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tv   Squawk on the Street  CNBC  May 28, 2019 9:00am-11:00am EDT

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welcome back everybody, let's get a quick check on the markets. the nasdaq is up by 14 kevin o'leary is our guest, it is great to see you. >> thank you >> thank you for being here. >> i am going to get this watch off. >> it is such a good watch >> we are out of here, "squawk on the street" is next ♪ >> good tuesday morning, hope you had a good memorial weekend. i am carl quintanilla with david faber and jim cramer at the new york stock exchange. futures coming down at five weekly losses. the president drove cold water
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on a china trade deal any time soon parliamentary election we begin with the trade pause, the u.s. is not ready to make a deal with china. we got big mergers this morning, automakers and fin tech deal for more than $21 billion. we enter this holiday week the dow in the midst of five-week losing streak. s&p and nasdaq is down about three week s in a row for the first time this year, the first losing month of the year and the first losing may in seven years. >> we are in a moment where michael corvat said when he was on our show. the more chatter i hear verses what mr. wonderful was say, we
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said everything seemed fine, the more i get worried that was a brutal week last week if it is in the mall, it is not good it was great, i think fabulous growth and the stock was down. we had foot locker it just got crushed. so i mean the market when it starts to see on how much supply it is coming we have zoom and beyond meat >> zoom is $19 billion and beyond meat is $5 billion someone recommended beyond meat. >> we'll talk about it can't go a day without talking
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about beyond meat. >> remember we need to talk about ulta when ulta was 100. i said ulta is the next big thing because of selfie generation, they can't go outside without looking great or feel great ulta says the cover is what matters, you don't have to check out the booking. >> since the crisis, since the bull market began -- >> it is execution also, by the way sephora because they are hooked up with jc penney >> even este lauder got good number >> they don't buy anything from huawei >> no, huawei does not make cosmetics. >> did you see the quote the head of huawei saying apple ises the teacher, i am not against
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apple and i don't want to boycott. this will not happen if that happens, i will be the first to protest, apple is my teacher. it is the leader and as a student, why go against my teacher? >> we'll talk about citi's call today on apple china 18% of sales, we think that could be cut roughly in half they go from 205 to 220. they say the brand image in china is actually seeing some ratio. >> they're using for 2019, $11.19 we noticed the stock comes down a lot. this -- i thought apple should be down two or three for this. >> as for china trade, we know
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what the president said. abe and the president seemed to have conflicting characterization of where we are. clearly we are starting another week which we realize it is not going to be over >> it is endless >> end lless it is just getting started it has been going off for a while. i do think weaponizing, anyone think we'll come up with that? huawei is trying to stop their technology, that was a far reaching move. we know they have other technology >> i am sorry, the u.s. has other things up their sleev sleeves -- what do you mean? >> anything that can be used against us is as problem supplies or military
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>> there are so many interdependant supply change >> all things being sold and always between the countries when it comes to high-tech >> the problem of the mark is domestics is really up high. we have good consumer spend but it is not spread around. our trade board is clever than the chinese. i think it was the best seller over there like amazon if you want -- >> yeah, there has been a lot of coverage in nor koreth korean ms about war. >> their movies are terrible
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>> this is no staling. >> staling produced a lot of it and sadly to say her movie still holdup if they start to run a staling movie, we'll be in trouble >> i want to prove that they have great customer service. at 3:00 in the morning, i called selena and i got selena, what do you have for a movie that's from moscow through berlin. he said you are probably interested in stalling >> who knew stalin directed a movie? >> it was blockbuster. iger does not have that. iger got popular viewers galaxy >> we do have some reports
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chrysler proposing a merger with renault. each automaker would an equal component. french officials are saying they have to protect jobs and french has a 15% stake in renault gm although is behind volkswagon >> number four in north america and number three worldwide and fiat's prize are undce are s previous they have been focused on automated cars, on autonomous and what was coming. you imagine the combination could be favorable there they're not talking about any job cuts they're talking about $5 billion
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in -- 5 billion euros estimated in synergies the most of it would come from synergies from purchasing savings. that could take almost six years. by the end of the sixth year that's when they realiz realize -- that's a big number if you are an fca holder, you will get $2.5 billion euro >> when i read this, the french government knew there is no lay offs it is interesting that the savings are supply chain and not labor. we have way too many people who work for us. i don't want to say that anyone is a surplus person. i don't mean to be too harsh
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i thought they're talking about saving and employment. >> they're talking about cons n consolidations -- not lay offs >> you are not allowed to talk about lay offs >> i don't think you are allowed anymore here in this country >> you saw some of the workers have been cut. unbeliev unbeliever human stories about, people turning to president obama and trump and get the same results. >> mercedes plant goes on for miles. what's next in glass plant and electric plant and windshield wipers the entertainment, everything. and people talk about the factory. you can turn the whole country or city or state around.
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>> we got a big deal also. we told people about it last night via twitter. global payments and total system services it is an all stock merger, 48% ownership by the existing shareholders of total system and global payments shareholders, we are going to talk with the ceo of global post-games, jeffery sloan. load double digits and operating bases and about another 300 million runway cost of synergies through the combination of operating and things like that
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there is been this wave of consolidation that's not complete among its players between pfizer and first data and world pay and now global post-ga payments >> global payments numbers and 735 and more like 8.80 to 9. this is about the register the register is on friday. this is against square tsy is a very good sales product. this is a battle for small and multitude ye medium >> potentially new entrance and
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everyone one that we have not fought amazon or the apple of the world may sort of want to move you want to be able to buy the software companies >> wjohn ledger, he's incredible he's in there. t-mobile t-mobile is -- that guy's tentacles are everywhere he's missing major moves in sales and in europe. >> we were just talking to "squawk" about the report that we had on goldman and apple and city >> for city to say no to that business, city has tremendous infrastructure and to say no to that, that means goldman business is going to overwhelm, meaning you are not ready or
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goldman, figure how to do losses and credit cards these companies are all about credit cards the infrastructure for credit cards are remarkably different >> when it comes to post-gamaym, six companies will be payments >> okay, i am just asking. >> maybe there is cash flow. >> do you know what else they have one last thing, when you go to a restaurant sometimes they bring it to you. >> yeah, in europe >> that's what it is about tsy has the best product, bring it right to you. >> they're very forward. >> i am all over this
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transaction. they really didn't pursue us at all because we are nothing >> when we come back, we'll have wall street on beyond meat tomorrow on this program tomorrow on this program exclusiv jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to maie with hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
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. beyond meat is up in the premarket. jp morgan with an over weight $97 target beyond meat is a true interrupter. goldman's 12 months target 67 implies 16% downside jp morgan does say we see at least one major qsr customer by the end of the year. >> sometimes what you do is try to pick the best what he does say is that beyond
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is a package food company and not a producer carl, you should ask him if he's using beyond meat in these 1400 restaurants in mcdonald's or germany or he's using nestle, it is pound for pound and just as good and does not have that curious after taste. >> in one of the reviews it was not the lab either >> he picked nestle. >> there is a study out today, it raised traffic in door stores by 18% >> the impossible burger, i had all three and it is outstanding. >> is that what they can use in their review >> be my guest
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we bought one. let's have another it was so good and juicy those and the two packages in the company that i want. >> $100 billion total market that's in 15 years >> 100 times today's stock >> they're millennials, they don't like to kill animals and they hate cows because of metha methane. >> you are such a stickler >> yeah. >> worse than zoom or uber. >> 50% off your next ten rides
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[ coins hitting the desk ] yes, and they could save a ton. you've done it again, limu. only pay for what you need. ♪ liberty. liberty. liberty. liberty. ♪ it's snowtime baby. [ screaming ] oh, it's just this weird little guy. ow! ow, ow, ow! ow, ow, ow! [ screaming ] not cool. welcome back, our trading begins 6.5 minutes now here at the new york stock exchange. activision, not the best performer over the last year >> yes, terrible
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>> goldman says at this time, they're talking about an acceleration of content. there has been as terrible engagement decline if you google him, he got the shirtless look incredible it does not look like it is photoshopped >> he's in his early 60s we can all aspire. >> ostrich meat is the king. anyway, this is as contrary call, why? their gains have been doing badly. they don't have a battle royal, call of duty is running out of steam. it is sort of a valuation rate if the others come down and started to go backup i don't know, david,ov overwatch
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>> i think take two is better. >> it is not just about his ads? >> bobbymay not have great ads but he got great brain >> i do think he's got a great -- he's got basketball david, basketball worldwide. >> in china? >> it is nutty they have not cracked down the stress no crack down on nike. it is interesting who they crack down >> it is still early when it comes to crack down. >> activision, you are on your own. own. >>
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you are a busy tuesday morning as well weathhether watn some of these mergers we have
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and the china trade and the election in europe we held 2800 >> yes i think that's what's so hard about this market. you will get across turn everyday it is negative and negative then we are all going to get a big deal let's say you decide to sale and he comes out with a great deal >> what happens? a lot of people don't want to leave the table. when the ipo in march, we can have a breather for new deals. think the luckin deal shows you -- luckin people got hurt. beyond meat --
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>> they previously thought to do it and pulled back and now maybe doing it again according to reports. >> that had been a great stock >> opening bell here at the cnbc, at the big board is champion 19. and inoy 500 >> toronto -- >> where is toronto? no, it is like a major market. >> he won new york
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>> brooklyn would have been fine >> listen, i think -- go bruins! >> bruins are in the stanley cup for the finals >> i tune out hockey about six months ago >> the indy 500. i heard those are winners. >> to both of your points of alibaba. the company is considering raising 20 billion in a secondary in hong kong hong kong lost out to new york >> i think it was a year ago that it pulls back i think it is certainly around >> how about fedex >> we have not talked about fedex. a couple of mistake in huawei packages and you got people call
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for boycott? what do we know about that an apology from the website. >> it is not needed. they picked the wrong time to send the packages. >> fred smith was on "mad money. china is really important. >> i don't know why people think that -- there are a lot of company that live or die by china. ch you got to solve this and the stock start to go up we are with canada right now president trump didn't leave it to abe, listen you can bring all the toyota from overseas the only place we have our
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friendship is canada >> is that a friendship? >> how can you not route for ote raptors, sorry >> you want an under dog >> bet on meredith sm >> what was the price? >> $150 million six months ago >> fortune is owned by a thai billionaire, i believe >> just the licensing rights though $110 million >> i will take the magazines that we grew up with are invisible. it is a remarkable thing >> do you know the guy
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>> now we care about - about -- instagram >> oh, we have news about instagram. >> they brought their time spent forecast on the core app, down two-minutes than their prior forecast, 38 minutes a day instagram continue to rise and snap chat, too but whether it is security provision or people deleting their accounts s t this is u.s. adults by the way. >> the money continues, any of these consumer companies, david, they keep on feeling it got to be on money. vines, i have motley on tonight and they talk about the need to
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have a smaller brand the younger generation like small is good. i had those fellas from paris. environmental is terrific and by the way, aneel bhusri, workday when you read through that, you should say buy vm ware. >> we should take a look at it >> they got perhaps more of the overall combination that's been anticipated all over it is an mo week global payments looked down in the premarket, i am not sure how
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it is actually performing right now. shares of total system are up a bit, up at 5% approaching 120 is tss. there it is. thank you. global payments and total system the other big deal as well, renault and fiat chrysler. shares were up nicely in the premarket, actually trading already taken place. 50/50. 2.5 euros with a form of dividend, 11 members board for free independence is what you will get there we'll see the payments deal. >> fiat is up by 9% now. >> carlos ghosn, huge problem
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apparently led to make this happen go back to what carl said. >> the number three automaker in the world. >> number three in the business is awful >> no growth >> when you look at their rev l revenue number and you are like whoa and you look at how much they make. >> how about the fact that apple is up? >> jaime dimon should make some comments about it. >> dimon is on the tape, "i think trade is a real issue, trade has gone to be squirmish
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to changed." >> i think he's right. what are the leading retailers the dollar tree stores, knock offs, tjx -- >>that's a reflection of what though >> people are not feeling so great. >> this is a real debate right now whether the weakness to the degree we get is consumer led and enterprise led >> i was working for the lowest. >> i think people are worried. by the way, there is a boat sharing. the sharing economy -- >> it does make sense. my wife keeps on wanting an upgrade. open o owning a boat is a chore >> that's why we have you as a
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friend, we like friends with boats. >> i have six people with boats. >> you are welcome to the one in mexico >> thank you awesome. >> i am not holding you back >> you make the offer, i just got to execute it. >> my next project maybe ten miles to the north of california i am going to make it into knth new napa valley, i pike p. >> california has a 22% surplus. >> roku did have an all time high on friday it almost got to 100 oh, he missed the whole darn
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thing. i had roku c's ceo maintaining their $84 price together, i got to tell you, i mi misjudged this thing so badly. they're really on fire a lot of it is they're built into tv. anthony woods is the ceo, he's not a promotional man. roku is all part of what i think is coming back to and it is not fire fest. the way that people consume when they are younger is not like us. it is going away it is a subscription economy, they're frugal they don't have any money. we have no money >> because of the scars of the crisis >> crisis. >> they are there. by the way, you see some of the cuts are moving -- workday is
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moving aggressively in trying to help universities saving money >> find out more tonight if we don't start thinking like them -- >> everyone laughed at beyond meat because they thought it is vegetarian it is more about looking good and feeling good and selfies and animal protection and methane. >> right >> the planet. >> that informs a lot of jim's views on dow and este lauder and beyond >> yeah, i think the people out there need to understand that when they like something, they like the 100 calorie packages.
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did you see what jerk did? it is a small pack taste it is brilliant. >> i eat the big pack. >> the millennials just want that because they have to be thin >> the other day at the hamptons and it is much smaller it is an agave plant >> very healthy. >> it is much less sugar >> when you launch your tequila -- >> my wife's project, whatever my wife says, wow, my wife is really tough on me >> we'll have some nice miscount here on the set >> my wife loves projects she's the most practical person in the world >> probably it is what going to
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save you >> yeah, i have to admit it. >> 92. i hope for the outdoors. >> no doubt you will i will belong gone >> how will millennials get us >> give up on the millennials, it is 30 years from now. it will be about the robots. what are their taste they have you. they infer what you like >> another ten years you can create a simulation and it will note if you like bethoven mozort mozart >> let's get to seema modi
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>> the dow is up triple digits led by visa right now. s&p 500 up about 14 or half a percent. despite today's gain, they're still on track on a 4% loss. the nasdaq sitting on a 5 point drop for the month of may. 10-year yield at a fresh 2017 low. in terms of worst performing sector, energy is leading the pack down. brent crude is breaking at $70 a barrel let's dig into the utilities sector, and all three of these stocks are on dividend yield of
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2.5% or higher yet another example of how the market that are balancing stock that are income generated stock. the sector is not cheap. utilities are trading at 19 times forward earnings the question is, is there more room to run? technology is higher in today's trade. we have costco and canada good news and dick's sporting take a look at their performance in the past. foot locker is down 21%. guys, send it back to you. >> seema, thank you so much. let's get to rick santelli >> good morning, rick. >> rates continue to aim lower, this is despite the fact that
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even though our economy is not fully horsepower as it was in 2018 it is certainly doing well especially if you are considering employment down they go none the less let's look at a february 2018 two-year note, they're at 2.15 it goes back to february, that's steadily lower, 10-year right now is down three. they traded as close as 227 getting close to 2.25. a l interest rates get low, alternatives are much more possible and a lot of substitution is taken place.
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that's the etf, dollar index, you know it jumped up 98.40 intraday last uniqweek it has done many times shooting in the 98. that's really been ever since, we keep on moving higher finally the euro verses the dollar, many people are looking at it based on the election in the eu and some volatility take you back all the way to may of 2017. carl, david, jim, back to you. >> we'll you see you in a little while. jeff bezos have joined the giving pledge. the wife of the billionaire ceo announced she signed a letter to giveaway half of her asset to people
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jeff bezos have not signed on. aft big deal >> jeff bezos, the criticism to a certain extent for having less of a plan than someone would hoped for in terms of philanthropy he's sort of like hey, i am busy >> and bill gates developed one of the great philanthropies of our time >> he's only 55 years old. >> give him a little time. >> he may be work to 110 >> elon musk will work up to 140. >> tesla still to come this morning. the ceo, you will hear what he has to say of the impact of tariffs on his business. a nice start to a short weekas
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we arey p
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liy-ornety good action on a hodashted week this tuesday, only two sectors in the red, bank
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to collaborating remotely with your teams. giving you a nice big edge over your competition.l ge that's the power of edge-to-edge intelligence. in a minute.y prtg n y prtg n i don't see the trade war resolving itself any time soon based on everything i'm seeing,
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we're the slowskys. we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands! check it out! now you can schedule a callback or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not. daddal, i'm just wanting you to know what you own. let's get to jim and stock trading. >> yesterday was memorial day. want to celebrate and sadly commemorate those who did so much for our country
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it was not memorial day in tie wine that's why amd give a speech talking about the new chips. a lot of people thought it was going to crush intel the speech was well received lisa suez was saying when the rise en chip comes out, it's going to wake people up, it's going to be astonishing. it looks like it is. this is going to be the new standard, claims better power than intel that's really important. but they talk about how they're ready. the hpq talk on friday with dion, we need chips, there's demand amd is back. lisa siu, one of the great ceos. >> intel down almost 2%. >> that's all amd. amd is the winner. work day, we're wary because of
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spluning but we'll have a quarter this man -- mondelez is on fire. a lot is because of oreos. who would have thought dipping an oreo in cad werery would have made such a difference >> god, i hate them so much. how can you eat oreos and not break out in selfies >> jim, we will see you at 6:00. "mad money" on cnbc. "mad money" on cnbc. when w i'm at work. oh gosh, so late. i know, but guess what? what? i've saved enough to come visit you. well, that's such great news!ee at u.s. bank, we believe that hard work works.
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and for everyone working toward a goal, we're here to help. multibillion dollar deal with global paymentyy #e' o
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♪ >> good tuesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sarah and david. dow is up over 100 points as we watch m&a t eu elections >> our roadmap for the hour starts with a, quote, real
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issue. jamie dimon issuing a warning on the china trade war. another large payment deal, all-star merger worth $20 billion. ceo of global payments and fiat chrysler wants to merge with renault. >> it would create the world's third largest carmaker we'll give you full details and the back story straight ahead. we have economic data crossing the tape. let's get to rick santelli for the numbers. >> we're looking for a read on may consumer confidence from the conference board, expecting a number around 130. it's out at 134.1. that's a biggie, following 129.2 and 134.1 is the best level since november when it was 136.4. then in october, the month before that, it was 137.9. that was the best going all the way back to september of 2000. a very lofty number indeed
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if we look at the present situation, it approved from 168.3 to 175.2 expect takes moved from 103 to 106.6. a solid number on may's read on consumer confidence. interest rates are ticking up just a bit remember, we're under 230 in a ten-year the low entry trade today 227. sara, back to you. >> rick, thank you stocks in general are higher dow coming off the fifth straight negative week first time we've seen that going back to 2011 with the ongoing china trade tensions hurting stock. when asked about those negotiations over the weekend, president trump said, quote, we're not ready to make a deal jamie dimon, ceo of jpmorgan weighing in. already starting to see businesses moving supply chains and stuff like that. they can obviously slow down business investment and cause uncertainty of different types joining us, david leibovitz and
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jeff moon, founder and president of china moon strategies as well as assistant trade rep for china affairs. david, five down weeks for the market how much more pain is there the longer this trade fight gets prolonged? that was the message over the weekend. we're not close to a deal. >> i think for us what really mattered was the pmis which came out last week. that was really the first look we've had at the impact of the reescalation in trade tensions over the past couple weeks what you saw, obviously, manufacturing remains under pressure we know the uncertainty has caused a slowdown in manufacturing and cap x more broadly. what caught my attention is the services side of things has begun to soften as well. there's been rhetoric that a healthy labor market and a dove vish fed will keep the ship afloat i think what we need to be cognizant of is if we see further deterioration on the service side, now the economy is coming under pressure. we start talking about the
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rising risk of as session sometime in the next 12 months. >> in the u.s. >> in the u.s., yes. when we look at what's going on, if we see full escalation in trade to us, that could hit earnings substantially, particularly 2020. we're not seeing those estimates priced in. if businesses pull back, that's in a consumption-based economy how you end up with a problem. >> we got word of a six-month high how can we take about recession in the same sentence as those things >> yes, the consumer looks pretty good right now. is there risk that, if you see businesses fully retrench and the unemployment rate starts to move the other way, then i think we're in a bit of a more precarious situation >> is risking being led by or will it be led by the consumer or the enterprise. >> right now you're seeing the downside risk primarily come through the corporate side of things if you see that move away from cap x spending and what companies are doing with the labor force, that's where the
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problem begins. >> jeff, we can all speculate as to the president's next move and his strategy how much economic and market pain do you think he's going to be willing to tolerate here in the name of this trade fight >> obviously he's willing to absorb the 25% i don't know if he's willing to absorb what's coming from china. their strategy has changed considerably up until now, china has had a reactive strategy. he set up tariffs and they responded. since may 5th, the playbook was used to retaliate against other countries. the moves include portraying china as a victim, expressing outrage that china is not getting the dignity it should, getting the media to whip up nationalism and threats. the next step, which is what we're going to season is action, action against american firms in china and perhaps american firms overseas, things like boycotts perhaps or inspections, all
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kinds of ways to interfere with american business. so this is pain that the president has not seen before and the chinese can ratchet it up or down, depending on how things go. >> none of it seems to be going in a good direction if you hope for some sort of agreement would you agree with that assessment >> yes i think we've also got a policy problem here china has just changed its policy considerably. over the weekend, while the president was in japan, xinhua, the authoritative state news service basically said the industrial policy issues of most concern to the united states are not negotiable they call them core interests which are the code word that china uses for things like taiwan, among the most sensitive and important issues here. so things are going south, not getting better in the short term >> so let's assume they continue to, they get worse before they get better, and some of these issues seem to be intractable
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and the u.s. doesn't back off. what's that going to mean in your opinion for the global growth, chinese economy and its ability to continue to grow? >> this is all going to be negative factors, all going to be things that will cause problems i think that both sides hope that the other is going to blink. what needs to happen is we need good diplomacy, need to find a process where both sides can take gradual steps to deescalate this situation and preserve face on both sides. if it comes down to just i win or you win, this is going to go on indelphly neither side can withstand that kind of humiliation. >> david, if you look over the past few weeks, buy utilities, sell technology. is that the trade as long as the fight continues? >> i think as long as the fight continues, rates are going to stay low and that's going to keep that defensive trade very much in play obviously tech is sitting at somewhat of an epicenter when it comes to trade more broadly. we think there's a way to balance the scale better and
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perhaps focus on some of the higher yielding sectors that aren't deceptive we think getting income above and beyond what the index provides can help push back against this volatility. >> energy has gotten killed. >> it has. it's a healthy dividend yield. if you're willing to look through that short-term volatility, we think there's opportunity there. i think the big risk coming back to china is we don't see progress made and we see 2020 earnings estimates begin to come down right now we're looking at 4% earnings growth this year. consensus is north of 10% for 2020 that feels like a relatively high hurdle given the u.s. economy is essentially full employment and expectation is for troend growth going forward. >> we're in that period now where analysts are talking about maybe cutting on the company they cover rather than broad s&p trargt changes or earnings estimate changes we have one sector on pace for a record close that would be real estate and utilities not far behind
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when do we start talking about selling those in the short term? >> i think it ties directly to a view on where interest rates are headed if you believe the clouds are beginning to break and there's the potential for the fed to come back into play in 2020, that's when you liquidate the more defensive positions that have worked out well up to this point. i think about utilities the same as a core fixed income you need defensive assets in your portfolio to us, assuming we don't go into recession, the path of least resistance for rates over the medium term will be up. >> city grooup slash priced on apple on this idea they could be facing boy kouts or threats from the china market which is, what, almost 20% of revenues right now? it wasn't the first analyst to sound this kind of alarm bell. what other consumer names do you think should be worried? >> i understand overnight fedex has experienced problems, virtually any iconic name that's
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out there could be making this up, microsoft or any iconic name, that everyone recognizes all around the world, products that are used are vulnerable to this. >> boeing, nike, any of them >> yes, absolutely boeing is the easiest because these are large purchases that the government frequently turns on or off depending who is in political favor or not this is easy for the government to do. >> jeff moon, david leibovitz, thank you both when we come back, inking a deal, global forces joining total system services agreeing to $20 billion ceo of global payments jeff sloan is with us the ceo of ace hardware will join us on how tariffs are affecting his business and consumers at large consumers at large dow up
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it's me. me, me, me. yuck, that's gross. you got to get that under control. [ dogs howling ] seriously? embrace the mischief. say "get pets tickets" into your x1 voice remote to see it in theaters. . the third big payment processing deal of the year, global payments buying total system services. it's a merger of equals. all-stock deal, valued at $21.5 billion. joining us, global payment ceo jeff sloan nice to have you here. >> thanks for having me. >> as we were on break, you said this was years potentially in the making now the timing was right why now? >> there's probably never been a period, david, where there's
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been more innovation in payments ali pay, contact list with omni in the subway. it's really a scale business scale has never been more important to invest in those new technologies than it is today. i think that's what's driving many of the mergers. >> you are the third we've talked about phi serve and first data, fidelity national and world pay. scale, what does it allow you to do are you going to be able to buy more software companies? specifically what is it that the scale is going to let you do >> we'll be combined the largest pure pay payments technology company in the world hands down. that allows us to do a few things first, continue to invest in the software markets that we at global payments have been investing in for a long time as a result of this transaction, david, we'll be the largest provider, 900 million of revenue in integrated payments in the world, the largest provider of e-commerce and omni channel
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payments, also 900 million in the world, physical presence in 38 countries and virtual presence in 100. that allows us with scale to continue to make the investments we need to make to stay ahead of the curve. >> is there an expectation among you and emerging competitors that there will fw new entrants in this field? is it possible we could see an apple or amazon try to get into this game? >> i think it's less likely. amazon with amazon pay, apple with apple pay is already in our business they're partners of ours in many cases. we're beneficiaries of their investment and growth. certainly, david, you've seen stripe, square, paypal with eye zettel there's plenty of examples of companies making en roads into our business today which is why it's critical to make the investments we're trying to make. >> who are your clients and who are they going to be in five years? >> today we have 3.5 merchant
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locations using our services those are our clients. primarily small to mid-sized businesses increasingly we take those folks online, domestically as well as cross border i think the answer to your question is more and more technology companies we sell our software directly to merchants. but we also partner with software companies and embed our payments in those software companies. it will continue to be a mix of merchants today, merchants in the future, software companies and other technology companies. >> sometimes the word merger of equals makes viewers' ears pick up is there any liability or potential confusion that comes out of that management structure? >> i don't think so here, carl these two companies are 100 miles away in georgia with similar cultures we've known each other at the board level and management level for many, many years in fact, before i came to the company about ten years ago when i was a banker at goldman, they were my banker as a client we actually go back 25 years in terms of knowledge of what these
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guys do. i would tell you this is one of those situations where we all know each other very well and i think it's going to work out as a fantastic partnership. >> six months ago you potentially could have had your choice of dance partners or vice versa. why is this the right one in terms of the combination >> because they have dispatched positions that combine company for success. unlike deals that have been announced, this is all the combined company does. the last pure play company at scale in payments rather than providing mortgages, providing loans, those may be very good businesses, b >> we were talking about tech innovation and the spachlts what does the tip of the spear look like in the tech evolution is it tableside payment or is there something else i'm not thinking about >> i think it's like q arco. the ability to load your phone directly from your bank account, wave your phone and accept a code is a very important thing in your business in general, that's in
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asia-pacific it's come to the united states and canada and the united kingdom west to east i think increasingly west to east, pay at the table, pay via qr code. coming to subways next month here in the united states, those are the kinds of innovations >> they started to actually put it in in some of the turnstiles here in new york as a test $300 million in run rate is what you're talking about basically most of that because of areas of overlap. what are those areas >> i would say the way to think about that, in the pure chant business, we're direct overlap that's the way to think about it we're not going to need two authorization platforms or two settlement platforms so really from a platform point of view, it's picking the best one of each of us and will take the best of each also i think there are duplicative offices, duplicative
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go-to-market strategies. i would say technology, operations, real estate, that's where the savings are. >> not really head count. >> no. i think to the extent most of our businesses are sales-led, we want those salespeople the combined company will have 3500 sales professionals, by far the largest in the world >> all these merge earls and this growth in this industry has happened at a time of very strong consumer and strong economic growth. what happens to your industry and how do you think about the risk factors on payments and credit card payments when we do hit a downturn. >> we chase gdp around the world. it's important there will be a healthy consumer and the gdp be large and growing. if you back up for a second, we become more resilient at global payments we have every burger king in north america, 40,000 k-12 schools, a third of the university in the united states. you're going to send your child to school, by and large regardless of the economy -- by the way, public as well as
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private schools. about 40% of the revenue of global payments today is not tied to the economic environment. we all like a healthy consumer at the end of the day we're going to be just fine. >> you mentioned goldman a moment ago i hate to ask. do you have thoughts on their foray with apple >> it's good news for us like sara's question, the more innovation that goes into the card-based business, new issuers, new rewards, loyalty schemes, the better for our business. >> do you think some players are underestimating the complexity. >> it's a come et kaed business. but it's not like goldman doesn't know how to do financial services at the end of the day it's a complicated business that's why tease sis has been winning. >> the comeback where you started in terms of why now and the advantage of sort of taking advantage of the disruption in the marketplace, what will be
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the first thing that investors should look at as a successful taking advantage of disruption from this combined company. >> i think you need to see continued accelerated revenue growth the way we generally measure our acquisitions and partnerships, years later is revenue growing at a of the faer rate than when we got in in the first place given e-commerce and faster growth geographies, that's exactly what you're going to see in a combined global payment system. >> jeff, we appreciate you taking some time thank you. congrats on the deal. >> thank you for having me. >> jeff sloan, ceo of global payments you're calling it global payments, nobody upset at total systems? >> we're all pretty happy. >> that's a mouthful you went with the right name. a quick shares of beyond meat a number of wall street firms issuing coverage on the name, higher again, 5.6%, gains of more than 200% since early may
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jpmorgan started with an overweight 97% target. goldman sachs have it at neutral. the s&p 500, this morning we have groups like communications services, consumer discretionary. discretionary. staples getting hit the hard
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time for our etf spotlight mike santoli taking a look at bonds versus stocks. quite the move in bonds today. >> yeah, sara. happening for a while. extending the bullish move in bonds. obviously lower in yields. it's been the story for about a year we're neck in neck if you look at the price return of stock and bond etf here is the agg. that's the total u.s. bond market aggregate index here is the investment grade you see here that on a one-year basis the s&p still holds a slight advantage however, if you're talking stocks versus bonds, you have to
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look at the return which includes interest and dividend payments on this basis for the agg, you have 6% on a one-year basis because of that income the lqd, plus 7.8%, and you have about plus 6% on the s&p there you go, bonds beaten stocks on a total return basis, one-year basis, and by the way, with a much smoother ride. this has been your move in stocks bonds are doing their job as a stabilizer of portfolios we also have a one-month look which does, of course, show bonds have been the haven here and the s&p has suffered a bit obviously doesn't mean it's forward going, doesn't mean this is the way it's going to stay. clearly bonds in favor and all the bond-like parts of the stock market holding upthe index as well. >> anything to think, mike, that that would change, or does the trend look set to persist as things like the u.s.-china trade fight get prolonged? >> sara, it's hard to know exactly how much more price
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appreciation you're likely to see in treasuries or how much more corporate bond spreads would compress from here given the uncertainty about the economy and the global growth structure. it's not just the case where you should say we'll bet on the trend continuing or accelerating from here. the stock market had a great run before this one-year window that we're looking at i don't know that you'd say now would be the inflection point. but clearly the bond market is lobbying hard implicitly for a fed rate cut if we don't get that, what happens to yields down the road? >> mike, thanks. we'll see you in a bit, mike santoli. when we come back, a fiat renault mega merger is possible. how the exit of two of the how the exit of two of the industry's
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it has been a busy morning in deal making fiat chrysler seeking a merger with renault it's the back story, the exit of the auto industry's most prominent figures that's driving the deal phil lib bow joins us on how the human factor helped propel this merger forward. >> two of the most colorful characters in the auto business who aren't in the business anymore, sergio marsh yoan and carlos ghosn who put together the nissan-renault alliance. most people this deal wouldn't have come together if these two gentlemen were around today. take a look at the deal following the merger offer from fiat chrysler. if these two automakers come together, it will create the world's third largest automaker in terms of sales. this is if it happens. here is what worldwide sales in 2018 would have looked like. you see vw and toyota at the
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top. fiat chrysler coming in at 8.7 million, just ahead of gm and hyundai. for john el kin who is the chairman of fiat chrysler and who is really the heir of the an yelly family who has a huge stake in this, you have to realize this is part of them saying we're going to continue to diversify the portfolio of the holding company that the family -- that's what they use in terms of their investment they have fiat chrysler, ferrari, case new holland. they have a big stake in case new holland and the juventus football club out of italy this is one more step of john el khan following the playbook of sergio mars yoan saying continue to grow, continue to get bigger and then diversify that's what they're doing here. >> phil, what do you make of obviously the french government, all these approvals and regulatory clearances they'll
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need and the request for job guarantees >> definitely thought the jobs guarantee was a mandatory. there's no way you're going to get this through with the french government if you came out and said the reality which is, there's too much capacity in europe some of these plants are going to have to close they're just going to have to deal with this and the way they're planning to deal with this is by synergies that will come through cost savings. at least that's what they say on paper right now. the bulk of those guys as they strip down the number of platforms, engines that will go into the vehicles and the supply chain, the bulk of those savings won't come until the fourth or fifth year after the companies are put together they're saying it's almost $6 billion in savings, at least on paper is what they say. >> interesting story, phil thank you. let's send it over to sue herera for an update. >> good morning. here is what's happening at this hour a united nations report says north koreans working in hundreds of capitalistic style
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markets are often abused and forced to engage in bribery to survive. a lack of inadequate reforms and uncertain legal environment means many host a host of human rights violations. >> the report finds that rather than ensuring this activity can take place in a safe and secure environment, has maintained a legal gray area where people remain exposed to arbitrary arrests, detention, prosecution and imprisonment for engaging in these activities. authorities are getting the first daylight look at the tornadoes that ripped through ohio they've confirmed several jaguars in the wake of the storms with extensive damage as many as 52 tornadoes in eight states may have touched down. take a look at this. a rare all-white panda, giant panda has been photographed for the very first time in southwestern china that photo, as you can see, clearly shows the panda with fur and claws, and i don't know if
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you can see it, but he also has red eyes as he moves through the forest the photo was taken in early april. extremely rare you're up to date. that's the news update i will send it back downtown to you. not my usual panda story >> not the best picture, but definitely fascinating look at animal nature. retail companies meantime warning consumers about the impact of the china-u.s. trade war. the ce of of stanley black & decker telling us last week how the company is handling rising costs. >> we've had to take pretty significant actions in order to offset that. there have been price increases. there have been supply chain moves and there have been some cost management actions taken as well we manage to offset all that >> joining us this morning, john van hiez en ceo of ace hardware. thanks for your time today appreciate it very much. >> thank you, carl great to be with you. >> how are you handling what we
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think we know about trade and tariffs at this point? >> the tariffs continue to be an issue all of us are tackling it's impacting roughly 12% to 15% of our overall business. despite that we've been able to have a good quarter once again we came off a strong quarter and are pleased with our financial results. >> quarter was good. revenue up 5 u.s. comps up almost 4 how much of that is at risk in the quarters to come if this lasts? >> i don't anticipate it having a major risk on our future our quarter is driven by predominantly three things we had a lot of new store growth, opened 47 in the quarter. as you mentioned, solid same-store surge growth. our digital business was up 55%. i give our local owners a ton of credit in this regard. they're really leveraging this new brave digital world by using
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their physical assets. stores, inventory, vehicles, people while we integrate that with digital investments i think that's why we continue to see north of 90% of our digital business is continuing to be pick up in store for free by the consumer where they're leveraging their local store recently we launched our initiative, a dumb industry name that means buy online and deliver from store we're leveraging roughly $2 billion sitting in our local stores within moments of most of the world's home and business. >> interesting on pricing at least, have you identified how much you may have to increase price and how many skus that might affect >> right now, we're the vendor of record, about 4,000 skus. we stock about 100,000 list one through three are general immaterial to our future like all retailers, we're trying to have the supplier absorb
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those cost initiatives so we can insulate our customers from the price increases. again, roughly 12% to 15% is at risk with lists one through three thus far. >> john, can you give us examples is it tools that are made in china? if so, can those products be made elsewhere >> that's obviously something we're looking into as well the direct import from china is getting hit heavily in tools as you heard from the ceo of black & decker moments ago that obviously impacts us as they're a supplier to us we continue to look to move our supply chain elsewhere we've done that in other areas of asia. as you know, that's a long longer-term solution given some of the uncertainty, it's hard to know how quickly to move it is a lever we are pulling still the vast majority is coming from china which will be impacted by these tariffs. >> any sense as to how much the consumer can withstand in terms of higher prices i don't know if you heard it from the ground in terms of people running all these stores,
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but where that sort of sweet spot will be >> again, there's no one fighting for their neighbors like our local ace owner i feel fortunate our business isn't massively impacted by these tariffs. these folks in the face of that are not focused on that. they're focused on trying to give value to their customers. predominantly for us it remains a laser-like focus on service. our stores, you know, they live there, too convenience, leveraging the local stores so we can try to be faster than amazon on stuff we stock. ultimately focused on high-fault differentiated goods they're fighting for goods that are higher quality and more differentiated than perhaps you'd find at a discount website or warehouse store that's fair focus. service, convenience, quality. the tariffs is an issue from time to time, but not an imperial impact on our business and therefore our customers at this point. >> i wonder how you characterize the impact of weather. a lot of discussion this morning
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about the wet spring, especially in the ag economy. a lot of farmers have been unable to plant and might have to switch from corn to soy beans, if that's a big deal or more about existing homes have had trouble in terms of sales, if people are choosing to fix stuff rather than sell. >> weather remains a material driver of our business in fact, we joke when sales are up, we take credit for great leadership and when we're down, we blame the weather. this first quarter worked out well for us. up 3.9% in the first quarter a lot of that driven by winter our stores are there when it hits the fan in terms of winter with ice melt and snow shovels, snowblowers, things our neighbors will need. on the flip side, as we go into spring, if you look at the first quarter which would be february, march, april, our stores are up 5.1% on a same store sales basis which is the top quartile of retailers. a lot is because they're serviced on service, convenience
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and higher quality goods i think we'll see it flip a little in may because it's been cool and wet. >> i found it interesting how you talked about one of the big sources ofgrowth in your business is digital. home depot, lowe's trying to figure out the same thing, buy it online, pick it up in store i guess i would think they would have more scale, bigger stores, bigger warehouses to fulfill these consumer needs is that tough to compete with some of those bigger players >> for sure. the names you mentioned, sara are outstanding retailers doing a great job in the digital space and, of course, the physical space. we feel like we have a strategic differentiator in that we have a lot more stores. we have 5,300 stores around the global, 4,500 in the u.s you have three-quarters of a home and business within 15 minutes of an ace store. while their volume is higher, our number of stores is nearly double that gives us an opportunity to exploit this geographic
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proximity advantage including -- we don't farm out our home delivery, buy online and deliver to store we don't farm that out to third party carriers we do that with our local owners it's their red-vested heroes doing those deliveries i think that gives us a speed advantage as well as a higher quality advantage. >> what's the biggest thing you'll be looking for in the back half of the year regarding the consumer, john >> we continue to see a pretty vibrant consumer carl, i feel very fortunate -- forgive me for answering from an ace lens we feel fortunate in that our business is driven by home preservation, paint, power, outdoor barbecue, and then home preservation is not as susceptible to be whip-sawed by tariff news or consumer sentiment, whereas home renovation which is what some of
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our other competitors are folked -- focused on our business is insulated from that. >> interesting distinction from your arch rivals as we go to break this morning, don't miss an exclusive with the head of mcdonald's tomorrow, steve easterbrook. tomorro-driverless cars...k. -all ground personnel... ...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.
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back in a moment.y stocks are on track for their worst month of the year as trade war tensions take down the market, and erthe could be even more pain ahead. more pain ahead. find out when it comes to your customers' expectations,
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there's one thing you can be sure of. they're changing by the nanosecond. that's why cognin tradinated a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪ cool. ♪ more "squawk on the street" is coming up. rick santelli with the santelli exchange. >> good morning.
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thank you, sara. welcome yra harris back from the warm weather, for more warm weather in the midwest finally was it a hot election in the eu? what were your thoughts? >> i thought it was pretty modest the interesting thing was turnout grew 10% the greens who did really well succeeding that. but the, quote, unquote, non-eu favorable forces actually did very well, too the results are pretty mixed. >> they call them populist it has such a negative connotation. but those that want to see their country have more of a say-so in the general operations of their economy in all issues definitely did well it was the greens that surprised. you see any market aftermath >> the market aftermath is going to be who runs the ecb now, i've been writing about this for years >> mario's term ends in october. >> in october. and merkel is going to be hard pressed not to deliver a german
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to be the head of ecb. forget the horse trading yens needs to be the head of the ecb. going forward for the next eight years is going to be a critical time you needful german sign-on into whatever takes place to resolve the issue, not just of negative interest rates, but there's a massive ecb balance sheet that has been built up for -- >> german economy slowing and surpluses in all their safety net programs, there's lots of conversations, there might have to be tightening up in the future that's something the germans don't like to do >> again, who is financing this? i'll tell you. we all know who is financing it. the germans. if you want the germans to buy into this, you need a german at the helm. >> there is something to be said for, they end up getting a weaker euro, their demark would be much higher if they didn't have the euro. with regard to financing a lot, there are some benefits to that weaker currency and they need to calibrate for some of the weaker
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countries. >> yes but the germans who are by nature -- that's their financial acumen, to be savers, have gotten crushed here, crushed because it's what reinhart referred to as financial repression she's written much about it. german savers have gotten financially repressed. you have growth in germany, inflation in germany but interest rates are minus on the ten-year. >> you're killing them >> real quickly, i look at our interest rates mike santoli did a great piece on total return. don't count bonds, the whole fixed income out but in the final analysis, much of the lower rates is for forces outside the u.s. >> yes but forces the entire curve down that's what richard core reda has been discussing. the fed has a third mandate which is the global financial system he's saying, hey, we have to
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respond to this because it's going out. >> i don't yet know of a tool invented that can work to try to address some of what's coming across from overseas >> yu. but when you pretend to make the rules for everybody, you're saddled with that gaime >> jai powell's finest hour. ira harris, thank you for joining me today david faber, back to you. >> thank you rick santelli when we come back, it's a good team to be a wealthy tax evader. we'll explain why. first john ford has a look at what's coming up on squawk alley. >> china trade issues continue to weigh on the markets. e esensahere not even ready to make a deal. what's the impact?
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we'll explore that coming up on squawk alley your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.
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welcome back to "squawk on the street." i'm dominic chu. stocks are higher, barely. you see here just about flat right now. they're well off their lows of the morning. the s&p 500 is trying for its first back to back gains in around two weeks
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we are seeing some strength in communication services and technology you can see there some of the more cyclicly economically oriented sectors let's stroll down in wup of the relatively underperforming group, that is the consumer staples group down by about 2/3 of 1%. that group now trading in negative territory for the month of may overall a broad set of names leading that group to the downside, kraft heinz, tobacco stocks, including phillip morris and altria kraft heinz hitting a fresh 52-week low in today's trading those consumer staple stocks, yes they are less economically sensitive but as markets are losing some steam here they are the laggards sector wise overall. i will send it back downtown to ewe gu you guys. a shrinking budget at the irs may make it a good time to be a tax evader. robert frank joins us now. he's got more on that story. i could have pretended i didn't know they made the change in the salt deduction and nobody would have caught it >> if only it were that easy
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audits of the nation's highest earners fell to the lowest levels on record tax collectors audited a little over 6% of returns for those making 10 million or more. that is down by more than a half from a year earlier and down by 80% from the recent peak in 2011 if you were wealthy those making a million or more, those making 5 million or more they saw much lower audit rates. it's unclear how much revenue has been lost from all these lower audit rates which have now declined for seven straight years. studies show the top half of 1% of americans account for 20% of all under reported incomes that adds up to about $50 billion a year the data comes during a battle in congress over funding the irs. the irs and many democrats say the agency is being starved for funds. its budget is 19% below its peak in 2010. the number of auditors has fallen by over a third
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the irs estimates that every dollar spent on enforcement or auditors generates 5 bucks in revenue. each collection's officer generates about 2 million a year in revenue it's a good return if you have those auditors now republicans say they don't want to keep throwing money at a big bureaucracy. president trump proposing a 1.5 increase for the irs budget this year and adding 15 billion over ten years for enforcement, but here again, the republicans in congress disagreeing with the president over just how much to fund an agency that, let's face it, is not popular with the american voter guys, back to you. >> kind of essential, though, one would think. >> yeah, absolutely. i mean, there are estimates that show that the tax gaps so that's the amount that should be paid versus the amount that's paid every year is now around $500 billion a year, so that would wipe out two-thirds of the budget deficit if you collected everything that was owed, so
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yes, it is important. >> robert, i remember mnuchin's confirmation hearing, this was actually a very big topic that he wanted to try to narrow that gap. to what degree have we succeeded in that realm. >> the administration, mnuchin, president trump have both agreed we need better enforcement the new irs commissioner spent his career representing wealthy families against the irs so the good thing there i guess is that he knows what all the tricks are, what all the mechanisms are that the wealthy use to avoid taxes so he could actually, despite some criticism be a good irs commissioner right now, but again, members of the congress not showing willingness yet to fund it the way president trump and mnuchin both say it should be >> aren't there a lot of questions as well or interpretations still in terms of the changes that took place in the tax laws only, what, a year and a half ago? >> it's a great point. there's probably no better reason to increase funding than the complexity that's been built into this new tax law. you and i both know there are
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all these loopholes for pass through income, all these carveouts for real estate. the opportunities to game the system have grown more complex with the new tax code, and yet the agency is not equipped to issue rules or rulings on all these taxpayers that may have legitimate questions about how to file under this new law and probably just say, well, i'll file it with a lower number, but the agency clearly not able right now staffing wise to keep up with it >> robert, thank you great reporting. appreciate it. robert frank all right, sarah we've got a closing bell coming up it's interesting, the market has sort of retreated a bitd apple's turned around a lot of drum beat in terms of fear about china, whether it be rare earths or any number of different headlines. i assume you'll cover that later. >> we're going to track the incremental moves china's been making and find out whether five down weeks is going to continue. we're also going to talk to
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former chrysler president jim press on this fiat chrysler renault deal and we will hear more from jeremy siegel on the markets, where we go from here losing the gains see what happens in the final hour, guys. >> see you then, guys, "squawk
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alley" is comingy don't go away.y prtg n ízn
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