilever deal. massive foreign exchange trade here because you potentially have a u.s. company buying a british company in one of the biggest deals ever $143 billion. deals like that move the markets, don't they? >> it's sizable certainly. i've seen cash component's not nearly as large so it's not going to be as influential as that. it's not as obvious whether it's a transaction dollars into sterling or dollars into euros as well. that being said, i mean, the euros have the foreign account surplus on its side. little direct foreign investment flow creates a little resistance. a lot of people questioning the euro in general, nice to have something on the side. >> the bigger picture here is we have a very strong dollar. i wonder if you're going to see more companies put that to work. >> yeah. it's plausible. i think, you know, people forget that the valuation aspects work in ways in which people, you know, think in terms of, look, we don't want to necessarily buy u.s. assets but equally u.s. companies are buying foreign assets. and this is one good example. >> peter, talking deal news,
megadeals potential, nothing happening here, but it does sort of remind you that corporations are making moves whether it's political or not in this kind of environment. what do you expect in terms of deal activity and how much of a market driver is that going to be? >> well, i think, you know, i think companies they transact when they see opportunities strategic to their businesses rather than because of a strong or a weak dollar. our view is that the dollar will remain relatively strong this year. we look at things like the schatz two-year treasury rate differential. right now it implies that we think the dollar's a little weaker than it ought to be. but again, i don't think that's what effect deal activities. companies make those sorts of decisions based a lot more on what they think is strategically in the best interest of their businesses. >> peter though, one part of the broader context of course which would help out this kind of deal making is just how accommodating the bond market is right now both with rates staying
contained and just tremendous demand for corporate debt. in fact, you could argue that the stock market has mostly been kind of following the strength in credit. >> yeah. i think that's generally -- that is generally true. i mean obviously credit markets provide the underpinnings for the equity markets. and as you can put more leverage on companies that implies by definition higher equity market valuations. so i think obviously the credit market has provided tremendous underpinnings. and in fact what's interesting is the other -- the reason for that is something that people really haven't focused much on, which is that even though the fed has been far less accommodative, global central banks globally have been tremendously accommodative in the fed. there's been $2 trillion of liquidity -- just under $2 trillion of liquidity injected in 2016 alone, and just since december of 2016 global central banks ex-fed have injected another $400 billion of
liquidity. and that is what has suppressed volatility and that has what has controlled credit spreads visa vis benchmark rates. we think that continues because we think the ecb in particular continues to act on the long end of the german curve. >> i mean i think we learned today, alan, that the fed is no longer the main market driver. yesterday's philly fed index going up to the highest since 1984, the dollar sells off, treasury yields go down even though higher prospects of the fed raising interest rates. >> yeah. i'm a little surprised at the market response, to be honest. i think over time let's see if it's actually accurate. i think the market's probably underpricing the risks in terms of either the march date, the may date or june date really in terms of potential fed rate hike. >> or is it a sign that just waiting for signals out of washington? on the fiscal side. >> absolutely. i'm glad you flagged that really. there's a variety of different elements going on. i think there's some elements of fading of the trump trade that you're seeing. but i think certainly in the foreign exchange markets where
recipients are really an equity market that's very strong, very benign bond market actually carries very much, you know, the story of this year so far. >> when you say -- when you mention the reflation trade, you mean the policy, not the trade? because the trade's been there all week long, right? >> right. no, absolutely. and i think aren't just a u.s. story, it's a global reflation story that's going on. global indicators are looking good. actually, there are some risks there. counter to maybe what peter is saying whereby you've got both inflation risks, you've got central banks who i think for example the ecb could be tapering in which that case you have bond yields could be backing up further. this benign environment might not last really. >> we'll see what happens. thank you, alan, for joining us onset. and peter ceccini, nice to see you as well. >> thank you. >> when we come back, at&t upping the ante in the wireless wars when it comes to unlimited data plans. and tuesday, we mentioned we have an exclusive with mondelez
ceo irene rosenfeld, stock on the move lower after news that kraft heinz wants to combine with unilever. you'll hear her take on that and a whole lot more. much more "squawk on the street" straight from the nyse straight ahead. with this level of engineering... it's a performance machine. with this degree of intelligence... ...it's a supercomputer. with this grade of protection... ...it's a fortress. and with this standard of luxury... ...it's an oasis. the 2017 e-class. it's everything you need it to be... ...and more. lease the e300 for $549 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade.
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at&t now offering unlimited data plans to customers without requiring them to subscribe to its pay tv service, directv. this comes after verizon launched its own unlimited plan earlier this week, all four national wireless carriers now offer unlimited plans. they do throttle you at a certain point. it differs according to the carrier. but of course what really is at play here is the competition that is going on between all of
these major carriers. michael, verizon had not offered unlimited data plan for six years. concern among some of them including at&t and why they limited it to directv subscribers is simply one of capacity. when you have all of potentially so much of your subscriber base on a limited plan, do you actually have the ability to service all of them effectively. >> right. which of course means that's money out of their pocket over time because you have to add capacity all the time. it's interesting verizon and at&t shares have struggled year-to-date. sprint and t-mobile have done okay. it's almost as if the big guys are having to play the little guys game. it's all about value, all about unlimited. this is zero sum type market share battle i guess. remember throwing in long distance for free when it used to be expensive and at one point, david, mci was going to merge with world kom, going to dominate -- >> as if it was an actual thing. >> so who knows if we're going
through something like that. >> this is not where the future of this industry is and fighting over wireless subscribers. we talked to at&t's randall stephenson earlier this week in dallas firmly focused on time warner getting this deal done looking out into the future into television, into video and into what we're going to be watching on our phones and not just getting wireless subscribers. >> right. at&t making the move much more so into content. verizon has chosen a different tact with the yahoo acquisition, which is expected to go through and of course their ownership with aol much smaller. but we've talked this morning of course about a potentially enormous deal in consumer goods. there is also the possibility that later this year we are going to be talking about at least one of these companies involved, not at&t because they already are involved in something fairly large, and let's throw in the cable companies into that mix as well. >> and reports out of the journal this morning that jared kushner adding pressure on time warner about cnn coverage. >> he's been all over for a while at the president's behest,
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you're watching cnbc live from the financial capital of the world, opening bell in about two minutes. what a morning as we watch the kraft heinz unilever news, president goes to boeing, s&p obviously breaking the seven-day win streak. the dow is on track for its best week since december 9th, needs to lose 86 points for that no longer to be true. putting this week in some context, mike, is heady. >> actually, the dow's been a huge outperformer really been in the sweet spot in terms of industrials, goldman sachs, high price financials, a lot of people wondering if this pause we're apparently going to see at the open has maybe something to do with some emerging doubts about the progress of a tax reform plan. there's some reporting overnight about it's just not going to be that smooth through congress, whether it's because of border adjustment tax or logistics in obamacare. i think that's much more kind of the excuse. i think everyone has decided
everyone else is trading on the speed of a tax reform package. so it's going to be an excuse for maybe an overheated market to take a little bit of a break. but we've seen these late-day buying kind of quiet buying surges every day. so the open is not meant what the day's going to be. >> to your point the times has a story in which they call the gop pro-growth agenda a mirage. coen has a report out talking about hockey, is it a stick where policy comes in the fourth quarter on inverse hockey stick where it's all talk now and nothing later on, those are the questions. >> the fact we have no idea and yet people are willing to pencil in the earnings impact into 2018 numbers, i mean that's a big question. >> financials are still at the top of the heap for the week. still looking at a pretty nice nearly 3% move week to date so far in continuing with a theme post election health care and technology stocks have also done well. trump tweeted this morning in the 5:00 a.m. hour about
obamacare, repealing and replacing. so maybe the agenda back on track. >> as far as data flow pretty light today. we'll get l.e.i. in about half an hour, baker hughes rig count. there's the s&p at the bottom of the screen, at the big board, producers and cast members of "billions" on showtime, premiere of the second season. at the nasdaq vh1 celebrating premiere of its series "the breaks." >> thought it was interesting we did mention this to david earlier that on word that kraft heinz finally came out and said they had made a proposal to combine with unilever, kraft heinz shares shot up and it's notable because that would be the acquirer and now we learned about a $143 billion deal as unilever confirmed. unilever told its shareholders to do nothing and it does not correctly value the company and it doesn't make sense
strategically though clearly the stocks are on the move. there's unilever shares up almost 11%. and the move in kraft, david, interesting because this week kraft had its worst day ever since actually combining back in 2015 because it had a weak quarter. >> right. >> and it's failed to show top line growth as these cost cuts continue under the 3g model. >> yeah. but the shareholder base at kraft heinz and/or kraft prior to the heinz deal always embraced deals because deals are large acquisitions are part of the strategy, part of the strategy of 3g, and sometimes we talk about them interchangeably, but 3g is its own investment fund really run by a very small group of people out of actually out of greenwich, connecticut, but they are of course associated with originally the kraft deal and then the heinz bolt on. and each time they've done a deal the stock has responded positively, which is obviously one reason why they keep doing them, but also because they have to keep, sara, to your point,
deals allow them to continue to cut costs. >> sure. >> which continue to allow them to a certain extent to increase bottom line the earnings even if they're not seeing top line growth. >> yeah, margins shoot through the roof. >> the stock's up because you own the stock knowing that premise, but look at the bridesmaids, the stocks we talked about earlier that are not part of this. campbell's down 7% at the open, general mills down 4%, kellogg's down 2%. so obviously there was this idea out there. >> without a doubt. >> these guys were the buyer. >> they have the premium. >> and there was almost an expectation in terms of when they do these deals, everybody was pointing to right around this time. >> yes. >> and/or early march as when you might hear something and interesting they have kept to it. as we reported earlier the overture to unilever was only made in the last few weeks. very recent is what people have told me.
the proposal again as sara outlined and if you want to go over it one more time, $30.23 a share in cash and 0.222 shares of new co for each unilever share they're valuing at $50. of course that actually is moving up a little bit given the move up in kraft heinz shares right now. it will be under uk takeover law which allows 28 days for the company that is kraft heinz to make a formal offer that will either be accepted and/or recommended or not by the board of unilever. but shareholders will have the final say here under the timeline set out in the uk takeover code. i still want to explore dutch takeover law a bit more here just that the idea perhaps there's some ability of unilever to use something to their advantage should they want to defend themselves. >> you go study dutch takeover law. >> oh, lord. >> so consumer staples are actually one of the only groups that is higher right now, and it's not the food companies. >> that's right. >> it's the household products companies. look at some of the winners right now.
kimberly clark, clorox, these are all the consumer companies that look a little more like unilever in terms of what they make, the soaps and the household goods like the proctor & gambles versus the food companies which are also selling off. >> either you get a little bit of a glimpse of what somebody thinks the product market value is for unilever as a comp or as david said maybe unilever becomes a buyer at some point down the road. or the scarcity value goes up. if unilever goes away, the scarcity value of these companies goes up. >> right. or maybe kraft heinz is very happy to settle for the food business, which is only about 38% of the overall company and is the slower grower and they've said, sara, they're managing it differently. they're managing that part of the business more for cash as opposed to the packaged goods part which they do view as a more innovative area with higher growth. and of course for the entire company their argument's going to be we don't want a food multiple. we're not a food company. we want the higher multiple that would be deserving of a higher growth packaged goods company. >> it's hard to speculate.
i will say 3g is very mysterious and quiet. they don't talk to the press. >> no. >> and of all the companies i cover in this universe, kraft heinz has gone very quiet since that deal in 2015. >> yeah. >> not eager to engage. >> let's not forget anheuser-busch or abi is another 3g related name that, again, same strategy of course having completed their enormous deal to acquire s.a.b. miller last year. >> watching some industrials. deere with a surprise good quarter. they beat and they raised. they see full year equipment sales up four versus a prior one. at the same time people wondering if buffett got out too early on d.e., caterpillar reported rolling three-month down eight, but equipment sales are going to be another story to watch. >> it's actually amazing deals tacking on considering the huge run it has had in the last few months. a lot of people talking about just even the agriculture commodities following the path that the global commodity prices have, look at the etf which
covers it which deere would be in seems it's one of these groups that's lagged a little bit and now people wondering if the global reflation story is going to be a tailwind here too. >> retailers having a tough time getting out of the gate. piper cuts three names to neutral, jcp, kohl's and nordstrom, picking up coverage after having a prior outperform. targets go to 18 on jcp. 65 on nordstrom. 40 on kohl's. jcp, mike, back below 7, as one of our friends on twitter points out selling these white house meetings has been a pretty good strategy. once a ceo goes to the white house, you get a pop, among some other things. >> that's true. i mean obviously the whole group is to some degree trading off of the odds of that border adjustment tax. i mean right or wrong it seems like that's front of mind for everybody. and i think one of the things that makes people wonder about the risks of doing something like that and to the tax code is this is obviously a heavily pressured group already. it's not as if we're just kind of saying winners and losers and these guys are in good shape
they can handle it. >> in fact, the thesis of the piper note is all continued secular pressure from amazon, no surprise there. >> another stock to watch would be boeing, today, because president trump is scheduled to make a visit to the south carolina assembly plant in north charleston. expected to hear from him and from the governor of south carolina. boeing we were talking about, mike, up 20% since the election. this is a company that trump has gone after last year in december for trying to cut costs on air force one. and since then seems like has become a little more chummy with the company and its ceo denn dennis -- all of the big manufacturing exporters. and also political football. >> and if you're a company like boeing which by necessity in history has always manufactured here, it's pretty good to be a friend of this president who wants to highlight that kind of domestic production. >> finally to circle back to our big story of the morning, it is
interesting to note colgate-palmolive also up over 4% this morning this idea on the perhaps unilever would be aggressive to resist maybe would do a deal of its own and this has been a name that's been around for some time, sara. >> it's such a split. the best performers right now in the s&p kraft heinz, colgate, kimberly-clark and clorox, biggest losers in the s&p, mondelez, campbell's soup. campbell had earnings this morning a little disappointing, all the food stocks. unilever combines both of those businesses. we'll see where this ends up. >> so unh dragging 25 points off the dow. this is the biggest declines for all the major averages this month. and the nasdaq could have its first back-to-back losses of the year. let's get to bob pisani. bob. >> good morning, carl. good morning everybody. we have a little bit of a fade in the global rally. i don't think it's terribly big, but two particular groups having problems, banks and energy stocks. let's look in europe banks have been the weakest performers all
throughout the morning. so you see bnp paribas, deutsche bank all to the downside. here in the united states banks also opening weak. banks have basically run out of steam since wednesday. remember that's when the chair of the senate banking committee came out and threw cold water on the hopes that congress might approve a large scale financial regulatory relief plan this year. so put up the u.s. banks here and you'll see they're all down to the downside. bank of america, citi group, suntrust also down today. and i think that's part of the problem here. regulatory relief is getting pushed out a little bit further. he was talking about potentially 12 to 24 months out. the other major problem other than banks are oil. i noted this yesterday but it's happening again today, big oil are down here. and big oil's had a terrible year. remember the stock market's been moving up all throughout the year, but your big oil names, hesses, apache, exxon down almost 10%, marathon, chevron new low for the year a problem with the stocks moving different direction. the oil stocks have a simple
problem, there's a valuation issue because a lot of people don't believe oil necessarily is going to be in the $60 range where a lot of people assumed it would be in the middle of the year. so the markets have been discounting a significantly higher price that may not be able to happen. i know about the bulls versus bears debate. we've done it many times. bulls insisting demand's improving, that the opec agreement is holding. but the bears have the upper hand right now. their argument on the supply side we're still oversupplied. there's 200 additional rigs added in the last year. u.s. production is backed up to 9 million barrels a day. did you see gasoline headlines? we have the worst glut in 27 years. there's still a major supply problem. what needs to happen is we need to see the inventory levels come down, that's not happening. and that's why the energy bulls are having a tough time of it right now. let's move on. you guys were mentioning deere. here's what's really important. they have pushed up the revenue numbers overall. by the way there's crude. crude was $53 exactly where it was two years ago on this day. so crude has not moved in two years.
$53 february, $53 february 2017 here. let me quickly mention deere here. the peak thing is guidance was terrific. in november remember had $23 billion for revenues, now it's $24.3 both times moved up. we were 92 or something, moved to $100 for deere and now it's up today as guidance has moved up again. important thing is they didn't say anything about infrastructure at all, but there's a clear implication here they're going to do better. 27% of revenues are in construction sales. that's very important. finally on this whole debate about the whole trump trade slowing down, remember the global trade. we keep emphasizing look around the world, the u.s. economy has been gaining momentum, there's a much brighter outlook over in europe, japan has been showing signs of faster growth. that's the reflation trade. yes, trump rally, trump component is a part of that, but there's a much bigger thing going on that's also helping to power the overall stock market. i know, mike, you've been making that point for a long time. i'm with you on that one. right now the dow down 76
points. guys, back to you. >> yes, the distinction between the reflation trade and the trump trade. bob, thank you. for more on today's movers let's get to bertha coombs at the nasdaq including kraft heinz, which trades up there, bertha. >> that's right, sara. you know, kraft heinz and mondelez today are trading. kraft heinz if it were just up for that would put the nasdaq in positive territory by at least five points. but mondelez is the biggest drag. but really what's been moving the nasdaq has been big cap tech. despite the fact we saw the russell finally did put in a new all-time high this week, it's been that big cap tech that's been moving things. the nasdaq 100 is up 9% for the year to the nasdaq composite's 8% gain and apple has been a big part of that this week finally putting in a new all-time high. but cisco at a new 52-week high. you've also got amazon as well less than 1% away from a new all-time high as well. that's what's been driving. those are the big names this week that have been giving impact. but i also want to point out that health care has made a big
rebound here although lower this morning. biotech this week is up over 2%. it's one of the biggest leaders in terms of sectors. and for the year it's up about 10%. that's a big rebound for shares that have been under pressure and really volatile really over the last year or so over this issue about biopharma and pricing pressure. finally, another health care stock today, it's not just mondelez and kraft being talked about in the m&a space, but webmd after reporting earnings yesterday said it is exploring alternatives which could include a sale. and that is giving shares quite a boost this morning. back over to you, sara. >> bertha, thank you. bonds also in demand. yields are moving lower. let's head out to the bond pit. rick santelli at the cme group in chicago. good morning, rick. >> good morning, sara. it's a fascinating day, maybe a more fascinating week. if you're just to look at the day we're virtually unchanged in the two-year, all the other
maturities are down three or four basis points. if you were to only look at the week, virtually all maturities are unchanged. look at a 24-hour ten gave up about four basis points. july 8th is a big day if you like treasuries because that was the day of the second bottom in the mid 1.30s, the historic low we built all this upon. so we're going to pick that particular day. and remember politically we're looking at a world that wants less globalization. but it's pretty hard to make the argument that when it comes to financial products, financial assets, boy, it is a one world out there. july 8th, 2016, here's our tens. kind of cement that pattern in your mind granted the yields are different. here we sit around 2.41. let's look at bunds. here they hover around 30. identical pattern. uk, a lot of talk about the uk. their data seems to be going a bit softer. they're hovering a bit below 1.22, same pattern.
italian, 2.16, same pattern. canada, 1.71, same pattern. well, let's remember that there's definitely a pretty tight marriage between the fx markets and the interest rate markets. just think currency forwards. they're interconnected. look at the july 8th start to the dollar index. all of those charts, all five of them look exactly the same. is it a bad thing? no. but what it underscores at a time where you have bank of england may be under pressure because policy isn't working, janet yellen may try to knock holes in some of the new things this administration and others may be talking about or trying, but growth hasn't been there. same could be true about kuroda. and what's going on? any of these policy decisions start to unravel or there are surprises considering how linked we are it's going to be very interesting to see if somebody pulls apart or if we all move together. carl, back to you.
>> rick, thank you very much. rick santelli. when we come back, the latest on snap's ipo road show. you're going to hear the pitch that the ceo is making when we return. dow's down 61 as bertha said led lower by unh. back in a minute. this is where i trade andrs. manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you. this car is traveling over 200 miles per hour.
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snap executives in new york for the company's build up to investors. as part of the pitch take a listen to this video on snap's core mission. >> snap is a camera company. we feel like we're really at the beginning of what cameras can do. cameras have evolved from being just a piece of hardware like a chip, to software that's connected to the internet. before cameras were the best way to perfectly save or record something that you saw. and they sort of helped augment memory. but now, you know, cameras augment the way that we talk. >> you can see the whole thing actually, guys, it's about 40
minutes long. snap.netroadshow.com. they're going to try to frame what they do in a much different way from what twitter does. >> pun intended there, they're going to frame this, right, as a camera company? it's interesting i do see people scratching their heads a little bit at just how aggressive they are about trying to put this philosophy of what their mission and purpose is. and i don't think anyone's going to care as long as the user growth is there and people use it and find new ways to use and advertisers feel it's a good platform. i think the risk people kind of have in the back of their minds is where twitter's founders too whetted to this idea that they're this transparent realtime forum for news. >> you mentioned combatting the idea of twitter, also facebook and instagram. that narrative that instagram stories which continues to be similar to snap and grow users
as snap's user growth has not grown as fast last year is going to be one that they're going to have to explain. maybe they do that with these content deals that they continue to strike with various networks. i know there's an article on tech crunch, could they be the hbo, for instance, of mobile. it will be interesting to see what they do on their own content. >> yeah, comes on a week where zuckerberg has that 5700 word manifesto about the future of facebook being a model for local governance, using a.i. to fix fake news. it's worth a read if you have half an hour. >> i think we have carrie swisher too. and also still to come, jim stewart. dow is down about 47 points. we'll be right back.
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and also talking about the situation in the fight against the islamic state and syria as well. european leaders are deeply concerned about what the transatlantic alliance means to the trump administration. we heard moments ago from the general, the new secretary of defense, mr. mattis, take a listen. >> president trump came into office and has thrown now his full support to nato. he too espouses nato's need to adapt to today's strategic situation for it to remain credible, capable and relevant. further, as noted last week it is a fair demand that all who benefit from the best alliance in the world carry their proportionate share of the necessary costs to defend our freedoms. >> reporter: the secretary of defense there just underlining what he said over the last 24 hours which is essentially that european counterparts in the nato alliance are going to have to pay their fair share going forward and that the united states is going to hold them accountable for that.
now, other topics on the agenda over this weekend of course the fight against the islamic state, several representatives will be here, saudi arabia's foreign minister, we also understand representatives from turkey as well. serious concerns over what's happening in the south china sea are also going to be discussed. and really the future of global stability, guys. >> hadley, thank you for that. hadl hadley gamble, that's an important meeting happening in europe. when we come back more on the big story of the day here, kraft heinz $143 billion bid for unilever. and later tonight -- >> softbank one of the most ingenious entrepreneur. he wants to do to tech what warren buffett does -- >> okay. buying fortress, is that part of it? >> he's an interesting individual. >> okay. >> i think his risk appetite hasn't changed in 39 years. and i think that's fascinating.
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♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla and sara eisen and david faber at the new york stock exchange. market struggling for the first time in over a week, about half of the dow's losses are unh alone, down about 50 points. kraft heinz and unilever and president going to boeing. >> a busy hour ahead, our roadmap starts with takeover rejection. kraft heinz proposing a merger deal with unilever, the stocks are surging on this news. we've got the details and analysis, what comes next straight ahead. >> markets taking a pause as we said, the dow, nasdaq and s&p are all in the red. >> and president trump heads to a boeing plant in south carolina. we'll take you there live for the latest. but first, we've got economic data crossing the tape. let's send it to rick santelli with that. rick. >> yes, the single data point
for today and next week's light on data is january read on leading economic indicators. we're expecting up half of 1%, we ended up with a tenth more. here's what's interesting here, the last time we had up 0.6 month over month was june of 2015, the last time we had a higher number than 0.6 was december of '14. so a pretty good number. usually l.e.i. doesn't move the needle much, but it was a strong read. carl, back to you. >> all right, rick, thank you very much. the president continuing to create questions for investors after delivering his first news conference. let's bring in anthony chan, chief economist of chase, terry haines, chief political analyst at isi. terry, for our purposes, we haven't addressed the news conference yesterday, the media reaction, how much of that are you going to filter in to what you're looking at as far as the
markets go? >> well, we filter everything in. but, you know, i will say generally that the president was trying to seize the initiative yesterday as much as anything else in the light of a difficult week and a withdrawal of his labor nominee. and he went on from there. it was about one month into his presidency and he decided to take stock and kick off what looked like a campaign weekend with appearances in south carolina and elsewhere. you know, that's part of what presidents do is continue to fire up the base, continue to try to define the narrative and he spent a lot of time doing it. >> meanwhile, anthony, markets got to figure out if the promises of policy are going to be fulfilled sooner or later. is today's trading a reflection some doubt that? >> well, i don't think so, carl. if you look at the s&p 500 from the close on november 8th, we're still up 9.5%. a pause is certainly in order. in fact, some people are a little nervous we haven't had a
1% decline. >> in 90 days. >> in close to 90 days, 88 to be exact. that's only the 17th time since 1957 that we have something like that. so the big question is what does that mean? does that mean a correction is coming? i did a little work looking at that and i found that on average 30 days later the market is up about 0.9%, 60 days later 1.1 and 90 days later basically up more than that, a little bit more than that 2.7%. so essentially what i find is 30, 60 and 90 days 69% of the time 30, 69% 60 and 75% 90 days the market is higher. so no need to panic over a little bit of a pause. >> do you buy this idea that the better economic data not just in the united states but around the world coupled with the fact that earnings have rebounded and outlooks have brightened is a big part of the story behind the rally, it's not just all about promises and hopes of trump policy? >> oh, i have no doubt. you look at the philly fed, one
of the highest numbers in more than three decades, you look at initial claims. >> but that's a confidence boost, isn't it? >> it is a confidence boost and right now you're absolutely right, sara, what we are operating on is increased animal spirits increased confidence, consumer or business confidence, all those things are getting higher. and the fact is that consumers and businesses are likely to act on those increased animal spirits. by the way, if consumers or businesses are reacting positively, no reason why investors shouldn't be acting positively. >> i don't know, what about the bond market? i mean the bond market doesn't reflect that kind of optimism that anthony just laid out, terry. you're seeing 2.41 on the ten-year. do you think there's still some skepticism out there in places like bonds and currencies? >> well, there appear to be some skepticism in a variety of areas. and the white house i think has been very sensitive to that. one reason why you had the president saying last week that he was interested in putting forward a tax plan. they're interested in showing
continued movement in policy in washington. and that of course has a direct impact on the markets because people feel that things are about to happen. the next touch point to look for in light of the fact congress is going out of session for a week is the address that trump will give to congress on february 28th. and you can look at that as yet another goosing of policy and the markets will react appropriately. what we think is that it will continue. >> what does he need to deliver on that night? >> well, what he needs to show is continued movement. he needs to show that he, the white house and the congressional republicans are united on the two big things, jump starting the economy, principally tax reform, and also reforming the affordable care act. and that those things will happen in 2017. i thought what he said last week
was an indication of that. and we'll see him continue to push, i'm sure. >> and, carl, with regard to the bond market, and sara, what we're seeing is the increase in the consumer price index and the increased prospects for growth are still moderate. we're looking for 2.2% growth this year after a little bit over close to 1.6% last year. so there's no need for the bond market to panic in this situation. and it's also telling you that they don't believe that the fed is going to go overboard and raise rates all that aggressively. >> one last thing on border adjustment, terry, which we try to dissect the best we can every morning. politico has a new report out today arguing that it's not just ge versus retailers. it's not just cotton versus brady. now it's cohn versus bannon, on this one issue. is it that divisive? >> well, it has the potential to show lack of unanimity within the party, carl. i thought yesterday you were going to change the name to
cbat, but the bottom line here is that politically as well as forpolicy reasons the president and congressional republicans know they have to deliver on tax reform. and they will deliver on tax reform. and if it's not border adjustment, it's going to be something else. but we think there's a very high likelihood that will happen in 2017. >> terry, anthony, thank you guys. good to see you both. >> thank you. >> president trump getting ready to head to north charleston, south carolina this morning where he will be visiting a boeing plant and delivering remarks later today. our phil lebeau is at the plant and joins us now on the phone with more details on what we can expect. phil. >> sara, one of the themes i think people are waiting to hear from president trump is whether or not he makes comments regarding the export/import. remember it wasn't long ago that the tea party and conservatives on capitol hill were saying, hey, we don't need the export/import bank anymore, and that would clearly have a huge impact for boeing. keep in mind that the
export/import bank, that's the way most airlines that are placing large multibillion dollar orders with boeing for an airline, they finance those purchases through the export/import bank. you'll hear some people call it crony capitalism. the fact of the matter is the default rate is less than 1%. and it's not a small issue for boeing. in fact, it's a very important issue as the company continues to ramp up deliveries. they had a slight dip in deliveries last year as they made the conversion and prepare for the next generation of the 737. this year their deliveries are expected to be at a new all-time high. and as you take a look at shares of boeing, speaking of all-time highs, look at where that stock is today. that is a fresh high for boeing. again, we expect president trump to be here a little after 12:30 or so. and his comments are expected around 12:40 or 45 or so we'll see what he has to say regarding the export/import bank which by the way he has now gone on record to be a supporter of.
it will be curious if that once and for all puts to rest any discussion of ending the export/import bank. >> phil, there's also been a curtain raiser that there could be some talk of unions and labor because this comes just after boeing workers shot down the idea of organized labor. what do you know about that? trump's position especially now he has a new labor secretary designee. >> we have not heard he will be touching on that topic. look, that's a hot button issue here in south carolina. we've been down here and we've done stories about how the growth in manufacturing in this state as well as other southern states is being fueled by the fact that for the most part it's a non-union workforce down here. and the fact that the machinists were unable to organize, the fact that the uaw has been unable to organize in the south, that is important to companies that have operations out here including boeing. >> phil, it's going to be an interesting afternoon. look forward to talking to you more about it. our phil lebeau watching the president's trip to boeing. when we come back, takeover
rejection. kraft heinz proposing a merger with unilever. we got details and we'll discuss a possible future deal. plus, the snap inc. road show kicking off. evan spiegel commenting on how users use the app. >> everyone thought of cameras as a way to save really important memories. and so when we created snapchat where everything is deleted by default, it didn't make sense in the beginning. people would say, you know, why do i want to use something where all my photos disappear? i want to save all of them. that's when we had to really explain that snapchat's used for communicating, used for talking. people save the bits and pieces that are important to them or something they don't want to forget. and so with snapchat you always have the option to save something. but we find that conversation is more comfortable and familiar and natural when it deletes by default. >> "squawk on the street" continues in a moment. ture of bw york state is already in motion. companies across the state are growing the economy,
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unilever, which includes axe and dollar shave club and dove soap and so many other brands. >> yeah. of course when you draw something like this up on paper and then as we reported have your first meeting really very recently and propose what you have, you certainly are happy to see that. meaning the share price reaction on the part of kraft heinz shareholders are certainly saying positive things at least this morning about the prospects for a deal for this company. but as you said, sara, enormous deal would require them to take on a great deal of debt. they have partnered with warren buffett in the past. nothing says that's an opportunity here for them to raise more equity in certain ways, but the debt load will be large. and as we also reported unilever sees itself more as packaged goods company as opposed to food company and making argument that an 18% premium on the stock price is certainly not enough and is not at a multiple that is high enough to justify its level of growth or innovation it has on that portfolio in the packaged goods side of its
business. there is hope on the part of kraft heinz shareholders perhaps even if this doesn't end with acquisition outright perhaps it would with the food business. perhaps that would give ammunition for unilever to go out on its own it might want to do to increase its exposure to packaged goods. so many different moving parts here. >> so i think the market likes potential for cost cutting on unilever's part. looking at marging 15.3% ebitda margin, which is lower than the 30% of kraft heinz. that is the 3g magic that investors seem to be buying and loving. the question though to your point about the cultural fit, kraft heinz 3g comes in there, they cut costs, they shave jobs, there's been a number of job announcements including last year and 2,500 right after the deal was announced and these are two very different companies. so far unilever is putting up a fight. wonder if they're angling for a higher price or trying to walk away. >> that's a key question we don't have an answer to. it will be under uk takeover law. kraft heinz has 28 days to make a formal offer and then its
shareholders will make a decision. the board of course does play a role in recommending or not to that shareholder base. >> when we come back, shares of groupon on a tear up nearly 30% in the past week. we're going to talk to the company's ceo on earnings and his advice to snap as they prepare to go public. nasdaq has ticked positive. we're back in a minute. connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. it's a performance machine. engineering... with this degree of intelligence... ...it's a supercomputer. with this grade of protection... ...it's a fortress.
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the great wall. rated pg-13. online coupon company groupon up on better than expected earnings. joining us this morning is the ceo of groupon, richard williams. >> thanks for having me. >> bring viewers up to speed on what's happened, changes on margins, revenue growth, ebitda. >> when i took the job about 15, 16 months ago, we set out on a really simple path. we said we're going to make our lives easier. we're going to focus on a handful of things and do them really well. we said we're going to start investing in our customers again, investing in customer growth. we did that added about 5 million new customers over the last year. we said we're going to make the business easier to run, simplify and streamline, we cut our footprint down from 47 countries
in 2015, we're now on 24 on our way to 2018. we said we would improve the margin profile of shopping and goods business which we did in significant ways. the gross profit of that business increased close to 19% over the course of the year. and last we said we were going to start building a better customer experience, make groupon better to use for users. we made progress on that. we exited the year with a top rated retail mobile app in the u.s. according to applause. and really only one of four retail apps in the top 25 in the u.s., and we're second behind amazon. so i think we're making great progress. >> what do you say to investors who wonder what took so long? >> well, i'd say what took so long we're an 8-year-old company first and foremost. this isn't a 20 or 30-year-old company where we had to flip something around or really turn it around. i mean this is a company we're building every single day. we're inventing customers every day. >> did something change in the dynamics of the business to allow you to do this now?
>> we had to make tough choices. i came in, i had the support of the board to make some tough calls. these are not easy calls to make where you say we're going to change our path. we're going to stop doing some things that seemed like a good idea when we were just starting the business seven, eight years ago, like expanding incredibly quickly. we're actually going to get smaller in order to get bigger. so we had to make some tough choices. i thankfully had the support of the board and the team internally to make those tough calls and make some progress against them. >> and certainly the shares have reacting to this latest quarter but we're still a long way away from the ipo price $20 a share back in 2011. so there's still a lot of work to do. what's the plan to keep the momentum going? >> well, a lot of what we're doing now is very much doubling down on what we did in 2016 to get to where we are today. so when we talk about it internally, we say there's three things we're laser focused on now. we're going to continue to invest in customer growth. an 8-year-old company too early especially in a space the size of local multitrillion dollar
space way too early for an 8-year-old company to pull back on acquiring customers. we're going to keep building a great user experience to make groupon more better and rewarding to use so it's stickier. that's about increasing customer purchase frequency. the last thing is we're going to keep making the business easier to run. we have a complex business, we have multiple categories we operate in. our goal is to make that easier and easier to do more streamline, better proses seszs, to make it -- >> the ipo predated your tenure? >> i joined the company just before we went public. i was originally the head of market for the company. i was the cmo and over the years have taken on ownership of different parts of the business and now i'm here. >> so advice to others? who are starting this journey. >> they're probably getting lots of advice, they don't need much from me. but i think i know who you're talking about, for those folks i would say, one, having been f through this process, be aware of the limelight, it's there, it's real. it can be a real distraction
especially when hype is built up around a company it can take people's eye off the ball of the long term strategy. stay laser focused on long term strategy. second, for those kinds of companies that started out in content, i would say you have to make monetization a first class citizen. making money off your user base, having a great business is something that has to be a first priority. the success stories in this space, companies like facebook for example made monetizationing advertising a first class citizen, they care just as deeply about it as users. >> does the businesses you offer the groupon deals on make money? that's always one of the narratives against groupon is that it's not really a good deal for the businesses. you're training consumers to expect deep discounts and another thing is very low barrier to entry for your business. >> we made mistakes early on. of course. we were building a new space that didn't exist and we didn't know what we didn't know at the time. but today well north of 80% of the deals we run are break even or better on the deal itself.
that's before repeat customer behavior, repeat visits and long term return on investment for those advertisers of small businesses. so those days are long gone for us. that's why you see the vast majority of our small businesses on groupon all the time. so they're on groupon on long-term contracts, fazing on and off our platform to build their business. that's really not something that's an issue these days. >> so what's the key challenge here though? is it growing the customer base or more about engagement and having those customers transact more often? >> i think what you hit on the last piece is big unlock for groupon. we've built a business now that has over 50 million customers active on our platform. that is a great multiplier effect. our key then to really make this an exciting growth story is to get people buying more frequently on our platform. if you look at what groupon offers, really our core is in local, food and drink, restaurants, bars, spas and salons, our customers are transacting at least 20 or 30 times a quarter in those
categories. they're transacting on groupon once every couple of months. when we get to that place where we're starting to have customers buying five times, then six times, then seven times, that 50 million customer base and growing starts to become a really powerful multiplier. that's the first thing starting in 2017 we're going to start to attack. >> well, you got a lot of people's attention. cramer included. >> yeah. he's no longer saying it's too early to buy groupon. >> we got that going for us. it's great. >> rich, thanks for coming. >> thank you for having me. >> when we come back, the perils of a white house visit. what a ceo needs to consider when meeting with the president in 2017. pulitzer prize winning columnist jim stewart will take a look for us and will join us right after this break.
senate democrats holding an overnight debate in opposition to oklahoma attorney general scott pruitt's nomination to head the epa. he's been criticized for his close relationship to industries that he would be tasked with regulating. pruitt is expected however to be confirmed when the full senate votes later today. secretary of state rex tillerson attending day two of the g20 foreign ministers summit in germany. on the agenda today, a special meeting on syria hosted by germany. russia did not participate. a florida man is accused of planning to plant bombs in target stores along the east coast in an attempt to drive down the company's stock. officials say 48-year-old mark burnett built at least ten explosive devices and paid another man to place the bombs on store shelves. barnett faces up to 10 years in prison. and free meals in coach will be returning to some delta airlines flights. beginning this spring the meals will be offered on 12 transcontinental flights. offered breakfast in the morning and lunch later in the day.
you're up-to-date, that's the news update this hour. carl, back to you. >> thank you very much, sue. the president meantime set to highlight american manufacturing in south carolina this morning. he's going to tour a boeing plant with ceo dennis muilenberg, making corporate outreach part of his administration. the summons to the white house now comes with some risk. joining us at post nine "new york times" pulitzer prize winni winning columnist jim stewart. good to have you back. >> good to be here. >> we've seen this pattern a few times, what does it mean? >> it's always been an honor and the big complaint was obama didn't do enough about it. everybody thought, okay, trump in the white house, this is going to be great. they signed up for his business forum. i was talking to a ceo last week who said what's the most dreaded words in the office right now, the white house is calling. because it's become unprecedented double-edge sword.
if you go you risk looking like you're endorsing policies that large percentage of americans are violently opposed to. if you don't go, you risk getting a tweet blast from the president or worse in terms of other things that you need. it's a no-win situation. so ceos were telling me we just don't want to be on the radar. we want to stay invisible. >> but why wouldn't they? isn't it better always to engage and offer your advice, especially when you have a president who wants to implement pro business policies without making any political statement to actually get down and talk about what kind of policies could be done? >> well, that absolutely has always been the traditional view. everyone would have said that until now where suddenly the terrain has shifted. i mean, the problem -- you know, we saw with travis kalanick and uber, they had protesters chaining themselves to the headquarters, they lost 200,000 apps in four days after he said he was going to go to the meeting. he said i'm not trying to make a
political statement, i just want to be heard. i think it's better to be there. it was untenable to their employees, he had to resign. the closer you are to consumer products company, the riskier it's going to be because of the social network backlash. now, my own view of this is personally i think, yes, they should go, they should talk, they should listen, but then the question is will he listen. for example, they all said to varying degrees they oppose the immigration ban and they brought that up in their meetings and made the point forcefully to president trump. well, he's going to issue a new ruling next week. so let's see, did he actually listen to them and do something? if it turns out this is nothing but like a show thing where you get the photo op with the ceos to buttress your own credibility and make it look like you have a lot of support, then i wouldn't stay on it. >> we'll see the same thing fend depending on what he says about tax reform and things like that after retailers met with him. and then you have guys like musk who are trying to convince his own followers i am better off,
we are better off at the table with the opportunity to make changes. >> and he obviously has a very tech savvy, you know, younger avid following that he's got to persuade there. the interesting thing about musk i noticed he agreed to go on the forum, now he's also on some other industrial thing. and several people made the point to me once you say yes once, well then you get another one and then another one. like where does this stop. so we'll see how deeply immeshed musk eventually gets. >> this idea and you look at this in your column of president trump saying out loud when jamie dimon was at the white house, we're going to listen to him there's no one better to advise us in badodd/frank reform. >> unfortunately it reinforces the perception that trump himself is simply handing over banking regulation to the banks, the big banks especially. and, you know, j.p. morgan's attitude towards dodd/frank is pretty nuanced. i think they've supported many
aspects of it in part because dodd/frank has made it so expensive for small banks to compete with the big banks. so, you know, they have very narrow self-interests reflected there. and while of course it's good to get jamie dimon's views, you need to hear from the small banks and a wide range of expertise before you can make a really good decision. you can't turn that decision over to the very banks being regulated. >> let's try to frame this meeting today. he's going to this boeing plant. having said what he has said about global trade, does it collide with this plane, which is one of the biggest things we innovate and make and sell as a country. >> yes. i mean absolutely. and, you know, boeing is one of the companies that he has blasted in his tweets. but he has a boeing representative on his forum. he is hearing this as far as i can tell from every business leader that we live in a global world. and we compete in a global world. we hire talent in the global world. and we sell in the global world. and this idea that we can somehow close the borders is not
going to work for us. i saw yesterday a letter that ginny rometty of ibm put out to ibm employees kind of explaining her involvement with the forum and attitude towards trump. it was a beautiful letter. it was very moving. and it really made the point ibm is a global company, period. and we care about all of our customers, we care about our employees whatever the current administration is saying about it at the moment. so i think trump is going to run headlong into the reality that america is thriving in a global world and needs to compete. >> i don't think that's the question about closing borders. i mean he doesn't talk about that. his administration doesn't talk about that. it's this idea that if america is competing so much on a global world, how do we make america more competitive, how do we make it more fair, how do we make other countries not play by different rules when it comes to trade. and the question, jim, is can anything be truck, a balance in between, where you can level the playing field without
jeopardizing some of your partnership relationships. >> those are good questions, they need to be examined. i don't think they have either easy or simplistic answers. for example, trying to have all the manufacturing and the working done in the u.s. with high cost labor here and then perhaps retaliating with tariffs on the borders. this is what global leaders do not want. while i think it's important to look at america and the kinds of jobs we have here, to be globally competitive, american manufacturers have to have access to lower cost labor in other countries and i don't see how you get away from that reality. >> one last question, no one can deny what the stock market has done since the election. lack of selloffs and the times this week writing about the division between social coverage of the white house and the economic coverage of the white house. that must strike you as amazing. >> it's fascinating. and i will say that the verdict of the stock market is the one
unaloied positive trump has gotten and he can take some comfort from. i'm impressed by the market that it ignores a lot of the chatter and goes to what really matters for corporate earnings and the economy. and actually not a lot of bad things have happened yet. even the travel ban hasn't happened. i think the market is good at sorting through all the optics and looking at what's really happening. they're still looking at his promised tax reform, which they really want most of all. and then the possible infrastructure bill, which he promises is still coming. he hasn't backed down on any of that. i think it's too soon to say he can't deliver on it. i don't think the market's being irrational here. >> we're definitely going to learn a little bit more about what he thinks about the dreamliner, a gorgeous plane. jim, thanks for coming in. >> sure. >> jim stewart. let's get back to the big story of the morning, merger talk between kraft heinz and unilever. unilever rebuffing that bid this morning. joining us on the phone pab
pablo zuanic. you just published on it. unilever says no thanks, do you think ultimately a deal will get done despite that? >> yes, good morning. yes, we do. if we go by the s.a.b. rejected at the beginning and did eventually happen. we think this deal works for unilever shareholders we see probably 5% to 10% bump from the current offer because of regulatory issues they have to table an offer in the uk by march 17th. but we expect that kraft heinz/3g to persist and eventually this deal to happen. the only thing with that is shareholders unilever they know they are leading a commonwealth type of company, ici, cadbury, unilever, a lot of opportunity for the company to be managed better and we think this deal will eventually happen. yes. >> is it a good fit? a lot of people were surprised because they were expecting kraft heinz to go after another food company. and you see that in the stocks this morning at mondelez and general mills and campbell's
soup all trading lower. >> yeah. >> what about this idea of a massive consumer products giant that sells food but that also sells so many household goods. unilever's about 50% household products, 50% food. >> that's right. so two things there, number one, we expect them to divest or sell the household personal care business, otherwise the deal is not doable based on the math given 25% equity you have to divest the business to allow for --. company set up to be a global indeed powerhouse beverage nonalcohol so it fits, you have ice cream, spreads, dressings, tea, it fits in that perspective. the second thing i would add is at the end of the day we have to remind ourselves that 96% consume er consumers in the world are outside the u.s. while the company had been doing deals in the u.s., kraft heinz is really 80% north american revenues, so we see an opportunity to diversify and
also because political uncertainty, border taxes and things like that lower the probability of kraft heinz going for u.s. food company for the time being. so, you know, that's why general mills, campbell's, mondelez have done. >> yeah, i mean, unilever about 60% of sales are in emerging markets, big play for growth there. i'm wondering about the political environment, pablo. 3g tends to implement this strategy of cost cuts which include job cuts. how do you think this is going to go down in a trump administration, in a theresa may administration post brexit could include job cuts in both places. do you think that that influences the deal? >> we don't think -- it's an issue of course. but we think at the end of the day in what's going to be left of unilever you're talking about half in developed markets, other half in emerging markets. there's going to be opportunities across the board. they've been able to handle this
in those markets before. just look at mondelez when they bought cadbury. despite environment we think would be easier to handle than saying buying mondelez and then have to worry about a plant in mexico that sends cookies or biscuits to the u.s. market. look, the only thing i would adhere in terms of implications for the group, the piece that people maybe want to look at its implication for pepsi. because there is a business between unilever and pepsi and this of course makes you wonder about their intentions within tea/coffee in the u.s. market and anheuser-busch has to deal with starbucks and starbucks has a coffee deal with pepsi. so just in terms of people looking at implications, stocks reducing probability of other u.s. food companies but does approach on the margin anheuser-busch/3g/kraft heinz. >> it also raises a question of what kraft heinz wants to do with that merged combination
with unilever spinning off brands, focusing more on food. how do you see this all playing out when all is said and done? interesting to see a divergence where the household products companies like clorox and colgate and kimberly-clark at the top of the s&p and the food companies at the bottom. >> that's right. yeah, i guess there's two things there. one, we always say food is cultural. it will take a while for people in china to eat -- for breakfast. as your income goes up, you will use more soap, detergent, tooth paste. so sells premium to food because of long-term growth outlook. having said that in the case of kraft heinz, again, their force to be a global powerhouse in food and beverage, not on hbc, so this deal if it happens, unilever on the food, which is what we keep, is aligned with our global strategy. we realize that we do not stop there the more we're following
the long term, but again, for the time being we have to digest this deal when it happens. >> all right. you predict it's happening. pablo, thank you for jumping on the line just as your note crossed. analyst covering kraft heinz from susquehanna. and don't miss irene rosenfeld's take on the industry, she used to be a part of kraft before it was merged with heinz, long history of m&a in this entire business and looks like more to come that's coming up 10:00 a.m. eastern time on tuesday, carl. >> when we come back, united health group is responsible for most of the dow's loss shaving off nearly 50 points from the industrial average after being targeted by a doj in a medicare related lawsuit. the president signs an executive order on mining. we're going to head to happy point, ohio and get reaction from coal country in just a minute. alpha seems more elusive today. is it because so many go after it the same way?
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dow's down about 64 points. let's get to the cme group. rick santelli with the santelli exchange. happy friday, rick. >> happy friday, sara. i'm glad jim bianco is here. last guest of the week. thank you for being here. we found a topic in the last few minutes and switched everything around because we connected with this. the notion that investors domestically and globally are missing something, that generic channels and newspapers that never cover business are more professional on that the sky has to fall at some point that these markets just aren't sustainable. i give global and domestic investors a little more credit, but we're showing some charts. why don't you set it up, jim. >> yeah, if you look at charts of optimism, if you look at
charts of the philly fed index. >> earnings phone calls. >> earnings, the word optimism has had a 14-year high in its usage through the roof. everybody's excited that business opportunities are going to go forward. >> oh, that's all hope. >> yeah. it's a little bit more than hope right now. and yet you're right, if you go and look at the political landscape, you've got exactly the opposite going on. and the mistake i think a lot of people are making is they're thinking that the political landscape is the reality. you've heard a number of well-known investors saying i'm concerned that what i see in the political landscape is going to sink the u.s. economy rather than saying look at what business people and consumers are saying that things are moving forward. maybe the political situation isn't as important for the economy as we make it out to be. >> and there may be some proof of this that the market is better polling just about everything even with its flaws, and it has some flaws, because of what's going on maybe in france? >> yes. remember after brexit we thought
it was the end of the world, markets traded bad for three days and went up. after trump thought end of the world, traded bad for three hours and went up. if you look at the polls, la pen is leading, left wing parties are trying to ban together. >> coalitions. >> into some giraffe, making a horse winds up a giraffe. this should be bad news for france. markets are taking it relatively in stride. >> no, i looked at italy, france, most rates are actually slipping, but not in a way that's a flight to quality, in a way that's kind of, okay, well, we're done with this for a while. >> right. the german/french spread is widening some but taking it in stride just like we're taking the politics in the united states in stride. politics is not as important for the economy and for the markets as we think it is. especially if you watch some of the political talk that we've had over the last month. >> and there's even more proof. who do you think globally if you had to pull one name that's considered the greatest of all time, warren buffett would have to be there, right? >> i would agree with you. >> smart investor. what he's done with apple truly makes my heart go aflutter,
right? when did he get into that investment? >> probably a week after the election. >> okay. forgetting all the different things he said politically, looking at this for what it is, isn't that a statement by the greatest investor that these investors aren't idiots doing what they're doing. your final comments. >> i agree with you. he got into apple at exactly the time he would have been telling everybody not to get into anything if you listened to his political comments. but he's able like a lot of other people to say there's political comments and then there's the economy. don't confuse the two. and what you see in politic land does not necessarily mean it's going to infest business land. that's where the disconnect is. understanding that our politics are not as important as we think they are. >> it's not only where the disconnect is, it's where all the money was. >> exactly. exactly. >> thanks, jim bianco, sara, back to you. >> rick, thank you. we've got a live shot here of president trump arriving at joint base andrews for his departure. he'll be leaving shortly to head down to north charleston, south carolina to visit that boeing
plant. he'll have remarks later today. guys, we're also expecting to hear from the governor of south carolina. and boeing of course has been a target of president trump's in the past. he's gone after it for trying to bring down costs of air force one. since then he's met with dennis mu . >> sara mentions that tweet in which the president literally said cancel order about the costs of air force one. but after that muilenberg joined the president's manufacturing council. and as phil lebeau said a few moments ago, the possibility that xm gets discussed. reopening of that would be a major victory for what is essentially the country's biggest trade company. >> yeah, and exporters. a lot on the table that could involve boeing when it comes to
some of these trump economic policies. one of them is this border adjustment tax, we talk a lot about some of the losers, like the retailers from the gop plan to tax imports. boeing is one of our biggest exporters in this country. something they might be in favor of even though it would imply a much stronger u.s. dollar, which kind of hurts exporters. so that's on the table as well for boeing. it's a big source of manufacturing jobs too. >> president going into air force one, by the way boeing at an all-time high today going back to records that last to 1948. best we can tell. >> up more than 20% since the election. let's send it over now to jon fortt with a look at what's coming up next on "squawk alley," jon. >> good morning, sara. of course we're going to keep an eye on the president's visit to boeing. aside from that it's identity crisis friday. mark zuckerberg of facebook out with a letter about the company's new focus, what exactly does it mean? we're going to dig in with two people who talked to him after
with reaction from coal country and the impact. contessa? >> reporter: hey there, sara. you know, coal miners are feeling more optimistic today than they have in a long time. this is an amazing place. there are mountains of coal that move through here every day. it is the economics lifeblood of this region of the ohio river. and when it stops, really, the economy stops around here. the coal industry really saw this stream protection rule as a sheer government ploy to put them out of business. the epa, the department of the interior and the army corps of engineers had worked for years to craft these rules to protect groundwater and habitat from mining-related damage and pollution, and boy, was there a lot of debate over how many jobs really would be lost here. but in the end, president trump sided with coal leaders who said this rule was too broad and too burdensome. the harbormaster who sends the coal here on to trains and barges calls it a good start.
>> we spend our whole lives complaining about politicians that don't follow through with their promises, and now we have a president that's actually following through and keeping his promises. >> reporter: j.b. and his boss, robert say this is just the beginning. they're looking for more regulations to lapse when scott pruitt, nomination to the epa, is confirmed. >> some hope for that industry. contessa brewer, thank you, out in coal country snp . as we head to break, don't miss our interview on tuesday. mondelez chairwoman and ceo irene rosenfeld. her opinion on kraft heinz' bid for unilever and more, tuesday. the dow is down about 53 points off the lows. much more ahead. stay with us.
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it's everything you need it to be... ...and more. lease the e300 for $549 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. welcome back to "squawk on the street." i'm dominic chu. stocks are lower, but consumer staples are on pace for a five-day win streak for the first time in eight months. this continues this week's winners, again, including
colgate-palmolive, kimberly-clark, clorox up 5% to 6%. also a good week for biotech. nasdaq biotech on track for a fourth straight week of gains for the first time since august. amgen, celgene, gilead and biogen all up for the week. xbi also tracking for a fourth straight week of gains for the first time since july, guys. send it back over to carl for the start of "squawk alley," guys. back over to you. >> all right. thanks, dom. good morning. it is 8:00 a.m. at facebook headquarters in menlo park, 11:00 a.m. on wall street, and "squawk alley" is live. ♪ ♪