tv Squawk on the Street CNBC April 20, 2015 9:00am-11:01am EDT
good morning. welcome to "squawk on the street." kramer is off after having gotten married on saturday but he'll be back in week just? time for the busiest part of earnings weeks. oil is down as the saudis say production will remain high and the ten-year is right around -- ugly finish to last week but set to open solidly in the green this morning. >> a strong quarter for morgan stanley, as the last of the big
banks report earnings and revenue both handily beating estimates. >> earnings don't symptom there. ibm, and amazon in the next few days. >> and very close to home, an important week for the comcast/time warner merger, a meeting with the department of justice is set to try to ensure that deal is not derailed we begin a new trading week china's central bank cutting the reserve ratio by one percentage point to stimulate lending. they still, guys a lot of no progress being made regarding greek talks and the deadline that is fast approaches. then of course 472 companies report this week 146 in the s&p. i think thursday is the single busiest day of earnings season this week. >> industrials, consumer staples and technologies are the three
groups up to be watching this morning. so far this morning looking pretty good. even halliburton, which had gotten beat up obviously, managed to post a pretty good beat on the bottom line at least. >> it's probably worth pointing out that the move by china is very reall sure because -- this 100 basis point cut in the reserve requirement and actually deeper cuts is actually quite good arguably if you're in this country, the market more reassured by the biggest debt -- do bear in mind that the chinese stock market and our stock market have decoupled while you see them down today in china, and down about 4% for the last week they've more or less doubled there in the last year. >> air mentioned a lot of industrials, but later in the week boeing coke mcdonald's,
you name it. >> as far as themes to look for in that group, strength of the u.s. consumer will be among them besides, of course the impact of foreign exchange and how the companies are weathering them reduced sales by 9% still managed 5% top line growth. that's certainly one i'll be watching. we'll see. that's been one that's been able to sort of buck the weaker economy. we'll see if it can continue posting impressive sales growth. >> another question is whether investors are will to forgive or forget. there did seem to be some forgives in though friday hard to pick ultimate on a theme. whether it was perhaps a responsibilities to some earnings that have not been as strong as perhaps some hoped for. >> it is worth that -- we're
less than 2% away. even with the falls you had on friday. >> let's talk about it. as simon mentioned, futures are pointing higher, as we begin the new trading week. no data today, barry, earnings taking center stage. are you seeing reinforcement, for instance this morning that companies are going to manage to beat what has been pretty low expectations? >> yeah most of the earnings weakness was in energy and basic materials. most of the s&p was looking okay. the market historically doesn't react that negatively to small changes in earnings growth. what we really need is reflationary traction including growth out of europe and more stability out of china. >> is it reflationary traction what we're seeing in terms of the massive global qe party that china perpetuated and kept going
over the weekend? >> it's interesting that the u.s. went into qe in late 2008. you wery lrto and now china is considering the same program. most of the world is on about a three 1/2 year lag, and so what's going on on the reflationary traction side i actually like. i would like to see better action on the fiscal side though. >> barry, what's the next bounce of the ball as far as the markets are concerned? what happens in the second half of the year do you think? >> you're starting to see some of the correlations shift in the market. we had an up market when we had weak commodities, a strong dollar and falling ten-year yields. now all of that is reversing. we want the ten-year to stabilize, and we want the dollar to top. that would be a sign of global growth. >> barry, i want to pick up a point that almost got lost at the end of last week. we were all interested as to what happens when the fed starts raising rates and questioning
why they're delaying that action as vehemently as they were. in the imx stability report as i'm sure you saw, there was a headline there that they think when the fed starts raising rates, that the ten-year treasury yield could effectively jump by 100 basis points which would obviously be a huge move. they're saying that's not unrealistic. if that happened, what would the fallout be for the market? >> well when you remember greenspan hiked rates ten years ago, his conundrum was the lodge end actually fell. >> so no i don't expect a huge up move. any positive move, a small move would actually be bullish, because we need that reflationary traction. what we're getting with a sub-2% yield, and we have to overcome that. >> you know help us prepare for what is going to be a heavy week for earnings. we're also going to get some housing data. is it enough to have a bottom
line beat and higher profit margins? do we need to start to see real revenue growth? >> there's less patience for what we're seeing out of the corporate america. >> yeah we have overcome the concern about the lack of top-line growth. corporations as the pre-cash flow diminishings capital spending returns, margins start to peak wages start to rise you'll get alternates more pricing power offsetting the diminuteishment of the buybacks so i would expect that to be a positive thing, but it's going to take time. don't expect a lot from top line. >> what industries are you looking at? where are you putting your money to work as we head into this heavy earnings season. >> well the -- right now the best way to go as far as the market has been as long as the dollar was strong you were in health care but energy is
actually where you have the biggest potential bounce. basic materials is really leveraged into the chinese growth. they need to stabilize the growth there. that should pick up as the year goes by. global industrials would pick up if we have some capital spending late cycle. that would be a good moving for some of the consumer discretionary or staples, but on discretionary, the mid sell-class consumer will benefit from the cheaper energy and rising wages. there's nothing wrong to be in discretionary, you just have to be selective. >> well that is assuming a few factors including the fact that the dollar has peaked and oil has bottomed. are you convinced we have seen that? we're seeing some pressure on energy this morning. >> we do have a bit of an oversupply situation in energy, but we also have a minus 50% year-to-year change so i don't
expect it to be a straightline shot back to 65 or 70 but we should stabilize around the 65 70 level, sure. >> thanks very much for joining us northern on energy and the stock market. barry bannister is with stifel nicolaus. profit was up 60% james gorman calling it the firm as strongest quarter in many years. morgan that stanley also becomed you its quarterly dividend. return on equity does exceed double digits that excluding a dba and net discrete tax benefit. looking through the report or at least through the press release about the report equity sales 2.3 billion up from 1.7 billion a year ago reflecting what morgan stanley said is strong performance, advisory revenues as you might effect were up
shatterly to 471 million from 336 million one year ago. and wealth management, somewhere so much of this company's future current and future performance is based, had a strong quarter. net interest income in particular 689 million, higher deposit, and loan balances client assets now 803 billion, that's up 11%. overall a strong quarter for morgan stanley, the stock which does appear to be poised for at least a higher open this morning. you can see it there perhaps as much as 2 or so%. you can look through all these press releases all you want even the 10-q. you will never get a full idea of how much financial risks they're tailing, but we know the fed is watching them very closely. don't just base it on all the of the things you see we have all the five of the big investment banks out and
r.o.e. pretty good. >> pretty good getting back to double digits as goldman did, as we saw here. i think jpmorgan as well. impressive. there was a time many thought r.o.e. would stay in single digits. they continue to come out from under this very stringent -- not out from under the regulatory regime, but adjusting to the various changes in terms of capital and what their business cuss do. >> i like the reuters angle. they have following this horse race for number one in equity trading. at the tallied it up at the end. 2.27 billion was equity trading revenues so it wasn't quite enough to take the throne, i guess that's been a pretty heated battle shares of hasbro in solid
demand for toys based on "transformers" movies and marvel comics. i think jurassic will feature well here. 13 cents above the 8 cents that were expected on the earnings per share. piper jaffray is talking about how the management is executing so well these license revenues up other 70% year on year particularly in the boys sector. >> people are asking why girls was down 16? >> maybe you can explain. >> some weakness if furbees as well as easy bake oven. >> that never came through for me. >> no my compliments do not go to the chef. >> we gave up on it after a while. >> but as simon says boys up 10 preexile up 22.
>> they make play-doh. it kept them entertained for the entire meal. they were quiet and good. >> you liked that and you can eat it and nothing will happen. >> i even asked that. apparently it stays the same color -- [ laughter ] >> when we come back the latest on the comcast/time warner and department of justice deal. the and the cruise operator lowering guidance. and the strong dollar. meantime, the premarket looks good as the chinese ease overnight. a lot more "squawk on the street" in a minute.
bloomberg story indicatic some position at the staff of the doj. frankly many have expected the main opposition were there to be opposition would take from the commission, and be focused on the broadband power, if you will that these two combined companies would have given the new definition of broadband at 25 megabistsmegabits though there are no barriers of intrigue bringing high speed to your customers but we've been waiting for a long time for this deal. it was announced in february 2013, 2.75 shares of comcast for each share of time warner cable. of course there is no brake fee. some of we remarked on. we do know charter had great interest here if you go back to
my first reports, i guess two, three years ago about charter's interesting. if you are to take the charter math and look at their original deal -- or their original offer. 8254 in cash there has been a significant spread due to concerns about how this all ends up in a regulatory framework. what concessions will comcast be willing to make of course the parent company and what will be asked for. if the fcc is going to regulate or some analysts -- if the fcc is going to hone down on the regulation, and regulate the entities as never before why do you need the doj to come there? this suggestion they're extracting specific measures they might ask them to sign up to the new definition of the fcc, regardless of whether it's upheld in cold.
the fact that it's going to this hearing, people are drawing conclusions from that. >> it's not going to a hearing. there's no set thing on a hearing -- >> that's the threat though. >> correct. what they're having is a meeting with the doj. >> the comcast spokesperson says we continue to believe our transaction will bring substantial benefits to consumers without any competitive harms, and 17 days in the market already a billion, that's the faster run to a billion ever with 294 million domestic, so there's a shade of good news on comcast stock today. we'll see. >> and doing well overseas. it took eight days to growth $250 million in china alone through the new era of big box. >> if this deal were to break, and we're not saying it will of course there's been a great deal of speculation. don't forget charter's deal to acquire of bright house networks we reported on is contingent on this deal happening, so that deal would no longer happen and
then a lot of questions about the future. just because charter might have interest doesn't mea time warner cable would be interested in doing the deal. we expect they might be interested in doing a bit again so that -- which actually had a pretty good quarter most recent quarter. >> keeps the cable drama going. >> lots the countdown to the opening bell. art cashin will be with us as we kick off a new trading week. it looks like we're set to open sharply higher. more "squawk on the street" straight ahead. it took tennis legend serena williams, fencing champion tim morehouse and the rockettes years to master their craft. but only moments to master paying bills at chase.com. depositing checks at the atm and transferring funds on the mobile app.
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big week of earnings start in earn zest this morning with morgan stanley and ibm tonight, chinesing overnight as well, cutting their reserve ratio. that's let to a big upside action. we'll see what happens when the opening bell happens in a few moments. let's bring in art cashin. good morning to you. people are still wondering about friday whether it was another test where retail investors bought the dip? >> they certainly did. the figures indicate that retail was a better buyer than seller. i think the selling may have come from at least part of it from europe because it continued on. you know when you can't sell what you want where you want to sell it the german marks was down the equivalent of 400 some-on points. but we had that combination, kind of a mixed blessen out of
china, cutting the reserve requirements. their markets were closed when they sit down margin trading. they were still closed when they changed the reserve requirements. the combination of twot let to a somewhat softer trade. they had been off 4% or 5% before they changed the reserve requirements. so we've got a mixed picture here. i would look to early resistance in the s&p, up around 2094 2098 and see where we go. it's hard to believe after all these twists and turns, the dow is flat for the year. here we are at break even. where is the next leg, the next direction going to come from? is it the fed? earnings? overseas? >> first of all, you're right. it's kind of like commuting by roller coaster, a lot of twists turns and terror and you pretty much ended up where you started and it cost you money. we had dudley this morning.
there was nothing brand new there, but i think you can see fisher will be the mor hawkish of the lot. >> what an honor to be mentioned in the cashin comments. >> well it was your interview, you drew him out. but i think i would look to later in the week and begin to see -- i think one of the other things that people aren't talking about is friday there was concern that if the greeks defaulted, it would be an instantaneous thing, but now people have learned there's a grace period there. >> two months. >> default may lead to another election. a lot of things can happen so people are stepping back from the cliff and not pushing too hard. >> all right. art, we'll see what happens. thanks the opening bell just 4 1/2 minutes away. don't go away.
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146 companies just in the s&p alone. it's going to begin with ibm tonight. we already have morgan stanley under our belts so far. says royal caribbean warning about the increase in fuel prices since january. we're going to hear more today, too. >> they actually beat on the quarter, but what they have done is lowered the guidance for the rest of the year partly because of fuel but also because of the stronger dollar affecting the spending of non-u.s. residents on ships, or people that are coming from other currencies on ships. >> one of the big movers will be 5% to the down side. we'll keep our eye on tesla. this interesting story that's crossing on some wire services citing a book about elon musk who apparently had a handshake deal with larry page in 2013 for google to buy tesla.
then procter also with a -- >> procter, that was a nice surprise, i guess, for investors, still waiting to see what the verdict is. there's a lot of talk around some of the beauty brands david, in terms of who would spin that off. besides other consumer staples, colgate got a downgrade to a sell actually and a lot of it was because of the strong dollar, saying they are more exposed internationally and not as much baked into the stocks. on that same node goldman updated general mills to a neutral, the food packaging stock giant saying things are starting to turn saying that general mills as far as packaged food companies -- kellogg, some of the others -- is actually in a prime position to make some progress.
obviously the godfather of modern cruising. "the allure of the seas" being christened in the port of southampton in the uk today. >> halliburton continues a modest gain even after -- they did beat by 12 cents, revenue was a beat down 4. you don't want to look at the gap results, they looked pretty nasty. they say the industry will be challenged, in their words, visibility and the ultimate depth and length of this cycle remains uncertain on a day when oil is pulling back because the saudis still have the pedal to the metal. >> and the rig count from baker hughes perhaps having some impact a 19th week in a row where u.s. oil rigs drilling actually fell.
did say the fundamental regulatory change was needsed. the industry is far more resilient, given the amount of accomplished. it's good to have a time-out set, who is leaving, departing for google. which will be interesting to see what participation she takes there, and how much of a voice she has in the running and management of that company. >> people sees continuity. >> she ran prior to taking over as cfo, if i recall. that is correct. >> ibm is a big gainer top of the dow today. >> we'll see what the numbers look like of course when you think about -- you certainly have to expect that ibm is also a --
>> and investors punished the stocks. look beneed the dollar headline seems to be the theme. >> this is the first quarter since the aggressive starts from ceo jenny rho mettic. irges can i come back to morgan stanley, if you strip off the one-offs double digit. >> right. 14% if you include these gains they had and yet the despite -- still in negative territory? >> even when they're performing at that level. >> i think morgan did -- had a very strong 2014 if i'm not mistaken, or fairly strong 2014 but you're right. financials have not -- last week was a decent week and overall the numbers we have gotten from the big five or six.
morgan stanley have all been pretty good. >> strong. not as good as hasbro. we talked about it in the s&p 500. strong quarter, getting a lot of props from the analysts on executing well during actually what is seasonally a pretty weak quarter for some of the toy makers. >> callaway golf up about 2% i think pretty close to a 52-week high. the news there that jahvidries initiates it as a buy. and the strong dollar and the impact on -- a proprietary survey of their own is not boding well, they say for future sales. right where cashing said to look out for some resistance. >> good morning, guys happy monday. complete reversal from friday. all ten sectors are up most of
them up fractionally. you mentioned halliburton, morgan stanley beat by 7 cents, and missed by about ten cents. that was a modest disappointment. suntrust missed on revenues but did beat on earnings. if you're confused about the effects on the dollars, royal caribbean had a great illustration of what happens. they're down today, because they cut their full-year guidance largely on the strengths of the dollar. here's why it's such a good example of what the dollar is doing to them. the majority of their on-board sales are in dollars. a lot of their guests are international getzs, so the purchasing power has been reduced on board. as a result they spent less. they had a revenue pick. that's the very simple way of
spending. now, they said 36 cents is what the impact is going to be also a bit because of the higher fuel prices, but the lower guidance is what is moving that stop to the down side. the ceo of royal caribbean listen on shortly let's talk about china marks. on friday they banned -- and over-the-counter stocks we did see shanghai and hang seng on the 24th it was 20%, with two steps, they lowered it. this is the second time they have cut these reserve requirements. it's going to make more funds available -- more funds held by the banks to be available for lending. obviously people think it's going to be significant. other things they're talking about is a cut in interest rates. again, the cut in interest rates is what stimulated the storm. on november 21st they cut
interest rates from 6% for 5.6% and cut it again in february. this is the one year. so the important thing is on november 21st that is the exact day the chinese storm took off. we've got up essentially on a rocket ever since then. the reason is obviously the interest rate cuts. they are talking stimulus in the form of interest rate cuts and cutting -- and at the same time they're pulling back in other areas like banning margin financing. that's what they're trying to do. finally david, goldman had a report over the weekend basically say the annualests have -- 59 companies reporting so far, only 3% have missed on earnings usually 15% to 20% miss and only 17% are beating on earnings and revenues. that's an indication that it's the revenues that are really disappointing. again today we saw a number of companies missing.
dow up 173 points. david, back to you. >> thank you very much mr. pisani. not a lot of m & avmt activity today, but there is a deal worth mentioning, 2.8 billion acquisition by a special purpose acquisition corporation. that tip came wouldn't turn that many heads, but it is interesting to know the spac in question was floated by martin franklin as well as noh -- two have had good success with special purpose acquisition corporations, the likes of which justice was one that in franklin ran that became burger king s of course, then it left the push market not along ago with the merger. freedom was another one they
had. that was where franklin spark, which then became a -- both cases they did do a decent job, if i real for shoulders. in the latest they're buying a unit from the private equity firm that usually does a great of work in europe. not necessarily something -- half dollar worth of revenue, 306 million in ebitda. 306 million euros in ebitda. the expectation is it will list here in a few months. it will then of course by trading, and they will use it as a vehicle, speaking of both gentlemen that told me use it as a vehicle to potentially try
to consolidate the packaged food business to a certain extent in certain areas and beyond frozen foods, which doesn't seem like a -- >> no it's all about fresh. >> i talked to both of them about that said hey, man, but they talk about new meal options, frozen food being less wasteful, for example, because you can use what you want put it back in the freezer, and any number of other acquisition opportunities, which they may see for buying nomad. >> that's why a lot of analysts continue to play higher valuations on these companies, because their stock in packaged frozen all of the trends that aren't working as deal candidates. look what happened to kraft? there's obviously value there. >> does trade aa huer multiple. >> can i push back on the idea
that frozen foods are less wasteful. i do way too many for -- >> do you do frozen dinners? >> when i come to your house, i'm getting frozen peas? >> yes, it's a british specialty. >> he's not a millennial. >> all right. let's head to the bond pits now. good morning, rick. >> good morning, david. and while we see many of the equity marks around the globe really rocking and rolling, the u.s. stock market is looking firm they're not all looking that great, at least when you get tard the chinese and hong kong markets. 24 hour remember automatic scaling looks pretty wild right? until you match it up with friday and you see how today's action shrinks are we are trading quite actively.
traders call it home base or a spiff involve, but should we start to break out of the range, as you see on this chart, look for follow through. one thing that's on their minds may more than mario dragon are the tens of billions that the member countries of the europo zone are owed by the greek government, and how that may play out doesn't seem to be getting enough talk so say traders, if we look at the bund market, a two-day refresher course is all you need eded today, like the treasuries really really narrow range. let's look at the hang seng down over 550 points about down 2% the chinese stock marketing look no better. we all know the reasons. they're trying to get this thing going again, reserve requirements ratios were
altered, as everybody knows. not a huge move but definitely a deterioration like the treasuries, look at the range established by misdemeanor march in the euro versus the dollar, 105 to 110 is what traders are watching. carl, back to you thank you so much. the u.s. supreme court has rejected the peal of gupta. you may remember he was convicted, an appeals cord upheld the conviction and now the supreme court has done the same. i believe gupta reported to prison last summer but in this case the supreme court has obviously rejected that appeal. morrison stanley wrapping up a conference call. one analyst's take on the call. tomorrow an exclusive interview with the ceo, james gormden, who called his company's results the best in years. dow closing in on a 200-point
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we're keeping our eye on a lot of round numbers today. s&p right at 2100 only the nasdaq has not achieved that 5k level once again the first quarter results didn't beat expectations. joining us chris kataski. at open hyper. give me your take on the quarter. >> it was a good quarter. about 85 cents on a core basis. we were looking for 81. street was around 78. so a solid beat. came primarily on the trading side in both equities compensation ratio was down a bit versus or expectations so a good solid quarter. >> investors have begun to train as -- given the prospekds for that business. how was the quarter at wealth management? >> it was good.
i get i have a minority point of view on this stock, which is that wealth management is a great business for them. it's a non-capital intensive business, it's more stable but on the other hand, if you look at it in terms of total earns per share, you know the wealth management business will probably earn like 1.10 1.20 something like that this year. it's a good business they are doing well in it but i'm not convinced it's big enough to move the needle for the firm and the stock overall. >> on that subject of the stock, we were talking earlier about how despite the fact they have an annualized return of over 10%, the stock still hasn't done very well so far this year. why is that? and what are the prospects for these financials in general, do you think? >> well the issue or the challenge that morgan stanley is facing at year end 2006 before the crisis they had about $36
billion of common et wicket. currently they have 57 billion. even though they were cleared for a $3 billion buyback, they'll still be building capital this year. it's a huge amount of capital to put to work and again a lot of morgan stanley's business is equities, wealth manage, so on are not really capital-intensive businesses. so i think there's a question still in the market can they ever earn a decent return on that? clearly making progress but it's still -- >> i wanted to ask you about the regulatory changes, outgoing cfo, talking about how much has changed in the last five years for all of the big banks now would be a good time i think she used the world to time-out when it comes to changing the face of the industry. are the regulators on that page? are the banks where they need them to be at this point? >> i guess i have a fear the
jury is out on how all of this will happen but i did a stuffy a while back. if you look at the amount of trading inventory that the big banks are carrying you know it's probably less than half the a trading kevintory relative to the bond -- relative to the size of the bond market. the brother/dealer trading inventories are probably half of what they were well before the crisis in the early 2000s, so the nest time you have a period of stress in the bond market that's when you're going to see whether we have overcorrected or not. >> stock's not doing too much up 1%. are you surprised at that somewhat muted response in. >> again currently right now i think morgan stanley is doing well but i think there are
better values elsy. i like the private equity companies, morgan stanley is a well-liked stock right now. >> well liked, i guess, not love. >> chris kotowski thank you. >> thank you don't miss or interview tomorrow with james gorman sitting down with him on "squawk on the street." >> 23 minutes into trade, let's look at where we are. it's a strong open up 227 points on the dow, all sectors are positive utilities, tech and telecom leading, more on this morning's really after this short break. the technology changes the design evolves the engineering advances. but the passion to drive a mercedes-benz is something that is common... to every generation of enthusiast. the 2015 dream machines, from mercedes-benz.
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a strong start to the trading week with the dow in the lead up 225 points s&p flirting just with that 2100 key technical level. the nasdaq also good for a gain of about 0.85%. all the major s&p industry groups are in the green this morning, led by it looks like utilities and technology carl a number of new all-time highs, including in names like you just
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good monday morning. welcome back to "squawk on the street." we're at post 9 of the new york stock exchange. take a look at the markets, making up what we lost on friday, for sure. not quite all the losses back but some. s&p is back to 21 even oil is chipping in let's get to the road map for the hour. apple also bouncing back. find out what it means for the stock also morgan stanley beating the street. the stock is looking relatively flat now. details are ahead and lily pulitzer with a shopping frejzy and coming up later, as exclusive interview with the ceo
of royal caribbean. we'll talk about how they're dealing with the recent outbreak of a gastrointestinal virus on two of its ships the dow is now up 233 points after of course we had all that selling on friday. let's get analysis on what to do next. ers la sell and samir joins us with fess fargo investment institute. samir, this feels very different from friday. what are you telling clients? >> what we've been telling them all along, weakness is to be bought as central banks remain stimulative. any pullback should be bought. >> you're not worried about the valuations at these levels? i mean what 2% from the record highs on most of these major indices indices? >> if you look at inflation and rates, we could see valuationses getting more full before it's all said and done. if you look outside the u.s.,
things are actually fairly cheap. >> what in particular do you think people should buy then? >> we think europe continuing to be the most compelling if you look at switzerland, they are on an ancillary basis benefiting from what you're seeing and if there is a bit of a call it hiccup around greece they are a little more insulated. >> eric would you agree with that, when you see, for example, today this big move by xhin on the reserve ratios or when you look at what might possibly happen in the eurozone with greece, would you be as positive on stocks? is that a natural reaction that sameer is making there, you think? >> i think to some degree in a world of you want ra low bond yields stocks need to be awfully sxejsive to be unattractive so there's an actuality tilt. when i look at something like the chinese reserve ratio cut,
el know it signals economic softness but markets do tend to be fairly myopic one of the trading rules has been rate cuts ultimately equals higher markets. i think that may well prove tore the dominant trend. >> how damaging it's going to be to margins, to sales, to profits. we're starting to get a picture. it will be one thing if this was a temporary factor but the kernel is that the dollar only continues to strengthen. it's stronger right now against the euro do you have to reset your thoughts about any company that does business abroad geffen the fact it doesn't seem to be a temporary phenomenon? >> i think you have to dig in deep, if it's actually volumes, which are probably a bigger predictor. one of the things i would throw out there, is a lot of people questioned whether international
companies would do well. >> okay. eric, when do you this the fed is likely to raise interest rates. you just said that rate cuts equals higher markets. do rate rises equal lower markets? >> well you would think if things were perhaps parallel they would, but at this juncture, my sense is hikes are not good for stocks and i think it comes down to really in the end why are rate hikes happening. i think september is the most likely, and in terms of that interpretation, if the fed is doing it for the right reason because the economy is rebounding because wages are rising, then it's the right thing in the sense it avoids problems so i think perspective perspectives are okay. >> what about the positioning of the market? we keep people having warning,
that the imf isn't liquid that maybe you could see 100 basis points decline and yield. should that be a real concern for people that we are in uncharted territory, we have never seen a central bank like the fed have to climb its way back? >> i think there are risks. in my mind it's less to do with -- and more having to do with perhaps a sharp increase in yields. we have gone through this in 2013. the imf does tack you about that. my sense at this juncture with yields so astonishingly so low, there would be a strong substitute effect that i think limits the effect of any increase and i think people underestimate how many so-called safe assets there are in the world. at a much bigger emerging market basis as well. i think there may be some
indigestion. >> sameer let me ask you the same question, if there were to be 100 basis points rise in the ten-year yield, what would that do to stocks? >> first of all, it's pretty unlikely anytime soon just because of what we're seeing on the international side with german -- so first, i would say it's unlikely anytime soon but i think if earp to see that you know i think ted be a bit of a headwind for stocks but if it happens to the right reason i think you could see stocks surprise to the up side. >> sameer and eric thank you both and stocks are moving to the up side, but still hanging in plus 200 points higher. up next apple coming off a down week but recovers some of those losses with the overall markets, we also have new estimates. what does apple say about the
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morgan stayly also trading slightly higher. our mary thompson is back at hq with all the details and headlines from the call. >> the quarter was the firm's second strongest ever once you include dva or changes to the value to death. more importantly it hit the firm's long-term goal r.o.e. return on ecity with a measure of profitability. driving toss quarterly results, strength in trading in both equity and fixed incomes commodities and occurrencely. while -- it's been shrinking to de -- in, strength in commodities as well as activity in europe along with make roe products all behind those good numbers. ceo james goren did sound a note of caution. >> they are as strongest revenue quarter in three years, as
volumes return to the market. needless to say, we must see the payout for more than one quarter. >> morgan earned 85 cents a shar in the quarter, the bottom line got a lift from the tax rates. the firm sees it normalize around 30%. 9.8 billion. now that the firm has hit its r.o.e. target ruth pratt noting it won't always be a straight line but the firm can exceed and maintain those levels including adjusts investment banks with buybacks and dividends approved by the fed and through debt refunding. she also points out that margin lone growth and restructured big should also help to main tan and compete or push those levels higher. looking ahead, the company did say the pipeline remains strong and is up year over year. sarah, back to you. thank you, mary thompson for
running through the morgan stanley results. don't miss tomorrow an exclusive interview with james gorman on this morning's results and what he sees as a heads-up tomorrow on "squawk on the street" mean time apple shares rebounding today. investors looking ahead to the apple watch with the possibility of $2 billion in revenue. could the apple watch by the company's most profitable product erv? let's brif? jim suva to talk more about it. good morning, jim. >> good morning. great to see you today. >> you too. there's been a few downgrades and this narrative has crepe crept this that it's still a phone company and the iphone psychling is beginning to peak. do you think demand is being underaccounted? important z importantly we think they're going to beat consensus by about 5 million unit. we have 59 consensus is only at a 4, but importantly as you laid out, they're rolling out with new products things like apple
phone, apple pay, we believe there's more new products to come. they think iphone is the focus today in the future many more products. >> how far out in the future? i mean when does the watch start to become a material element for analysts putting together their models? >> importantly, you know it's just got online orders. we do believe as the future progresses, we'll be able to asays that more but let me quantify it a bit. on an annual run rate we're building about 20 million units. that represents about 5% of the company's installed base only 5% if you say it will be 10% or 20% that makes it rifter. and importantly that will low the company to so they're more than just a phone company, then we look at applepay passbook,
things like that. >> are you convinced they can make enough watches to meet that number? >> that's a good problem to have. if demand is outstripping supply that is a great position to be in. i put in my order at midnight when online order became available. my apple watch will be available and shipped to my house on may 20th. a bit of a disappointment, i was hoping to get it sooner but at least demand is outstripping supply at this point we've heard in pretty radical estimates, how sweet do you think it will be? actually we quantify this at least 10%, a week from today, as well as increase their stock buyback from 90 billion to $120 billion to deploy that. that still puts them with over
$20 cash per share. so they'll still make acacquisitions, increase their employees base and continue to innovate, but a 10% different increase and increase their stock buyback to $120 billion. >> is that already priced? or was that surprised? >> i think it's pretty much in line with expectations. the stock has had an incredible run over the past year or two, and i think -- apple is a cash flow machine. they have too much cash that is a good problem. they can give more back to shareholders, so investors are indeed expecting a dividend increase and stock buyback. >> jim, just changing the subject very slightly. there's a report back in the day 2013 elon musk did a deal to sell tesla to google. we don't know if it's true. the fact is apple could buy tesla with one quarter's free
cash flow. do you think they would ever do that? >> well your facts of how much cash and cash flow apple has is very accurate. you know what they have on their acquisition scope, to be honest they haven't made a lot of large acquisitions outside of beats, which we already know about and has been integrated with the company, is now history and in the past. looking forward, i believe it's looking -- everything from apple pay, apple passbook apple watches, lots of different things, you know people talk about the car. i'm not sure about that but i definitely can say they have enough cash to do what they want and flex their muscle. regarding about tesla, i really can't comment on that other to say if apple wanted to do something, they could, but apple is focus odd making money, and they make a lot of money with the iphone product, and as apple pay ramps, that they'll be making money on that. they want to increase their available market in money-making
opportunities stock's already up 15% for the year three times the nasdaq. we'll see what happens next week. jim suva talking apple over at citi. up next west texas crude coming off the best weekly gain since february 2011 but with saudi output remaining near record highs, should experts be bracing for a pullback? we'll be back after this. female announcer ] who are we? we are the thinkers. the job jugglers. the up all-nighters. and the ones who turn ideas into action. we've made our passions our life's work. we strive for the moments where we can say, "i did it!" ♪ ♪ we are entrepreneurs who started it all... with a signature.
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pressure. the activity has dropped 50% since november challenges in the international market as they continue that slump. baker hughes which halliburton agreed last year to buy, rising as well. sarah, back over to you. >> helping out those energy stocks. we are seeing prices of cruelty oil at the highs of the year. brent also higher at an earlier decline, going along with the overall markets. michael cohen is the head of xhodsities research at barclays do you see a reason why oil was higher? anything from the -- taking it back up? >> there's a couple things fundamentally that's driving the market though saudi products is up implicitly that means their spare capacity cushion is less. i think that's the first thing, the market tends to get some
jitters whenever saudi arabia is producing at very high levels. the second thing going on right now is we basically had some change in perception about the speed of u.s. oil products outlook. so the u.s. oil production outlook for now, at least for april and may, some expect that production will basically flatline. we think that it's still too early to believe we'll see that flatlining. rig count has come down but we have this large amount of waiting on complete of wells drilled, but uncompleted wells that can come on if prices do raise up to a certain level. >> sounds like you're focused on u.s. supply. there's also a tweet right now from ha sass rouhani, talking about the with the oil minister of venz wail ah the quote is to achieve fair prices, no choice but to reduce supply. we're all focus on saudi arabia and the u.s. what is else is
going on in other major producers around the world? >> i think the likelihood is we could see additional amount of slippage, maybe 2 to 300,000 barrels a day, as we get closer and closer to a deal. the likelihood that a deal will emerge by the end of june is becoming more and more likely but we still need to see compliance with that deal in order for increment at experts to make their way onto the market. that's a big thing hanging over the market. we have extra opec supply that can come from iraq iran libya production has been extremely variable and is of light quality, so that can weigh an extra amount on the overall market balance. >> we've had the back and forth about, oak, that oil might enter the supply chain, but it's going to take them forever to do it. it is and it isn't.
i think it's important to understand as we move throughout the second quarter, which is the weakest time of the year for the overall market balance if the perception is we'll get another 2 to 300,000 barrel a day from iran that will bea on the overall market balances. right now opec's strategy is working. they're regaining that market share they lost over 2014 when non-opec suppliers raised their output when surprises were extremely high. >> let's talk about levels here and how you forecast it. i know the estimates are all over the map. at 8% gain last week and the highest level of the year what are the next price targets that you are watching? >> from a technical perspective, we -- we kind of went through the main resistance level over the last week so now many market participants are looking for whatever that next technical targets is. from our perspective the
fundamentals do win out, and we see the second quarter as the weakest overall for the market. we'll have to definitely mark to market the recent rally, but it definitely doesn't change our fundamental view that we sue downside risk. >> you're not buying this idea that production has peaked in the u.s. and will decline in the latter half of the year? i know there's not a direct translation necessarily, but explain what you see for u.s. production in the second half? >> for the second half of the year, we'll definitely see that year on year production growth start to compression to a level of only about 2 to 300,000 barrels a day for the entire year. we definitely see an impact with rigs coming off. that means there's less drilling activity and it also means that there will be less production by the end of the year. i just not going to be an immediate impact in the second quarter. >> know you were saying we would see the 30s.
do you still think that? >> i think there's definitely downside risk from here. that's a level we can't exclude from the equation but i think the strength we have seen so far is something we have to acknowledge when we put together our price forecast for the next couple months. >> all right. we'll see what happens. sticking to the bearish view on oil, thanks for joining us michael cohen market is in really mode so we'll get more on today's big move, after the break. ♪ ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ ♪ she can print amazing things right from her computer. [ whirring
good morning, everyone. sigh sue herera. here's your c nshs news update at this hour. the bodies of 24 victims of what could be the deadly i lily lily italy says as many as 900 people could have ground in that disaster european minister gale are gathered in luxembourg to discuss their response to the migrant emergency. new pictures of noirkian leaders kim jong-un show him at the top of is the country's tallest -- he attended a
oath-taking ceremony a life-like robot will be used to greet customers and give them directions. it's dressed in traditional japanese clothing. toshiba developed the technology and the android was produced at osaka university. pretty darn cool. that's your update this hour. back to you guys. markets are in broad rally mode this morning. the dow is up almost making up for the 28 on-point loss we saw on friday. joining us ben willis with princeton securities. on friday china was at the top of the list of worries, now it's at the top of list of what's helping this market rally. they continue to be in growth at the 8% gdp.
as he started to pull off, they put in downward pressure on the rest of the world to have to compete like the united states is doing now, but the fact of the matter is i think friday as you mentioned was an impact of raising margin requirements and today is another step in their weaponry on trying to manage to keep their gdp above 7%. it loose like investors are -- >> and halliburton is a great indication. they've been crushed by the whole oil complex, yet is it made comments after the exception appear earnings that things still look pretty miserable.
if you had been following that past. >> now that the death has settled on friday what with very learned about that? we're at the highs, climbing toward the record highs again now, clearly the volume activity has ebbed away again. what did friday teach us? >> volatility cuts both ways we're do you 370 points approximately. we bounced off that coming in. part of friday's explanation also has to go to the fact there was an expiration. you also have pinning to the stocks -- the strike prices within the option complex, so that adds to the volatility. today it's a parabolic move to the up side on it but we've run up and now in a basic trading range. >> is friday an aberration or an indicator of underlying stress? >> i think it's an indication of what can ha happen if you can surprise the market. i love volatility quite frankly as a trader.
it's not necessarily comfortable for a long-term investor. that's why you need to keep your windshield clean with where you said to invest but for a trader, we love that. it gives a second or third or fourth guess. >> we've been in this neighborhood before, ben, low 2100s, any reason to think we're in that range boujd again? >> no no reason. i think we need to see a better indication from the american consumer that seems to be sleeping right now. and i think hasbuilt ro may be an indication but you also want to see the restaurant stocks some of the other stocks. i think health care has been one of the benefactors. with the money that they're making, or have traded up on cars and are spenting an extra $30, $50 a month. >> are you going to be looking at guidance? looking at comments from ceos?
we're about to get a whole lot of earnings especially on the and they. >> 25% of the s&p 500 will report this week. so it will be -- i think it will be stock specific, but the fact of the matter is the numbers we continue to see on the large scale have been positive. even again, halliburton is a surprise, because the indications of what they gave looking forward were not very positive yet the stock rallied. yes, i would look to see comments for what they expect going forward, but the fact of the matter is this quarter had a very low bar to jump over. >> what's interesting is the ten-year note yield is actually higher 187. your stock is high. how do you factor in what's happening with the dollar stronger today, and treasury yields? >> the dollar will get stronger as the yields increase. again that to me is the big make roe economic picture for trading. we're in the middle of a
currency war, whether people like to call it that or not. the united states unfortunately is not trying to temper its rise. we know the interest rates are going to go higher. it will create new leadership. is the chinese are continuing to try to manipulate their currency. i think in your pictures as you create your portfolio, you need to understand there's a strong dollar. >> ben willis thank you for jumping on post 9 set with us from the floor of the dow. greece continuing to be part of the eacquisition. michelle caruso-cabrera has breaking news. >> just an indication of how desperate they are, the government decreeing that all local governments and any kind of government arm that has some cash available must transfer it to the central bank. this is just telling you that they are slowly but surely running out of cash. every single day the government is spending more than tax revenues. they have some payments coming up specifically may 12th to the
imf about 700 million euros. if they don't have enough cash they're going to have to start making choices. do they tart so pair their government employees or the umf? do they start printing iou? the greek yields have been rising sharply. what we've got waiting ton is if there's a contagion effect. do we see their rates rise relative to 9 -- if they start to get wide that would be the first sign of contagion. so far it hasn't very much. the markets are saying they're not concerned concerned about a contagion. of course on the greek side they keep arguing, carl if greece leaves you'll see this ripple effects across europe. so as far as we're not seeing it in the credit markets so far.
>> thank you, mish. today is april 20th or 4/20 also know as national weed day. jane wells is live in l.a. looking at how native-american tribes are hoping to take advantage of is the money-making machine. >> casinos have head some tribes, but not all. so to diversify in have gathered to consider using reservation land for the fastest-growing legal crop in the u.s. now leaders from some of the 566 sovereign tribal nations within the united states met in las vegas last month at a summit put on by the national center for american indians enterprise development. the hottest topic, the justice department may allow tribes located insigh states where pot is legal to grow marijuana if they follow certain rules, talk to their local u.s. attorneys. this could be big for those two far off the beaten path for
casinos, and many are being approached by investors. >> they're telling us we can't possibly create $3 million a year for our tribe alone, as economic development. is this adding drugs, adding thc, marijuana to this current issue of alcohol? are we really helping or community or hindering our community? >> we have to look at the opportunity, but it's not as simple as let's sell marijuana or get into that marijuana sector. and do we want to? >> one investor is exploring the possibility of creating a bank on tribal lands, where the lack of banking is a big issue. even if the feds were to allow it states may not, even where pot was legal, because it would bring more supply on line. so lots of talk simon. we're a ways away from some action action. >> a controversy.
thank you, jane. good morning. >> good morning a live exclusive interview with the ceo of royal caribbean, stock i think is the worst loser after the exude lowered the outlook. "squawk on the street" will be right back. it took tennis legend serena williams, fencing champion tim morehouse and the rockettes years to master their craft. but only moments to master paying bills at chase.com. depositing checks at the atm and transferring funds on the mobile app. technology designed for you. so you can easily master the way you bank.
one incredible chart shows why oil can go higher. catch that on tradingnation.cnbc.com, and then more "squawk on the street" after this. so open an account with schwab. and when a market move affects, say a cloud computing stock you're holding, we can help you decide what to do. with tools that help you see how market activity is affecting your positions. so when the time comes to decide whether to scale in or scale out... you can make your move wherever you are. and start working on your next big idea. ♪ ♪
the street." take a look at luxury goods retailer michael kors. downgraded from neutral to the previous rating of buy, the firm says results from the survey doesn't necessarily bode well. simon, back over to you. >> the real life house from the disney pixar movie "up" is going up for auction. this is interesting, diana. >> this is very interesting. it's not the exact house. that's just the lore that disney might have thought about this house that did it but this is the classic story of david and goliath. you throw in a little disney magic, because all the tourists who walk by see the reassembling of the story that goes behind the movie "up." today the time is up to bid on this home and finally determine its future but you have to
start this story with once upon a time. there was edith maysfield. she grew up in this 100-year-old home and refused to sell it not even it's said for $a million dollars. after he died in 2008 at 86 she willed it to a construction worker she got to know as the mall was built. she sold it to an investor but the investor defaulted on the loan. the house is being sold by the lender to a closed-bid auction. the area isn't even zoed for residential. so the value is really anyone's guess. >> i wouldn't be surprised if it sold for a quarter million or less. i wouldn't be surprised if it sold for over a million. there's no comparables. there's nothing i can look at that's anything like this to even give myself a wide range. i don't have a clue. >> there are balloons that
people have brought by sending messages, about adventure, or putting the house where it might be happier. we'll find out if there is a winner for this auction. it will likely end up being part of the mall or turned into office speights a little restaurant. it could even be a pot shop given where we are. but today is the today to find out what happens to edith maysfield's last stand. >> this has resonated with so many people. don't you think somebody will try to buy it and keep the house? it sort of stands there as the individual against corporate and all its development. it's come to mean so much more for the community, i think. >> reporter: it has come to mean so much more. hundreds of thousands of hit on the real estate broker's website. but you have to talk about value. seeltsds is one of the tight zest housing markets in the nation, and the house really has
no value as it is. if it were turned into something else,' as part of edith's last stand, there's nothing inside it's boarded up and just kind of sits threat in the middle. >> thanks so much diana. joining us from seattle. when we come back an exclude interview with rich ash fain. dow is up 229. don't go away. doug. you've been staring at that for awhile, huh? listen, td ameritrade has former floor traders to help walk you through that complex trade. so you'll be confident enough to do what you want. i'll pull up their number. blammo. let's get those guys on the horn. oooo looks like it is time to upgrade your phone, douglass. for all the confidence you need. td ameritrade. you got this. man: you run a business. could be any kind of business. and every day you've got important decisions to make, like hiring.
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a solid earnings beat for royal caribbean this morning, but you can see the shares are getting hit after the cruising giant lowered the full-year outlook. talking exclusively now to cnbc on the news did not line the chairman and ceo richard fain who is in fact in the uk for the naming of the third largest cruiseship in the world "anthem of the seas." welcome back. what's going on? why are you lowering your outlook? >> thanks simon. i am calling from the "anthem of the seas" a very good day for us obviously disappointed at the market reaction. we did lower the outpit mainly because of the foreign exchange in fuel which i think most people knew was coming.
we lowered or yield guidance by just a quarter of a percent, so i think from our perspective, we are on track, hatting towards or double-double, and this is just part part of the normal progression. >> just to change the subject slightly, richard, knowing a little bit about you and how you run the business, i felt for you last week when we had the headlines about 200 sick passengers partly because of course as we know you are one of the very few industries that has to report these things publicly, football games don't do it leisure reports don't do it you have to. as an innovator, can't you simply invent something to get people to wash their hands more often so you don't have to suffer these sorts of headlines? >> simon, yes, i wish i could invent something. i think the good news is what we really need to invent is a better way to explain to people how much cleaner it is on board and how much safer they are. i did see one report that said
your chances of getting norovirus on land are 1 in 15 and getting it on board a cruise ship is 1 in 15,000. i wish we could invent a way to explain that but overall, our guests are safe and healthy. and that's why we actually continued to do well. i think most of the public understands that which is why we don't think that's really hurt us so much. >> you are, for you guys obviously, it's all about the pricing of the cruises, you basically got a fixed supply you know it's how much can you charge to get the people on board? what are you seeing as you look out over the next 18 months and was that a reaction in realtime to the headlines last week? >> no. i think we really did not see a reaction to the headlines. i think there is an understanding by most people that that that those were anomalies and that the bulk.
overall, looking out further, we're really seeing good news from most of our markets. the currency has hurt us. that's been significant. but the markets shows the demands in the u.s. and in the caribbean, in europe and in china, across the board, quite healthy numbers. and so i think we're, if anything, more bullish than ever. and that's going to enable us we have this program called the double double -- >> sure. >> to get out by 206. >> richard, we've seen airlines say they're going to reduce capacity on some of the routes that have been affected by the dollar, do you think you'll follow suit? >> we're not. we really see the demand is still there. the currency hurts us but there are ways that we can offset that over time. and so no we don't see the strength of the dollar as causing us to shift our itineraries. >> richard, just briefly if you
would, talk to us about the "anthem of the seas" you had the conference call on board the ship, are you going to send it to china? it seems all the best new ships that you're come up with you send to china. and it's to the point that carl is making. >> well simon, you're right, it is a marvelous ship. but we're, she's not going to china. she's going to operate right here in the u.k. for the next six months then she's going to be operating out of new york. we are sending two of her sister ships to china because that market continues to explode. and we want to maintain our position as the preeminent cruise line but "anthem of the seas" is there for all of your buddies in new york. i look forward to welcoming them on board. >> full credit for doing the interview on a day that you know your stock is under pressure because you know you're downgrading the estimates. good to talk to you richard
fain. let's get to the cme group, let's get the exchange for many monday, hey rick. >> good morning carl first guest of the week mr. harris. we were talking, if it was just about the balance sheet issues the greek exit wouldn't be nearly as confusing as it is. but in your opinion, the real difference has to do with russia potentially and foreign policy. >> it's politics. you saw it out of washington. president obama and secretary of treasury jack lou were pretty, you know, firm in telling them be careful with this the world economic situation is so fragile, as is the geopolitical situation, that you don't know the outcomes of this and we're not ready at this point in time. the world is not solid enough to take on these known unknowns. >> and the more i read about this, it seems as though the general press and bloggers are gravitating still to the threat of being the financial side world systemic risk.
you see it more like the reason ukraine was so important to putin is because there was a new love affair potentially with the euro zone. what happens if greece gets kicked out? who's going to be the one suitor to take it to a new debutante ball? >> no doubt. the southern fike of nato does this. especially because the russians have taken crimea back. it's the direct link now look at where the greek bases are and what they protect and defend. >> let's play some more chess. i like world chess. okay we had a g-20 that dove tailing into an imf meeting several days this weekend. we see what china did. you think the two potentially could have a common threat explain. >> always have a common threat. the kline such great world watchers. and it's interesting that over the weekend, they came out with lowering their reserve requirements, it was a shot at west saying hey, we have tools in our tool box, if we want to
depreciate the yuan. let me stop you here. while we're talking, i want to show you the yuan. tell me what viewers are looking at and finish this thought. >> well this is critical because as you the yuan appreciates against -- >> because it's linked with the dollar. >> when the dollar appreciates, so does the yuan. they're keeping it very closely pegged. if you look at a yen yuan chart, euro yuan different story. >> the yuan has been appreciating, you're starting to see a breakdown because i think when you get to the g-20 meetings. there is a lot of noise being made about how the yuan has bourn a lot of brunt. and what in the ft last week there was an interview with premier lee when which he said didn't call it qe he said quite
easy policy. you have to watch it. >> don't cop the chinese out, once again protecting the chinese market sarah, back to you. >> rick thank you very much. let's go to newlywed kayla tausche with what's coming up next on "squawk alley." >> thank you, we have a big hour coming up. with the marketed rally mode we are about to embark on a huge week for tech earnings. find out what could move as we get some of those numbers. and what derailed a potential google acquisition of tesla? a new book has those details and we will have them for you on our show. and new uber competitor saying no to surge pricing, that's all up next, stay tuned. the e-class has 11 intelligent driver-assist systems. it recognizes pedestrians and
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