Transcripts For CNBC Squawk Box 20171205

Points s p turned negative. Down by lows to 3 points the nasdaq down by 72 points this morning a mixed bag again dow futures indicated up by 43 points s p down by 3 points the nasdaq down by 27. Overnight in asia, the nikkei ended down by 0. 3 the hang seng down by 1 shanghai down by 0. 20 in european trading, ret arroir across the board, though the ftse is at the flat line lets check out currencies yesterday cruel oil prices were down 1. 5 . This morning the dollar is up against the euro at 1. 1862 dollar yen at 112. 45 Republican Leaders in the house and senate are racing to merge the tax plans and send the bill to President Trump before the end of the year. A Conference Committee plans to reconcile the two pieces of legislation starting this week among the differences the house has four individual rates, the senate seven the house cuts the corporate rate to 20 right away the senate waits until 2019. The senate repeals the individual mandate while the house doesnt. Another point of possible contention, the house bill would repeal the corporate amt, alternative minu alternative minimum tax. The senate bill retains the amt. This morning well talk to kevin brady. He will join us at 8 10 eastern. Dont go anywhere at 8 10. Or between now and then either if you do need to go somewhere when is andrew no. Hes coming up lots from him, too in other washington news, House Republicans introducing a stop gap spending bill the temporary measure would fund the government until december 22nd Mitch Mcconnell says it will be passed by the end of this week in the senate. Democratic leaders nancy pelosi and Chuck Schumer accepted an invitation to meet with President Trump later this week to begin talks on a longer term spending bill. We all thought the same thing with this. In corporate news, britains cineworld has agreed to buy u. S. Movie theater operator Regal Entertainment for 3 3. 6 billion the deal values regal at 23 a share or 12 premium to the Closing Price as of monday cineworld is the uks largest cinema operator. Last month cineworld approached regal for the potential deal we had cinnabon last week. They sent some stuff over. Still floating around. When you realize i told you, its like celery. No. Its not its the opposite of celery cinnamon is good for you. Cinnamon cuts fat but the bun does not. It destroys fat cells in my mind now, cinnabons, you are a net loser of calories. Theres cinnamon with the cinnabons. On earth, its one of the great things its the smell. They know that. Its almost like an aphrodisiac. At least for me. Okay. On that awkward note andrew is in shanghai. He has a big lineup of special guests here he is with a look at whats coming up. We are at the starbucks shanghai this is the largest starbucks roast ery in the world theyre opening today. We have a big show from here lots of different interviews, lets start with a tour that how wart shultz just took me on of this very starbucks. Welcome to a coffee wonderland thank you the likes of which you have never seen in your life. Twice the size of the original Seattle Roastery i would say everything weve done at starbucks for the last 46 years has led us to this moment took us 18 years to get to 10,000 stores in the u. S i think in half that time well have 10,000 stores in china we want to create intimacy and experiences for customers like they never had they are sitting at the bar. We have wonderful people not only experts in coffee but experts in theatrically democrat traiting what we tem stra demonstrating what were doing we have the tea bar. The values of what weve been able to do culturally in the u. S. Weve replicated. Every starbucks partner, three employee in china is an owner. Everyone has Incremental Healthcare beyond the above that we provide we provide healthcare to the parents, Housing Allowance all the things weve done as a pane to enhance the life of our people what we tried to do in addition to the design and everything were doing with coffee and food is most importantly be respectful and dignify the chinese culture. It is pretty incredible to see what is going on here. Through jo throughout the show well bring you a number of big interviews great, sounds great, andrew in todays wall street agenda, the october trade deficit is out at 8 30 a. M. Eastern followed by the ism auto zone and hg supply report before the opening bell. Dave busters is out after the close. Lets get back to the markets. Joining us is noah blackstein, Portfolio Manager at dynamic funds, and chris burtelson, and our guest host, ed keon. Gentlemen, welcome to all of you. Noah, lets talk about what happened yesterday looked like a big day for the markets. Ended up with a bit of a reversal the dow ended in positive territory, but not the s p or the nasdaq is that a concern . I think what you have seen from the second to last week of november, last week and the beginning of this week is a massive rotation out of the yeartodate winners and into companies that have been losers or heavily shorted or into stocks that people believe will benefit from tax reform. Theres also a shift towards value. Even though the yield curve is flattening, the banks are doing well youre saying its not a concern, just a shift in leadership it hurts for sure, especially if you own Technology Companies. Whats changed its not like youre getting a wave of negative announcements the opposite its not like gdp growth isnt strong the fed now is 3. 9 for the Fourth Quarter everything is strong secular trends are there youre witnessing a rebalancing between hedge funds now. If you missed these for a long period of time, theres good names down 10 , 12 15 off the highs. In that vain, chris, you think this is a great opportunity for infrastructure stocks in particular why is that . Absolutely. If you look at it, along with what noah had to say everything with a tax rate thats 30 plus was up yesterday just about industrials yes industri industrials. Retail tech, biotech, anything that is really 20 or less was down. And i think its a real great time for infrastructure. There are industrials. There tend to be a lot of them, mid cap type names thats what really is prejudiced in the new packs bill. I think it was a tax shift, if youll have. Quan quantitative, yes, but a tax shift. Were still wrapping our heads around what the combined tax bill will look like. But not too many differences between the house and Senate Looks Like it will be good for earnings which is the bottom line earnings in 2017 were remarkably good and stable. Usually you start the year out at 10 , 12 , growth expected, then it goes down about 5 by the end of the year. This year we started 10 , 12 , we will end up there thats unusual and a positive surprise for the markets as we go into next year, were looking at 10 , 12 Earnings Growth here, first of all, the economic fundamentals remain strong we could have the same effect as last year. Also we will get this tailwind of 5 , 10 from the tax cut. So, it looks like once again well have a double digit Earnings Growth year and though we might have rotation, we might have correction from time to time with the tailwind of double digit Earnings Growth, its likely to be another good year for the stock market mike santoli was here yesterday, he made the point that december has never been the worst month of the year. The worst month of the year so far has been a flat month. Is that a reason to look at this and think, okay, dont be waiting for the pullback if youre waiting to put money in you had the pullback in certain sectors. The yeartodate leaders pulled back dramatically over the last week and a half. Theres no evidence that this economy is slowing down or that earnings are terrible. Its not like were going into a recession. The Earnings Growth is there you have the tax cuts plus the Regulatory Framework which is Getting Better the tax cuts look like theyre on track i wouldnt bet against it. What happens if it doesnt get passed what would then play out i think we would see a correction 10 you know, maybe 5 , 10 we havent had a pullback in such a long time if you have a piece of genuinely disappointing news, which is a failure of the tax cut would qualify, that would be a good excuse for genuine correction. Just looking at noah because how is your guy how is trudeau doing up there . He lives in i do. He got emotional last week about something. He did. What was it we saw him cry im not here for healthcare thats what i asked you did he see a specialist . Im here for cinnabon you can come back in nine months or see your specialist up in you know, a lot of liberals would love trudeau. They look north. Ed, not for nothing. How much would you like trudeau to be why are you laughing . We can only have one president at a time. Unto nanortunfortunately for. Youre like a yankee in King Arthurs Court up there. A little bit. You have a great oil and gas industry i think with the opec cuts, its obviously i think this umbrella opec is putting up is bringing back the shale plays. Which should in turn bring Oil Prices Back down isnt there a ceiling where oil prices can do . You would think i think by taking oil prices higher, a lot of the shale plays which were producing to meet cash flow needs and pay bonds, now have more running room that sector pays high wages. Do either of you think that the you know, that the tax bill will not result in 3 or 4 growth and the market is this is like being fooled by all the happy talk about whats going to happen ed, i cant believe you believe that oil these private sector things are going to work its very hard to get 3 , 4 growth over a long period of time you believe that . Quite possibly it could happen in a short period of time i think we have 3 growth now. Already Corporate Taxes are close to 300 billion a year the regulatory costs in the United States are 1. 9 trillion dont underestimate the freeze the first thing that trump did through the executive order about checking the cost benefit analysis, thats a tax cut in and of itself. Thats spurred ceo growth. You have tax cuts and then regulatory reform. Theres 23,000 regulations in the previous eight years getting thrown on to businesses, as that rolls back, it embeaus ceo confidence we had the two healthcare ceos, one paid 42 , and the other 37e . The rest goes to hiring people and expanding businesses. People, i think, expect ceos to say, yeah, when i get money, i will hire people and thats not necessarily ceos will do it when demand picks up from the more disposable income in the private sector they expect it to happen in a vacuum but you hope its sort of like a circle that happens. I hope we do get a big surge. Chris, are you still there . Yes, i am i would say that though its down the road a bit, the real threat is the cross over if you get tenyear higher than 3 with Economic Growth, the fed starting to raise a bit. They start concentrating on the you think thats a bad thing if we see tenyear above 3 . Absolutely. I dont know why Central Banks are looking to these inflation numbers. Start looking at real growth and crisis level lows in Interest Rates, you will see it bump up that would be a good thing, wouldnt it . If the economy is firing on all cylinders, we see the tenyear above 3 , maybe we would be getting back towards normalization . That would be a good thing, right . Yes, but that would create a draw down in the market. As soon as you have the 5yearold the the 55yearold to 90yearold set saying i prefer bonds, will you see some withdrawal from stocks you think the stock market is being artificially inflated by abnormally low Interest Rates, and its not just the economy and all these other things that are kind of pumping things up . I certainly think that thats still the case we have crisis level lows. Look at Interest Rates they need to get north of 3 guys . What do you think . I think that if rates rise because growth is strong, thats good for the stock market. Good for the economy if Interest Rates are higher, thats a normal natural thing. Yes, some people might reallocate, but i think in general theyll be enough buyers for thats what we were hoping for all along. You could hand off the baton if we can get double digit Earnings Growth, 3 , 4 gdp growth, theres another good chance for the stock market. Not at buying amazon at 238 times earnings they will draw down some great companies, yes, but at these levels not so the reflection is to those benefiting from the tax breaks chris, you want to talk about a couple picks you mentioned infrastructure stocks i know you have a couple in mind specifically what are they . I think if you look at flor corp, for a long time its ban poor performer, down for the year now all of a sudden you will see the fact that theyll start to get large contracts. Theyre only a 6 6. 5 billion company, but they can have a huge book. Looking at maztech, everything that is communication oriented, as soon as you see growth coming from infrastructure plans, you will see those companies go forward. They are what i consider political neutral. Doesnt matter which side of the aisle, as long as a rep is in the district and gets spending chris, thank you for joining us noah, good to see you. Whats your Corporate Tax rate in canada same as new york residents. No Corporate Tax 20 . And youre giving him grief why was i giving you grief . Because you enjoy that. I do. All right. Thank you. Ed will be with us for the rest of the hour. Coming up, well talk about Growth Opportunities in china. Joshua ramo will join us, andrew and us in shanghai at 7 00, andrew will talk to jack ma. Squawk box will be right back. It can detect a threat using ai, and respond 60 times faster. It lets you know where your data lives, down to the very server. It keeps your insights from prying eyes, so theyre used by no one else but you. It. Is. The cloud. The ibm cloud. The cloud thats designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. We thats why at xfinityic. Weve been working hard to simplify your experiences with us. Now with instant text and email updates youll always be up to date. You can easily add premium channels so you dont miss your favorite show. And with just a single word, find all the answers youre looking for. Because getting what you need should be simple, fast, and easy. Download the xfinity my account app or go online today. Welcome back to squawk box. Lets head back out to andrew in shanghai with a special guest. Andrew joshua, thanks for being here. Pleasure. I always think of you as my china hand all right help us understand right now whats the most misunderstood thing about the country and the economy here when youre sitting in the United States, theres an admirable and justifiable focus on the Macro Economic conditions here, which are extremely troubling in some regards, certainly by western standards different than anything than any of us would feel comfortable waking up with having said that, the remarkable thing about life on the ground here is the dynamism of the consumer economy, which you cant miss the premise at the moment is if the great trick to chinese growth over the first 30 years of reform was connecting the Global Markets and low cost labor, whats happening next is the explosion in the domestic market you see that all around. You see that in places like this, the ability to open Something Like this in downtown shanghai expresses that. Youre on the board of starbucks, and this is working when i say this, starbucks for the first couple of years it was a tough run. Why is this working . Why is this working relative to the fact that so many other american countries have try dodd business in china and not had that same success . Its a great question how bad was it when i moved to beijing in 2002, i would at night take a taxicab back between the two starbucks it was undrinkable to go from that to this, its growing rapidly, you have to ask what went right. One thing that went right, starbucks figured out where the sweet spot in the market was they provided a unique experience that you couldnt get anywhere else. People thought this was a tea brinking nation. How do you get people to drink coffee, that was a huge advantage. And a desire to have this consumer experience. They didnt do it with a partner. Meaning, this was done relatively on their own. Thats right. They had a partner in east china, but made a decision what they would do is try to learn themselves this is a fundamental question for a lot of western companies will you go through the early years where things are uncomfortable, youre breaking stuff, its not working out, but youre learning how to use the new muscles in the market. If youre in the business of making steal, selling iron, probably there are different structures you need to go to market what do you thinkibili ibila u. S. china relationship . North korea continues its overhang in terms of the conversation yeah. The challenge in the relationship which has not changed in the 15 years since i moved to china is how can you find a way to get both sides on the same side of the table, whether thats north korea, which is a joint threat or Economic Issues which has the possibility for joint benefits, thats where youre trying to go xi jinping had this idea, new kind of great power relations, thats what the chinese wanted from this last visit, was to cement a new way that big powers coWork Together. T could Work Together the question is economically and politically, and that debate is still going on in washington here, theres a desire to find a way to cooperate all right thats andrew in shanghai. He did some of these interviews. We dont do like a thanksgiving show, and then yeah great dinner. I toss to him, but its like, andrew, lets toss to you. Yeah. The Supreme Court handing President Trump a victory. The court says that the president s travel ban can go into effect while challenges continue to be heard in the lower federal courts Ruth Bader Ginsburg and Sonia Sotomayor noted their objections President Trump said yesterday that he wants senator orrin hatch of utah to run for reelection next year. Hatch is 83, and theres speculation that he will retire. That would put the president on a collision course with mitt romney who has been preparing to run for hatchs seat when asked whether his support of hatch was meant to send romney a message, he said mitt is a good man. When we come back, the senate will be voting on a bill to slash regulations for regional banks. And later, congressman kevin brady will join us he was named chairman of the committee to reconcile the tax reform bill that came out of the house and the senate a lot of questions for him before we go to break a look at the s p 500 winners and losers its all yours. Wow record time. 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With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning u. S. Equity futures at this hour, kind of a mini session from yesterday you still have the dow with some positive pressure. Positive momentum. The s p and the nasdaq both trading lower. Youre seeing some a bit bifurcated or trifurcated. Not firing on all cylinders. We know how well the nasdaq and Technology Stocks have performed. Lately its been led by some big names. Watching shares of sanofi as well the World Health Organization says it wants to review safety data on the dengue vaccine this month. The french drugmaker said the Immunization Program could worsen the disease in some cases. Especially in people who had not previously been exposed to the virus. Sanofi expected the vaccine to bring in nearly a billion dollars a year in sales, but those forecasts look ambitious after this program was halted in the fill peep philippines and rd in brazil. Discovery communications will become majority owner of own, the Oprah Winfrey network decemb oprah will remain ceo with an exclusivity commitment through 2025 and her production company, harp po harpo ink wic will remain a miny investor amazon officially launched in australia first orders were taken today. Retail stocks rose in australian trading as many analysts took noted of uncompetitive prices for amazon across their platform the Senate Banking committee in the United States will mark up a bill that willease financial regulations on companies. Kayla tausche has the details. The Senate Banking committee will take on that markup after voting on jay powell this morning. Then they will Start Talking about what changes they would potentially make to the bill that would ease bank regulations. Its a bipartisan package. It has a ton of cosponsors from each side but already won key support from four moderate democrats, mostly from red states and up for reelection next year. The most significant change coming from the legislation would be felt by banks with between 50 billion and 5 50 billion in assets. They would be newly exempt from onerous regulations in doddfrank you have groups bike bb t, sun trust, citizens and fifth third. Those with more than 2 250 billion like pnc, they would still have to comply the bill is not expected to become law for several more months in the meantime congress has to work to keep the lights on the house will vote wednesday on a bill that would maintain Government Spending levels for two weeks and reauthorize xir s Childrens Health insurance. The deal put forth by the house over the weekend would expire on december 22nd, thee days before christmas and could create a Pressure Cooker for democrats who want protection for dreamers and for fiscal conservatives who worry a yearend fix will be stuffed with extra spending. Democrats will meet at the white house on thursday. Republican leaders will meet with the president today the president has taken mixed views on whether a shutdown would be good for him politically. Aides say he wants a workable solution from congress kayla, thank you very much. Kayla tausche. Back to our guest host, ed keon, Portfolio Manager at qma these daily divergencies between different averages, today the dow is strong, nasdaq weak a couple times the nasdaq, if it was in a vacuum t would look like a rout. The nasdaq up, dow down. Rotation is healthy for the stock market so this is not unhealthy. Its not a seen of cracks. Weve become accustomed to a level of volatilitvolatility, aa small change like this intraday swing seems like a big move, but its just a tiny fraction down in, some stocks up 30 , 40 , 50 have pulled back thats a normal, natural part of market history i still think were in a bull market im nervous about it because evaluations are high as long as earnings are strong next year, we have a while to go in a world where the market is sort of recalibrating what our Corporate Taxes will be here and what that looks like for how well we do, corporations, and in a world thats now looking or a market looking at europe and saying, wow, not only are they not not they dont theyre at 2 at least, not at zero, not negative, theyre growing. Where does the market say this is where we should be with the new perceptions. Are we almost there yet . We might be it is okay to pull back. When the president signs this tax bill, isnt that a time where you might think it could be, but this might continue for a while it will take a while for analysts to adjust earnings forecasts for the year why does the market care what analysts are doing analysts forecasts have been a good projector of stock prices for years. I worked at ibes before i came thats because youre an analyst, you think youre important. The market knows long before you guys know. In the practical experience qma has had working with these forecast for years, in Academic Research we used to do, these forecasts have been a pretty good indicator of future stock prices at the individual level and mac colevel. So macro level so you will see positive news come out in the forecasts. The market is trying to guess at it now thats why you see some companies probably not bog to benefit that much, doing worse than those that will likely benefit it will take a while to figure this out. As long as you get the strong level of earnings that we had in 2017, that i think will happen again next year, the tailwinds of the economy, i think tail n wiwi wins tailwinds of stronger investment activity, and the growth that we want on a sustained basis. What finally, you know, puts the roof on this in the past its always been Interest Rates, something thats overheated but were starting from such low levels is that why its seeming like its taken much longer we had our little technique we use, rsvp what calls bear markets . Recessions, shocks, valuations and policy mistakes. Valuations can cause it not by itself, but it sets the stage. Say that again . Rerecessions, shocks, evaluations and policy mistakes. So right now the question is are we going into recession any time soon i think the answer is no well get fiscal stimulus. So that might be a worry for 2019 or 2020, not for this coming year. Policy mistakes, i think we have a higher probability at some point there will be one, because were coming off an unprecedented situation. Again, i dont think thats something we need to worry about for 2018 again, were worried about valuations but i think theres enough positive fundamentals both in terms of Economic Growth and Earnings Growth to carry us to another decent year next year. All right ed is our guest host for the hour he will be staying us with when we come back a busy morning of news. At 7 30, well talk to former aetna chairman ron williams. And coming up at 8 10, congressman kevin brady will join us. And senator Charles Grassley is weighing in on the tax bill and the vote to cut regulations for some banks stay tuned, you are watching squawk box on cnbc and highdividend strategies. Sure, these are investments. But theyre not what people really invest in. What people really invest in, is what they hope to get out of life. But helping them get there takes a pure focus. 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The dow futures are indicated up by 66 points this comes after an update for the dow even with the markets closing at the lowest levels of the day. S p futures and the nasdaq both indicated lower after they both closed lower yesterday s p futures down, but fractionally the nasdaq is down 24. 5 points looking at the bond market right now the tenyear is yielding 2. 378 . Lets get back out to andrew, i think, in shanghai with a special guest testing, one, two, three youre there hi, joseph. Youre there. Hi, joseph. We are live in shanghai this morning. We got some big interviews coming up. You will be seeing jack ma and Howard Schultz in a bit. One thing we wanted to do while were here is introduce you to some of the hottest companies in china that people dont know about. One of those people is lee so xou, he runs itu its a remarkable company. An ai company. Facial Recognition Company yes for those who dont understand what you do, tell our audience when i talk to people on the people on the ground, i say what is the hottest company around. Yours is what theyre talking about what does it do . We are doing ai technique, facial recognition but the official Recognition Technology that youre doing being used in large part by governments, Chinese Government uses it. I read to actually catch people jaywalking for example facial recognition may be used for police, for banks, may be used in iphone and so on. Everywhere this technology that you have, the biggest use case, is it surveillance and security issue, a consumer issue . How do you think about the technology i think both. For example, its a Security Industry for example, you can improve fingerprints. You use your face, you can use it to open the door, open your phone everything so how many part of this is about big data. Yeah. How many faces do you have in your database . We use like 100 million, this kind of level of faces to do training, to train how hard is it to differentiate between faces . When apple came out with the iphone x, it said it was pretty good, but if you were a twin or some others, it couldnt tell the difference thats true its too challenging for this kind of case can yours in some cases its okay because our algorithm performs like you can distinguish the machine can distinguish your face from 1 billion people right what is the Privacy Concern for consumers . How should we feel about the fact that all of these faces, our images are being plugged into these databases oh, its not you can use faces online, you can collect whatever face, then you can feed it into the algorithm. Is the Business Model ultimately one that can be commercialized beyond government how do you see the revenue stream for your company . You can apply this kind of technique for atm. You dont need to bring your card to withdraw cash. You wont even have an atm card yes i will walk up to the machine, it will take a picture of me and give me money. Yes well walk into a store and there will be no money, and ill walk out yeah. How often are you wrong is it possible that i could end the machine could end up the atm machine could give me money and im not the right person it is compared to traditional methods like a card, bank card and so on. How quickly is the processor when it sees me, how quickly does it know than me less than one second. Remarkable. Yeah. Technology is here in china now. You will be selling it all over the world . Sure. Yes. We look forward to seeing your success its a remarkable thing. Thank you this is Just One Company well introduce you to a couple others that are changing the face of business well see you a lot more throughout the rest of the show. Changing the face of business facial recognition you are very well done. You all right. Well be back. Yeah mmhmm well be back to you coming up, behind the wheel. Well look at a new offering from lamborghini and its a first for the High Performance automaker. Think maybe its not an auto, theyre making something else. Before we go to break a quick check of the european markets. Theyre mixed. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. You probably guessed it yeah, luxury crossover lamb boring eveny getting into the luxury crossover race, and phil lebeau joins us now from chicago. We want to talk to you about a ferrari we drove a couple of years ago, phil, that you might remember i dont think it was a crossover, but it was like kind of a really cool Station Wagon i dont know if you remember it. Its kind of its not a crossover, but it was fast thats different than this right that is different from this. Ferrari is really going to be in focus to see whether or not it makes the full commitment to Going Forward with an suv. We talked about that in just a little bit first, let me show you the oris, which was unveiled by the lamb boring any yesterday at the companys headquarters in italy. The base price for this vehicle . 200,000 again, thats the base price nobody is going to pay just 200,000 it will be well over that once everything is all done with all the options added in it goes on sale next year. This shows you the growth in ultra luxury suvs. This is not just the price of a cayenne or macon were talking about ultra luxury rolls royce is going to be coming out with its own suv in the future, as will aston martin that is a very small but important market because the Profit Margins are so significant there, and this is where you extend these brands. As you know, porsche has had great sussex tending its brand with the macon, with the cayenne. Hasnt diluted the brant its helped grow the brand, and thats what lamborghini is hoping to do here. Theyre going to have to add Production Capacity in italy i know the purists say youre crazy, youre nuts you cant do that to Ferrari Sergio is no fool. He realizes the value of extended brand its just weird for me to try and sell it, you know, as something that we need because you think of i think of the original suv as a jeep where you go off road and you get fourwheel drive its fundamentally different than a High Performance sports car. I know that porsche was able to do it. Bring it into the perspective of lamb bori lamborghini. There is a limited number of people who want to buy a car by building this suv, it brings them into markets where you have a driver who can take somebody who is ultra wealthy around maybe in the middle east or in china or southern california, but that is primarily overseas where you have the driver. You cant do that in a regular lamborghini. That is for performance driving. I admit, the macon, for some reason i like that a lot more than the cayenne why . Can you figure it out . Its a tight Little Package the cayenne is very nice, very successful, but the macon, i think they hit the sweet spot just right with that crossover utility vehicle. All right, phil interesting. Thanks well see what ferrari what was that ferrari we drove . What would you call that do you remember . I like to see that again because, you know, technically ferrari only has cars. We drove them all together, and i had the one that kind of had you had the bigger. It was back seat it wasnt a Station Wagon. It was a ferrari, but it had a big back seat and Everything Else we had v. O maybe well pull that out for you. Becky is waiting for them to bring back the road master bring back the buick road master there is a fan of those in my house. Thats all you need you already have a minivan you need a buick minivan he wants one of the woody ones yeah, yeah the mastery its the companys largest sreto in the world stick around squawk box will be right back. Dow fights pointing to a higher open, but, again, tech appears under pressure as far as washington and what were watching there, another key stat for tax reform. Plus, lawmakers move to keep the government funded. The latest out of d. C. Just minutes away and starbucks is expanding in china andrew is in shanghai speaking to Ceo Kevin Johnson and the Warren Buffett of china. Those interviews are straight ahead as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning welcome back to squawk box here on cnbc we are live from the Nasdaq Market site in times square. Im becky quick along with joe kernan as we mentioned, andrew is in shanghai this morning. He is talking u. S. Chooirn relati china relations. Were going to be hearing from alibaba executive jack ma and many more. Andrew is in the largest star buck in the world, which just opened in shanghai with us is the ceo of Richard Bernstein advisors and a cnbc contributor. Good morning welcome. Good to be here lets check out the futures this morning we have seen more of the divergence between the dow and the nasdaq this morning. Looks like right now the dow has continued to pick up steam its up about 80 points after fair value nasdaq closed down yesterday, and, again, once this morning we see some red arrows. Its indicated to open down by close to 20 points this morning. S p futures have just turned positive theyre up by just under one point. In our headlines at this hour, ford motors going to be launching 50 new vehicles in china by 2025, including 15 electrified vehicles ford made that announce am at an event in shanghai as it looks to rev up sales growth in the market, and shift towards cleaner electric cars. Ford sales in china have been weak in recent months, and the company has tried to come up with electric and hybrid vehicles to try and comply with Strict Chinese quotas over production and sales for squauld new energy vehicles. Japan airlines is investing in a u. S. Startup called boom supersonic the company is developing a jet that could cut flight times between u. S. And asia in half with cruising speeds of more than 1,400 miles an hour that would make a trip from San Francisco to tokyo less than six hours. Mcdonalds is bringing back an old favorite the dollar menu. The fast food chain will make it part of its regular menu starting january 4th this time the items will cost 1, 2, or 3. There are a dozen items, including sausage burrito for a buck and a happy meal for 3 its a dollar meal or some its dough nominated in dollars. Might be 8, but its the dollar menu i have to laugh. If i let myself go cory has a cookout, yes. I talked about the president used to be on the menu for at mcdonalds i didnt see it no what was it . Two big macs, two fillet of fish, and a chocolate shake. Swear to god im not no way. Im not faulting him for that if i was president , i might a man after my i eat one fillet of fish and a few fries, and i feel guilty. So you, look who is here dude kaching on the cnbc contributor thing, huh yeah. Do you make youre on for two hours. Two hours does that change your fee no. No it doesnt see, about that shouldnt matter because i would think the second prize is two hours. I think this is great for you to be its great exposure thats what i mean. Why do we i dont see why we pay you anything to come on herefor you know, its a stipend, i guess just to show our appreciation we got you for two hours. Congress Committee Plans to reconcile the two pieces of legislation starting this week, and among the biggest differences, you may have heard, the house has four individual rates while the senate has seven. The house cuts the corporate rate to 20 immediately, while the senate waits until 2019. They have some immediate expense. I dont know thats something that makes it attractive, but its easier on the cost side of things. The senate repeals the individual mandate while the house doesnt, although the house tries to do it the house already said they like that. Yeah. And another point of contention, the house bill would repeal the corporate alternative minimum tax. The senate bill retained the amt to help pay for last minute deals. Thats a much bigger fight. In fact, we talked to mccarthy yesterday who said they want the house version. Not really apologize, but he said weve had some other things happening with both the administration and the so just always focused just on this, and it looks like it might can you believe the guy from mccain, murkowski and colins im not surprised really . They needed a win they needed a win for the 2018 midterms, right they had to show something that would be in effect and would gain some momentum for the 2018 midterms at least two of them arent running, and mccain has some health issues. Well talk about it. Brady is just one of many big guests that we have today. Another one is coming up right now. Lets get to andrew in shanghai who has a very special guest too. Andrew hey, guys we are live in shanghai. We are at the largest starbucks in the world the grand Opening Party hang right now behind me. Howard schultz is here along with his family. All sorts of Chinese Business luminaries have been with us all morning. One of whom is jack ma of alibaba. We sat down with him and hourld schultz, the other now, i began the conversation by asking him and howard why so Many American companies who come here it fails all too often, but at least for starbucks right now, theyve made it work. Weve been here 18 years, and many people dont realize the first nine years we were not very successful. There was a lot of pressure on us early on to kind of close the tend e tent and say its not going to work. I think we had to have patience, and we had to have a deep commitment to being locally relevant and understanding the consumer i dont want to embarrass jack, but you also have to have friends here who can help you kind of navigate through some of the issues that are difficult to understand, and, you know, jack and i have known each other. I said this the other day. I knew jack before he was jack i i think the understanding that there are more similarities between us than differences, and the consumer, although the Chinese Consumer that didnt know much about coffee, did understand customer service, did understand a beautiful place to be, and i think also building the kind of company that would be balancebased and the culture of the company where we can put people first that gave us a leg up. We came here to give back. When you look at this and a lot of Technology Companies in the u. S. Have tried to come here unsuccessfully what do you think has gone on . I think most of the technology Companies Come to china to learn from starbucks. First, our heart for the customer, for the market we love the people im doing this for 10, 20 years. Chinese people dont drink coffee we drink tea coming here i respect. I like i told my wife, i dont like coffee, but i like starbucks because the reason is that i met him first time i think we discussed long. I listened to his talk we discussed about the value, vision, mission. Then i told my team. Everybody drink coffee in the world. Nobody thought coffee could be business that would be a global company. Serve people with heart, not coffee thats what we do. Tell me whats going on in retail here in china you just had your singles day, biggest ever, against 25 billion day. Thats been mostly online day yeah. But you guys are getting into the bricks and mortar space. Yeah. As well yeah. Weve been moving very aggressively in the four years ago when we grow so fast and we got a lot of complaints about traditional retailers saying, hey, ecommerce takes away all of our jobs, all of our business. We asked ourselves, are we wanting to serve our customers or do we want to kill all the retail, traditional retail we think we should Work Together we believe online and offline should Work Together with the data, with the Customer Experience, we think retail traditional retail has huge potential if we do it properly, if we Work Together. That isnt why were going aggressively in four years he just gave up on Online Retail he is doing it himself he has handed over some degree to amazon, and amazon just came to china what do you make of that amazon comes to china theyve been here for almost 15, 20 years you do not see them here you should have patience, great services, good people. I think people working together online and starbucks has presents a shot and they are using alipay. We officially open tomorrow ill give you a statistic they gave me an hour ago. We sold almost 2 million of merchandise and coffee through alibaba in the last 48 hours the store hasnt opened yet. Its incredible. And the other thing is you understand that the technology in the store is being powered by alibaba, so the partnership that were establishing here in china is in its early stages of what we can do ogether. How do you think about u. S. And china relations these days and how it relates to you doing business here and you doing business in the u. S. We have two leaders, but one of them talks about america first, and president xi to some extent may be talking about china first. Though, opening as well. I did not see the president xi say china first president xi thinks a lot about the business should be growth together, shared profit together so but do you look at whats happening even in the conversations and the overhang of the conversation around north korea, for example and how that could affect you being here and you doing more i know youre trying to do more and more business in the u. S. As well i think, unfortunately, because of the political issues that exist, i think theres a possibility that companies that have a shared level of values you can take alibaba and you can take several american companies. Perhaps we can demonstrate the kind of cooperation and kind of trust and build a bridge between our two companies thats perhaps the politicians cannot do, and demonstrate to america and to china that we are much more the same than we are different we talked about it can you do that, though, if if there is disagreement among the countries over things like north korea yes, of course, we will continue to do it. I think politician create great. Nobody can stop the business nobody can stop trade. Nobody can stop the cooperation between the business this is what we think, and they are so great on the offline and were so good on ofnline. We should set an example of how we can Work Together that improving the relationship, the strength of the relationship, this is what we think. By working together, the two countries can do it a lot. Do you have a take on north korea . I know youre response every onning, by the way, the olympics this year. Im going to be in south korea youre going to be there as well its going to be a Big Conversation whats happening in north korea. Yeah. Its too complicated to me i have enough headache in my business when i hear that north korea, i say, oh, my god, north korea did this, russia did this, and china did this, americans did this leave the job for president xi and donald trump let me ask you one question last time i saw you in davos, you said something very provocati provocative. President trump had talked at one point about the u. S. Or, rather, china stealing jobs from the u. S. You said that was the strategy that was the strategy by the leaders of the u. S i think americans when you say i want to do this, he has been president only one year or something, he can never get achieve something within one year at least he is trying. As for me, i think the china is not saving jobs. We are creating a lot of jobs. A lot of companies succeed in china. Starbucks did it excellently in china. Microsoft did excellent in china. Ibm did excellent in china im not going to criticize the president of the United States back there when you buy coffee, you can pay with allipay, and you can also pay with we what are you going to do to stop that . Why should i stop them . If there is only one allipay, alipay cannot grow that fast. When there is fair competition, grow fast. No matter how fast it grows, were still bigger, were still better we have a fair, healthy competition. It is good we dont want to be lonely and talk to government because were the only one if theres two or three, then we have the right policy. Talk about currency, the topic is back in the u. S i think here as well its bitcoin and what some people think of as the modern, like, bubble, or is it a bubble . I dont know if you are going to accept bitcoin do either of you have a take on whether were in a bubble . Other people have called it a fraud . Jaime dimen says its a ridiculous thing i dont understand it myself. Im just trying to figure it out. Just two days ago at a conference people asked me what do you think about it . I say, honestly, i know very little about it, and i am totally confused, and even if it works, the whole International Rules and laws on trade on finance is going to completely change i dont think we are ready for that i think im focussing on the alipay and focused on imb, u. S. Dollars and euros, and thats fair not yet no. Do you see a day where you could . We have a team specifically to study that and also we have a team block chain technology. Weve spent a lot of efforts on block chain technology, but bitcoin, i say not for me. I dont know i can see a point in time where starbucks becomes a cashless retailer. I think that time is nearer than you think. Let me say one thing. We are not focused on bitcoin. We are focused on cash for china, trying to make sure the society is more efficient, more transparent, no corruption this is what you want to do. I have two final questions, and im going to embarrass you with one of them theres a lot of speculation in the United States that this gentleman may one day run for president or should run for president. What do you think of that . I think he should be careful here i respect him a lot he is a great value, vision, and is very paranoid for the future. Always thinking about how you can change see this thing very i see so many retail complain about new technology, and they hate technology they stop. They just complain he is changing it. I think this is what a country leader should have final question, weve been watching you dancing like michael jackson, creating movies whats next outside doing magic shows . It outside of running alibaba. I try to do something because there are three jack ma. First jack is, ah, he is great, he is not good peoples imagination second jack ma is the ceo and founder of Alibaba Group third jack ma is my real person. I love to sing i love to dance. I have fun i like Walking Around the streets. Im myself my real jack ma coming up these days i have a fourth jack ma ive known jack a long time, and jack obviously has become extraordinarily successful and influential in china and around the world. The fourth jack ma is a man of humility, is humble, and thats why i think i have so much respect for him. He has not changed at all. Hey, guys. We spent a lot of time, touched a lot of topics. Were going to bring you a lot more news here in shanghai from the opening of the new starbucks roastery when we come back, were going to introduce you to a man that is being referred to as the Warren Buffett of china. Perhaps the most influential investor in china. Owns pieces of just about every Major Chinese company around were going to come back with him in just a little bit from the capital of china im going to send it back to you for now. Andrew, we look forward to that coming up, well hear also from starbucks Ceo Kevin Johnson and starbucks china ceo belinda wong on the companys expansion in asia then at 7 30 cvs is buying aetna, as you know, in a move that will arguably clang the face of the Health Care Industry ron williams, chairman of aetna, will join us to discuss what he thinks about it. Youre watching squawk box on cnbc i think we should do that meeting tomorrow. Well wait. What did you think about her . Its definitely a new idea, but theres no business track record. Well, have you seen her work . No. Is it good . Good . At cognizant, were helping todays leading banks make better lending decisions with new sources of data so, multiply that by her followers, speaking engagements, work experience. Credit history. That more accurately assess a business chances of success. This is a good investment. Shes a good investment. Get ready, because were helping leading companies see it and see it throughwith digital. We thats why at xfinityic. Weve been working hard to simplify your experiences with us. Now with instant text and email updates youll always be up to date. You can easily add premium channels so you dont miss your favorite show. And with just a single word, find all the answers youre looking for. Because getting what you need should be simple, fast, and easy. Download the xfinity my account app or go online today. news anchor downtown traffic is still bad. Expect massive delays. radio channel changing news anchor 2 all lanes on highway 50 remain closed at this hour. news anchor 3 the stats are in and this city leads with some of the worst traffic, with the average driver sitting in gridlock the equivalent of three days a year. For every hour that youre idling in your car, youre sending about half a gallon of gasoline up in the air. That amounts, over the course of the week, to about 10 pounds of carbon dioxide. Growth is good, but when it starts impacting our quality of air and quality of life, thats a problem. So forwardthinking cities like sacramento are investing in streets that are smarter and greener. The solution was right under our feet. Asphalt. Or to be more precise, intelligent asphalt. By embedding sensors into the pavement, as well as installing cameras on traffic lights, we will be able to study and analyze the flow of traffic. Then, we will take all of that data and we use it to optimize the timing of lights, so that traffic flows easier and travel times are shorter. And sacramento is just the beginning. With advances in cameras, sensors, and network speeds, we have the ability to make cities smarter, and happier. What excites me about this technology is that were using some of the most cuttingedge machinelearning, and ai, to help solve the most fundamental challenges that cities face around the world. Who knew asphalt could help save the environment . lani and the possibilities are endless. When we come back, ron williams on cvs buying aetna, and how it will change the landscape. As we head to i break, take a look at the u. S. Equity futures. Dow futures indicated up by 72 points s p now in positive territory wno, but the nasdaq indicated do by 17 points. Stick around squawk box will be right back. Its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested we thats why at xfinityic. Weve been working hard to simplify your experiences with us. Now with instant text and email updates youll always be up to date. You can easily add premium channels so you dont miss your favorite show. And with just a single word, find all the answers youre looking for. Because getting what you need should be simple, fast, and easy. Download the xfinity my account app or go online today. Its the 69 billion deal cvs buying aetna in a move that will change the face of Health Care Industry in this nation we spoke with ceos of both companies yesterday. Mark and i continue to have discussions in terms of how can we do things more strategically, and it was clear that cvs health was moving to become more of a Health Care Company in getting closer to payers mark had a similar strategy in terms of getting closer to the customer its really the perfect time to bring these two companies together to create a new Health Care Platform that can be easier to use and less expensive for consumers and really create a new front door to health care in our country. Thank you for being here today. You heard what larry merlo about this is creating a new front door for consumers do you think thats exactly whats happening i think thats exactly whats happening. I think theres an opportunity to bring the kind of hodge podge Concierge Care that only the wealthy have been able to afford for primary care and place it in the community and give people access to readily available general primary care does that mean that they will have to be putting doctors in cvss across the nation . If you think about where we spend most of our money, chronic care, patients who have conditions like diabetes, congestive heart failure, hyper tension, really need the kind of assistance thats available in the pharmacy with perhaps Nurse Practitioners and certainly physicians can be available for referral what will other insurance companies, other drugstore chains wind up needing to do well, i think everyone is going to look at their strategies health care is an area where there are moments where over months we actually have decades of change happen now were in a period where decades of change may happen in months if we look at whats happened with apple watch, if we look at whats happened with the express scripps and the everyone will be looking at their strategy and trying to figure out how do they get on top of the macrotrends, which is everything moving from institutions to the home to the community. What does that mean just in terms of what matchups do you expect to see more . Yesterday there was all kinds of speculation as stocks of some of the chains had been higher as a result is this the model for the future i dont think there will be one model. What you are going to see is every health plan and every pharmacy company, retail drugstore is going to look at their capabilities, their geography, where they are, and have to answer the question whats the right strategy for us the one thing thats certain is there will be change and people will react to what is going to be a consolidation vertically that is really good for patients, i would say, great for patients and really good for those who want to see more valuebased care we have seen regulators at f buying time warner do you think this is something that will draw their attention . It is a very large transaction, so i wouldnt be surprised if there is very careful thought or review of it. If you see Something Like this, there are new winners and new losers you always hear from those that may be on the losing side of this who you wont hear from is the 76yearold retiree who has diabetes and hypertension and who would really benefit from going to a communitybased center where they can talk to the pharmacist, perhaps see a Nurse Practitioner who coordinates with their physician. I expect well hear from the losers, but the winners we wont hear from. What do you think that means, and what would you say about the state of the Affordable Care act today . Well, i think the Affordable Care act really has really been principalably on medicated expansion, and i think by and large that part is untouched i think in terms of the elimination of the mandate, i think its going to require states to take a look at how they can make certain that individuals that arent required to get health care have health care what the mandate eliminates is a requirement to buy it, but people who couldnt afford it, werent buying it anyway im a big advocate for those that have a certain defined level. You talked about some of the bills that have made their way through the senate i suppose youre talking about the murrayalexander bill . Yes, i am where. What do you think of that you know, i think its still being formed i think it provides more flexibility and provides one really workable set of alternatives i do believe the best way to make progress in fixing obama care or aca is really through bipartisan the other point that i think is really important is that we have to continue to focus on increasing access to health care the other thing the aca did is it legitimateized the transformation of the health care system, and it made it a determine conversation in many households, which i think is very important the individual mandate will strip costs, but we have premium that is have gone up significantly already. Individuals who are buying on exchange are paying for the individuals who come in and out of the system and are using the health care and then not paying a premium. I think if we really want to increase coverage, we really are going to have to look at both how we finance it, but more importantly, how we deliver care i think this cvsaetna merger is one example where we can have a very meaningful impact if you look at how much we spend in health care, one of the big issues is chronic care medication ad heerns is a huge problem. Only about 50 of people are actually adherent to the medication thats prescribed for their chronic condition. If we could move that 10 we would have a huge reduction in the rate of increase in health care, and it would be more affordable for everyone. Starbucks is opening its largest location in shanghai today. The 30,000 square foot roastery location in china includes three coffee bars, on site chefs to serve you 80 menu items, and an augmented Reality Experience to go along with it as well right now andrew is there for the opening, and he caught up with someone very special. Andrew, lets get back to you. We want to introduce you to the ceo of starbucks china, melinda wong its a remarkable thipg to run starbucks china. Its also a remarkable thing that a woman is running starbucks china. She sat down with us along with the ceo much starbucks, kevin johnson. Its been really emotional. We worked on this progress for three years now, and everyone has put in their heart and soul into making this impossible possible tell us your story. Im not sure people know you its a remarkable thing that you you run all the starbucks china now . Yes, i do its been seven wonderful years. You were born in china . Le. I studied in the u. S. Then i study at ubc, brush columbia, and then right after i graduated, i came back to asia dare i say theres not a lot of female ceos in the world, let alone china. Culturally, what do you think youve done . Has that changed the dynamic here for you i think, you know, im so lucky that i worked for a company i know i just come in here and try to understand what the mainland chinese customers are thinking about, what our partners are thinking about. I come in it assuming knowing nothing, so that makes it really easy for me to understand them whats the difference between the u. S. Customer and the chinese customer some people thought the chinese customer was never even going to like coffee to begin with. You know, weve been in china now 18 years, and china is a teaoriented culture weve introduced premium coffee experience to the Chinese Consumer we also have our teavana tea that experience has continued to evolve were now serving over five million customers in china a week were starting to see more business in the morning, and well continue on that journey this is ultimately the biggest Growth Market if not ultimately going to become the biggest market for starbucks youre building over one store a day. One and a half stores a day day. I know the name and the place. I know you have to do this with a very trusted team, and this is not my glory and my success. Its because of the 40,000 partners that we have in china and one of the things you do and its really extraordinary because i got the chance to see it yesterday, was an annual meeting for the families you provide Critical Health Care Insurance for families i mean, its a very different dynamic than what you do in the United States or, frankly, any company does how did that evolve . How did that start well, you know, certainly the values of the company are consistent around the world. You know, we started Offering Health care to parttime employees, our partners in the United States years ago. What they did is took the same principles and identified what benefits would be meaningful for partners in china . They take the same values that are global to starbucks and apply them through the lens of the Chinese Consumer and the chine chinese. We have a Housing Allowance subsidy for our young barristas and shift supervisors because these groups are the ones who just finished college and university, and we want to make sure that they have the Financial Security when they start out their career right so this new store every 15 hours, how long is this going to go on for . As long as possible its about opening a store 500 different times. You are in different neighborhoods. We have to build that connection with our customer. You know, we announced i think july the acquisition of the china joint venture. As belinda and her team integrate china into our Company Operated molgz, thats going to position us to go a bit faster i think now we have Company Operated stores in china than we are in the u. S guys, i want to give you a quick note, by the way you are going to hear a lot of people, including Howard Schultz earlier, but you just heard that conversation partners in starbucks pa also, joe, you might remember when i was in it saudi, you asked about alcohol. If you remember in saudi there was no alcohol one of the things thats interesting about this starbucks, and you are going to see in other starbucks too, theres alcohol all around me, by the way theyre selling beer over here in the new york starbucks, theyre going to be selling liquor theres going to be a whole bar. Its a much higher mashlgin. People thought that Starbucks Coffee was a high margin business the liquor business is going to be high margin too anyway, we had a lot more coming up from shanghai he literally has investment stakes in just about every Major Chinese Technology Company in the last decade, and we want to introduce him to you in just a moment for now im going to send it back to you guys and maybe drink a little bit what time is it there what time is it, guys its 9 00 right now. Weve been going all day, though oh, oh. Well get on it theres waiters and waitresses look, see, theyre very happy. Were going to come back and have some real drinks. Howard is going to be here at 8 00 if we want to loosen him up, well actually, he is over there, he actually has something in his hand. Well see. Squawk box coming right back you cant predict the market. But through good times and bad. At t. Rowe price. Weve helped our investors stay confident for over 75 years. Call us or your advisor. T. Rowe price. Invest with confidence. I just finished months of chemo. But i dont want to talk about months. I want to talk about years. Treatments have gotten better, so. Im hoping for good years ahead. Thats thanks to Research Funded by the American Cancer Society. The same folks giving me free rides to treatments, insurance advice,and a place to stay during chemo. I need that stuff like you dont know. And now that you do, please give. Call 18004164357 today. Your contributions to the American Cancer Society fund valuable research but thats just the beginning. A cancer diagnosis can kick off years of challenge. And thats where your donation truly shines. You help us fund free rides to treatment. A live 24 7 help line, free lodging near treatment centers, and even efforts to expand access to insurance. So, please donate today at cancer. Org and help attack cancer from every angle. We are live in shanghai at the grand opening of the largest starbucks in the world wresh got a chance to spend some time with arguably the largest and most influential investor in china. We want to introduce him to this morning. His name is neil shen, and he runs sequoia chapt china i think people still say china is about low tech. China is about things have really changed especially in the last five years. It originated from china think about it who launch shared bicycles that was china in fact, the two leaders are going to u. S. And tried to address the what about, you know, cgi . A company who occupy more than 70 of the market share in a commercial in the world again, thats we look at the website. We look at product you probably saw this it is not. Do you think there will be a day where the twitters, the facebooks, and the googles do business here . Well, i dont know whether theyre competitive. If they are not competitive, i wouldnt even know i wouldnt even suggest they probably should not because even if you have, you know, sort of you may not be able to be effective as a Chinese Company what do you think of it you should take it very serious because today they are probably among the top 50, 60 socalled, you know, economy there are a lot of people that should be shut out, and there should be heavy regulat n regulations applied to this areas. Can bitcoin be successful if governments, like china, want to regulate it . Well, i think, first of all, china has really done the right thing to regulate it i dont know whether its going to happen to other companies i think there are other countries who say to they are best interest they will allow or even promote that bitcoin, its, you know its not just the one Single Technology it can be applied to many areas. Financial services you know, health care. Education. Et cetera. You know, i see this as really something critical for consumer that has become more sophisticated and who does things for the better, and also its had a lot of issues in vertical applications. Thank you appreciate it. Thank you you know, when you sit with neil, you really can start to appreciate the scale of whats going on in china. The numbers are just remarkable, baffling is what they are. Its im glad we can have that conversation. When we come back, were going to talk to Howard Schultz. Guys, ive got a beer ready, so this is and its nighttime. Were going to be like andy cohen watch what happens. Im going to toss it back to you guys right now andrew, i know what happens when you have tasted beer in the middle of the show before. Have you tried any today not yet not yet. See, were getting towards the last hour of the show, so i think weve got a shot were going to be doing a little on squawk on the stroo et a little bit later, and theres an after party here watch what happens its like saturday night live youll be there all night for the gas party. Andrew, thank you. Well be back in a couple of minutes. When we return, a growing number of rich people are doing their Holiday Shopping at the big auction houses we have the details right after the break. Neem, lets check on the futures once again wow. Look at this even the nasdaq has turned positive dow futures indicated up by close to 90 points the nasdaq now ubyp 4. 5 the s p up by 4. Squawk box will be right back. So youre looking for male customers, ages 2554, who live within five miles of your business . Like these two. And that guy. Or maybe you want to reach women, ages 18 to 34, who are interested in fitness. Namaste. Whichever audience youre looking for, well find them were the finders. We work here at comcast spotlight, and we have the best tools for getting your advertising message out there. Anywhere, any way your audience watches. Consider them found. We thats why at xfinityic. Weve been working hard to simplify your experiences with us. Now with instant text and email updates youll always be up to date. You can easily add premium channels so you dont miss your favorite show. And with just a single word, find all the answers youre looking for. Because getting what you need should be simple, fast, and easy. Download the xfinity my account app or go online today. Zbloinchts wealthy Holiday Shoppers are turning to an unlikely place for their pricey gifts. Robert frank joins us with more. Robert, good morning good morning, becky well, this is im at christies right now, and this is the place where they sold the 450 million da vinci a few weeks ago, but they also sell handbags this year sothebys and cre christies going into the giftgiving business theyre holding a flurry of auctions of handbags, watches, wine, jewelry. Over 150 million of gifts going in both auction houses over the next few weeks a lot of that through online bidding. Lets show you some of the highlights over at sothebys they have the largest round diamond ever sold. 111 care ats thats 4 million to 6 million. For the guy they have some watches at around 4,000 here at christies, i want to show you this, this is a berken bag, this is the prized bergen bag. The bid right now is 95,000 over here weve got some rolexs. This daytona will go for 500,000 to 1 million now we have some 1962 mccallon thats 4,000 to 6,000. Theyve had thousands of people come through here in the past few days and the rest of this week to show you how kind of flush the economy is, especially at the high end, guys. Back to you. Joe, you finally found out what a berken bag is zploo its not like a berkenstock a berken bag you get any perks . Is there any swag there . See if you can bring me something for a gift for christmas for my wife. Anyway, thanks coming up, congressman tim obrady on tax reform. Plus, more froanewm dr in shanghai Howard Schultz coming up joining us live. What people really invest in. What people really invest in, is what they hope to get out of life. But helping them get there takes a pure focus. Because when you invest their money without distraction, hidden agenda or competing interests, Something Wonderful can happen. They might just get what they want out of life, and maybe even more. What we do every night is like something out of a strange dream. Except that the next morning. It all makes sense. Fedex powers Global Commerce with vast, farreaching networks. Deep knowledge of industries. And, yes. Maybe a little magic. We are also were going do look at futures in a minute, but were going to introduce our guest hess on. Our guest host is richard positive attitude. Positive the ceo of Richard Bernstein advisors, and richld, one quick question we look at the futures does that matter no. I think were going to talk a lot about taxes in it the next is a, 20 minutes theres nothing to be bearish about the corporate takts cut. Thats what were seeing right now with those futures s p futures positive up by four points above fair value. Dow futures up by 86 points. The nasdaq positive too. It went positive in the last 20 minutes or so. Its now indicated up by just over three points. Mcdonald eights is cloudsing in after an alltime high. You want to lisp closely. It had been 150. Where is the stock . He sees now its a good time maybe just, you know, just meant to do it and didnt, you know, just oh, forgot to upgrade it again. I forgot to raise my price target anyway, he must have been when he was a hold, right, so he had a hold it was the price target of 150 he was so wrong that its not he is citing the refranchising efforts and the data and technology for digital and delivery, and there are the shares right now see, you get off light with that one separately theyre offering a new dollar menu. A dozen items, including, okay, youre speaking sauceable ber eat sausage burritos the fast food chain said it made the move to recapture value oriented diners. The new menu will debut in january, and i defer to steve. Whatever he thinks whatever he thinks im good with in terms of the menu offerings and anything theyre willing to put through it took that thing. He took the wheel at whatever the price was, and it was, you know mcdonnells has been through a lot of phases, and p. R. Isnt always great because of calories. You remember when it was 12 it was 12 not too long ago request. Hot quality next thing you know youre 200 price target yeah. Great. Andrew is in shanghai he joins us with a special guest. Hi, andrew hey, joe. I promised you a special guest in Howard Schultz. I also promised you beer and liquor this is beer i said it would be like watch what happens live. Cheers not only is it beer theres coffee in the beer when did you get into the beer business . Weve been selling beer and wine in a number of starbucks stores, but now all the roasteries will have beer and wine theres no alcohol in the store in china, but the one in new york, which will open next september, will have the full 45 foot long spirits bar in the roastery i want to talk about china, but just margin on liquor relative to margin on coffee, you guys have people always say theres a big margin on Starbucks Coffee how does it compare to liquor . I think the Coffee Business is a place wreshd be this is not a bad business to be in is there caffeine, though caffeine, yes caffeine in the beer. Youre going to have a tough time sleeping tonight. Its so hard to really articulate to the audience ive been trying to think about this when you are here, the size and scale of everything first of all, the size and scale of this, congratulations, but just the size and scale of china, the scale of the consumer, when can you think you first appreciated the level of it . A couple of statistics. Were in shanghai. Theres 28 Million People living in shanghai. Theres eight Million People in the five borrows of new york city to the scale of shanghai alone, its emblem atic of whats going on here. Its going to be 600 million middle class consumers what they want are experiences in western brands. I think five or ten years ago when we start opening up in the cities, the nap i began to realize and they told me theres 50 cities in china with 50 Million People alone what an opportunity we had i think we made a big bet ten years ago. You talked, though, about this being a turning point, being the creation of this roastery yes but also this being emblematic of where starbucks is going in terms of the growth trajectory thats going to be in this country the revenue and profit in a short period of time will shift a much more balanced from the u. S. Right now its about 70 u. S. Yes and how is it going to change the company when more than 50 of the profits come from a place like china people talk about are you an American Company are you a Chinese Company . Are you a multinational how do you think it will change the way people feel about it its an interesting question because i think the problem and the challenges we have early on when we came to china is we were making decisions for china through a u. S. Lens sitting in seattle. I think once we realize we needed to have a chinesecentric team of managers that understood the margaret, and we had to have the confidence to give them autonomy it was a complete autonomous business here that was decentralized. That is why we have been successful were a global enterprise, and i think china on its own merit is going to be a market that is going to rival the size of any market in the world for starbucks and contribute significantly to shareholder value. I also think that china is a market that is going to have tremendous impact around the world, and were going to be one of the big winners in terms of our consumer brand, the halo on the brand, and also the way weve approached it. I think its important to say that theres very few companies in china doing the things we have done, giving health care to parents, housing llowance, equity in the form of stock options. The government of china is looking at starbucks saying you are doing all these things help us understand how do we interpret this we appreciate what it does. Cut it out or reduce it. By the way, especially when you look at same store sales, in other parts of the country, its harder and harder to grow. We dont think in a retail brick and mortar business today, where every brick and medical record ar business is under so much pressure, if you dont put your people first and invest in your people, i dont think you can really have the kind of Customer Experience that customers are going to want to be attracted to and be loyal to. For 30 years, as you know, we have linkedshareholder value t Value Creation for our people, but we also recognize that shareholder value and Financial Performance is the price of admission. One of the things that we had a lot of conversations in china about over the last 48 hours is a. I. And technology. By the way, Technology Effectively taking a replacing jobs this is a place, and starbucks has always been a place where the relationship between the barista and the customer is key. Yeah. Could you see a day where all not all of these people, but maybe you need less. I dont see a day where Artificial Intelligence or robotics is going to replace the humanity of starbucks. The equity of the brand is based on that intimate si between our customers and our people thats why we invest so much in our people were employing 400 people here. Were almost up to 50,000 employees in chooirn alone almost 400,000 globally. Were a People Company right i dont see that. Were going to have kevin brady on in just a little bit talking about taxes. I cant wait. You say that. Lets talk now, what is your position on the tax plan as proposed by the senate and now the house and well see where it ends up you and i have spoken about this before. You know, i look at the reduction in the Corporate Tax rate to either 20 to 22 . I would just i would ask a question to the Republican Leaders, and that is what insilent, what experience do they have or what evidence do they have that their reduction in taxes for all those corporations are going to result in either job creation, higher wages, or an opportunity for their people to grow versus the amount of money thats going to go back to shareholders and corporate profits . Show me the evidence then one more thing. Then theres no doubt every economist left and right this is going to add at least 1 trillion and maybe 2 trillion to the debt. Thesis are the same people the last ten years that have been yelling about having fiscal responsibility what happened there. A lot of foreign money here folks like tim cook, who are in china right now desperately say they want to be able to bring that money back. How do you do it in the Howard Schultz version of the world. I think all that money that is sitting overseas needs to be reinvested back in the United States what i would like to see is some kind of thread in which that money was linked to some project that would advance our society if we look at the amount of people in america being left behind, let me give you one statistic, 70 of the households in america, families in america, do not have 400 in the bank for a crisis this is a statistic that came out after the houston hurricane. If were going to bring all that money back, isnt there something we can do as citizens and as corporations to become a more Compassionate Society Howard Schultz, thank you thank you for having us. Appreciate it. Cheers to you. We will see you in a little bit, and in the meantime, i got to toss it back to these guys back to you, guys. Andrew, thank you very much again, andrew in shanghai along with Howard Schultz. Folks, when we come back, the house and the senate are set to merge their two tax bills. We will hear from the newly named Conference Committee chair, congressman kevin brady thats coming up right after this is what they hope to get out of life. But helping them get there takes a pure focus. Because when you invest their money without distraction, hidden agenda or competing interests, Something Wonderful can happen. They might just get what they wanted out of life, and maybe even more. Win an uncertain world . K predictable income pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over 120 billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Welcome back, everybody the naming of the new conference chair committee. Congressman kevin brady. Thank you so much for being here today. Thanks, becky thanks for having me you have a lot of work ahead of you, and i want to run through how you plan to tackle all of this. What happened at the House Freedom caucus well, look, they had discussions with leadership about the end of the years spending process, how thats going to work out. I wasnt part of those skugs because i was leading the effort to move to a Conference Committee. Leadership has got the details of that. What i do know is the house voted strongly to go to a Conference Committee, and heres why. Bottom line, both the house and senate bills are strong, and they can be stronger theres a lot of improvements. We are still eager to make those. Yesterday was an important step. The Freedom Caucus relented it would have allowed this vote that a lot of people saw as something that was just going to sail past. They are showing their muscle, and i just wonder what type of things have those caucus members asked for when it comes to tax reform i know this is primarily focused on spending, but is there anything that they really want to see in the tax bill and things that you are going to have to toss their way theyve been incredibly helpful here look, they want the lowest rate for businesses to compete, and anywhere in the world, they they the highest tax cuts for families as well theyre all in are for growth. I think the Freedom Caucus has been helpful for us on tax reform lets talk about the issues that you are going to have to jump into when it comes to the differences between your bill and the senate bill on this. One of them is at the last minute the senate bill went ahead and kept the alternative minimum tax for corporations your bill does not have that in it how do you hash that out were going to have to work out the differences there. I think that the individual and corporate amt is its costly and complex. On the business side, it in proamerican provisions in the tax code were going to work with the senate to reconcile those two differences. Were really going for that growth in simplicity the other thing on the family side, the n. T. Really hurts families in those high tax states in fact, new york and california when they have to refigure that second tax, their taxes go up on average 7,500, and in new york it can go 10,000. We relimb natured that. You do my guess is that he is creating some flexibility for us to get the most progrowth code we can get were still focused on the house on 20 we think thats an important rate both because it really helps us leapfrog to the front. We know that makes us competitive not just now, but in future years as well youve seen those reports that show if we have been 20 the last decade, we would have about 5,000 more businesses in the u. S. And a lot more in investment headed towards america. We have video to eliminate that tax, and we didnt have it in our tax provision, but now its in the senate, and were visiting we started last night. We will again here later this afternoon meeting with House Republicans on the steps they want to take Going Forward theres a chancethat you vote on the bill asis from the senate thats a zero. The chance of that is zero this conference, i think, we want the best tax reform overall for the American People and for growth yeah, this is important. I dont know what you think i dont know how you feel about yourself when you read pelosi, congresswoman pelosi said its the end of the world, its armageddon, and its the worst bill if history, and then Larry Summers says minimum, 10,000 people start dying every year when you pass it. When you see that, are you are they wrong are you just heartless or misguided or do you know i mean, when you see that, what do you do when you hear hyperbole or comments like that . So we expect that look, this was exactly what we saw in that 1986 efforts with the reagan reforms we saw the same armageddon catastrophic type of language. It was just because theyre defending the status quo lets ask about those Corporate Taxes the individual tax rates you have four that you keep the highest level at 39. 6 for individuals. Senate bill has seven, but the top rate is 38. 5 . Yeah. What happens . Do you keep the top tax rate or go with what the senate has . Were going to reconcile that in a positive way. Were trying to drive that to top rate down. Theres some income brackets not as strong as we would like thats why this Conference Committee to work out those differences is really important. Another reason the Conference Committee is in important. Can we talk about whether or not there are any nonnegotiable areas. In the past it had been 20 . Obviously thats changed after the president went ahead and said that he would accept 22 . It sounds like you would too chairman brady, this is rich bernstein. If you knew where i grew up, i would be very impressed. Thank you for your work. Give me a hint anywhere here . New york suburbs. But being named Richard Bernstein as joe will tell you, its like being named john smith. Without a middle name until i gave him one. As an investor, you know, what you are proposing is great for the equity market, and i think people have snifd that out a little bit people are i think a little more concerned about the deficit implications of what that means for the bond market longer term, and you mentioned the reagan tax cuts, and people forget reagan tax cuts resulted in the biggest peace time budget deficit up until that point i mean, obviously weve eclipsed that, passed that. Should people just like me just not worry about this no. You should we do too. Heres the point if we say what economists believe will be 1. 9 or 2 growth for the next decade, i guarantee you those deficits are going to grow bigger and bigger now if we can get this economy moving, if we can make america competitive, and i think we all agreed we are not in this global marketplace that alone wont do it weve got to have spending restraints weve got to change the way washington operates, so you got to do several key things, but like any business, beyond constraining spending, you got to grow revenues, and this is what tax reform is all about mr. Chairman, so many things swirling around. You get involved with any of that at all . I mean, big victory on friday, and, i dont know, maybe thats when they finally figured out what to do with flynn, but did that seem a little weird that the day that happens, they you know, they announce those . It totally took the wind out of the sails of the win with tax reform, and then i wonder all the stuff about the fbi that were hearing now and, you know, comey tweets when that flynn news comes out about justice and quotes the bible i mean, do you have any any light bulbs going off in your head that something is rotten in denmark here or not . Look, no. The reason i think we have got tax reform despite all the skepticism to where it is today is weve not been distracted by any other issues Going Forward i think the key working with the president early on to come to one tax reform approach, staying on this timetable, continuing to move it, thats why were in this position. Until we finish this here over the next several weeks, were going to stay just laser focused, head down on tax reform okay. Chairman brady, thank you very much for your time today. Thanks, becky appreciate it. Coming up, theres breaking economic news. Well try to fix it. Then october trade dics efitare just minutes away. Were going to bring you those numbers when we return im here to talk to you about how at t gives you more. And so am i. Like how when you buy the amazing new iphone 8 you get another one on us. See we give you more phones and more spokespeople. Are you guys doing a spokesperson thing right now . Yes. Awesome, can i be in it . Well, its kind of like a twophone deal. So two spokespeople. Got it. K. Thanks. At t its time for more. Its time for more. Buy the amazing iphone 8 at at t and get a second one to gift, on us. For example, you know, on friday i watched how much money was lost in some of the currency trades too based on that errant news report . Anyway, rick, what happened today . Minus 48. 7 billion is the trade balance, which, of course, is a trade deficit that is a larger deficit than last month sequentially when it was revised to minus 44. 9. Wall call it 45 billion now, the minus 48. 7, thats the largest negative number since basically january when it was 48. 77. Even if we call that a tie normally were supposed to be seeing smaller trade deficits. Remember, were down, what, close to 7 on the dollar index. Youre right, joe, all markets were affected briefly by the errant, erroneous news that was brought out by abc friday. If you were one of those involved and maybe indirectly many are involved with our 401k or other type investments, its not a good thing i whn i saw the move, joe, tried to get everybody to take a step back because in the big analysis of 2017, policy plays much larger than politics especially when you never know how to believe or not to believe. What do you think, joe . It was the word it was the word candidate. At the same time they were all talking about december dates i was messaging all of our Washington People immediately saying this you know, when you see it from someone like abc, you believe it. You believe it and if candidate trurp told flynn to contact russia, thats why the it was a sickening feeling to watch the feeling you are talking constitutional type worries at this point if i ask you five weeksago sunday who did you meet, who did you talk to, who did you have dinner with, could you recite it that quickly for me . Yeah, probably. I never go out to dinner i had determine at home. I had dinner with my family. What did you have for dinner . What were the toppings my son only eats about three things, so i probably pretty good idea what i had either burgers or steak or chicken. Anyway youre not making this easy, joe. How about those stocks got hit in all markets, and didnt people stopped out of currency markets, equity markets. I mean, its mindboggling how much money are we talking about, rick . Seriously. How much money are we talking about . Its hard to say. It really is its one of these words where there arent many sets of rules for many different people, and i think thats really at the heart of trumps following, to be honest with you. All right rick, thanks, man. Well see you. Stocks have been surging, but what does it mean for the broader economy . Steve liesman is here, and he has a lock at what economists call the wealth effect hey, steve should be a soundtrack torg with the wealth effect americans have that wealthy feeling right now, and just in time to spend. At least some of it for the Holiday Season yeartodate the nasdaq 100 market cap up by 1. 7 trillion. The s p 500 up 3. 7 add the two together, you get 5. 4 trillion of additional wealth out there not a small number barclays and Goldman Sachs believe that as much as threequarters of a point of the recent rise in gdp coming through the wealth effect. The rule of thumb is that people dend to spend about 5 cents of every dollar increase in their asset value. Bad news, the wealth effect doesnt sustain themselves unless the market gains keep going. You need wage and salary growth for sustained spending gains up side, more of this wealth effect fueled growth is in our future as it tends to hit the economy with a lag people look at it, and then they say, okay, its okay then they go need a little bit more if stocks go down, they immediately pull back. This was kind of like the entire idea that the Federal Reserve had, right it was to help boost the stock market and use that wealth effect as a way of, like, boosting all everybody across the board. Remember, i think theres a couple ingredients needed to spend that wealth. The first is confidence, right, because theres a confident feeling. Then theres the actual money. Right . Confidence was harder to come by with the wealth effect after 2008 the lingerring lack of confidence really echoed for a long time after that, and people didnt feel confident about it, and now in the current environment, i think people feel perhaps a little bit more confident about it one interesting fact is theres a big difference, by the way, in housing wealth versus equity wealth you cant use it as an atm anymore. At least not as easily as it used to. People think that the equity effect is greater than the housing. Steve, stay right here. Well talk more about this right now. Joining us is bingy chada, chief u. S. Equity strategist and global strategist at Deutsche Bank welcome to the table thank you lets talk about what steve was just mentioning. How does this kind of play out into the broader economy how do you see this affecting things in 2018 i would say, you know, to what steve said, that, yes, the statistic that we spent 5 of an increase in our stock market wealth is a good number to keep in mind, but i would contrast it with the fact that we spend 95 of our in care or 97 given the Savings Rates just gone down, and what i would say is, you know, yes, our gross assets so the size of our Balance Sheet in the u. S. Is, you know, an important number to keep in mind 1. 5, 2. 5, 3. 5 trillion sounds like big numbers especially when you think about it relative to gdp u. S. Households have, you know, 108 trillion yon, 110 trillion in assets. I think this transition were talking a little bit about how the fed has an impact. What i would argue is i think we need to give a lot more importance to how important the household Balance Sheet is i would say, you know, monetary policies i dont ever emphasizes the flow issue in terms of what its going to do to gdp, and doesnt worry enough about the Balance Sheet where i would argue many of the impacts are actually perverse. Can i ask richard a question. Theres a distributional aspect to this. You know, Something Like 10 of all stocks that are owned by 90 . Whatever the numbers are more of the gains go to wealthy people at the same time about 53 of all households own stock at least according to our all america service. Theres a wide swath of the public that feels the gains, but a smaller swath that really actually gets them from a stock play,ing is this a tiffany and i hate to say tapestry play more than its a Dollar General walmart play well, steve, what you are referring to is more or less where are we going to get the bigger umpf in terms of the stock market you know, were at the point where were pretty close to full employment, so i think the story for, you know, a Dollar General and most consumer stocks is reasonably played out. I mean, its not the end of the story by any means, but reasonably played out. Certainly at the beginning of a cycle, its Dollar General what happens is if you didnt have a job, and you just get a job, and it makes you are going to buy something you didnt buy when you didnt have a job. What were talking about now is the improvement in the quality of life because youre going to get better job youre wealth effect thats different im not so sure thats pure Dollar General that may be more standard retailers where. Lets talk just a little bit about what weve seen. Obviously a huge run for stocks this year. You expect that to continue in 2018 i do, but tempered a little bit. I would argue, you know, most of the rise in the stock market yeartodate, so weve had a target for the s p 500 of 2,600. I dont think, you know, much of it has to do with tax reform i would argue since last tuesday so the last 40 points in the s p has to do with the tax reform. The way i would think about we tend to pull them back a little bit last week or tenl days i think, you know, one of the ways to simply think about next year and the impact of tax reform is that the cycle is actually ongoing the cycle is actually much bigger than tax reform, so in the absence of tax reform, we have 10 up side with tax reform we have 15 up side so the cycle is still bigger than the tax reform thanks for joining us steve, thank you when we come back, senator Chuck Grassley stay tuned u e tcngsqwkox here on cnbc n . Trillions of dollars going back to taxpayers. Who could possibly be against that . Well, the National Debt is 20 trillion. As we keep adding to it, guess who pays the bill . Him. And her. And her. Congress, we should grow the economy. Not the debt. Your bbut as you get older,ing. It naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. 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Return, the next steps for tax row form we heard the new Committee Chair conference up next well talk to senator Chuck Grassley at cinupthsomg some moments can change everything. You cant always predict them, but you can game plan for them. For 150 years, generations of families have chosen pacific life for retirement and Life Insurance solutions to help them reach their goals. Being ready for wherever life leads. Thats the power of pacific. Ask a Financial Advisor about pacific life. Thats it. Im calling kohler about their walkin bath. Nah. Not gonna happen. My name is ken. How may i help you . Hi, im calling about kohlers walkin bath. Excellent happy to help. Huh . Hold one moment please. [ finger snaps ] hmm. The kohler walkin bath features an extrawide opening and a low stepin at three inches, which is 25 to 60 lower than some leading competitors. The bath fills and drains quickly, while the heated seat soothes your back, neck and shoulders. 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I imagine there wouldnt be because theyre so close you know, i think you got to look at it at the 50,000 foot level until people sit down and get in the weeds of the details because so much of this policy in both bills fit within the six page framework that came out from the group of six back in september. That was a short version you end up with a 400 page bill. You got a lot of detail. Not a whole lot of difference on the big policy i suppose the alternative minimum tax that was kept in the bill for corporations is going to create a major problem. Theres a difference between the two bills on estate tax. Theres a difference between four brackets and one bill and seven brackets in another bill, but the overall distribution by income group is fairly the same in both bills. Theres a bubble in the house bill that gets some taxes for some higher income people up to 45. 5 compared to 38. 5 for the highest bracket in the senate. Im just giving you a rough figure of things that have to be worked out you have a take on estate taxes that i dont think everyone is basically heard. That is that people that are actually trying to save that arent spending every darn penny they have that, you know, once they save it, if they can leave it to their heirs, that thats important. I can see two things why not you know, if theres lets say that you put something in your estate that, you know, you have never paid Capital Gains on. Should there be maybe maybe there should be a step up for the next generation where its just not avoiding ever accident taxed, Capital Gains would that make sense . How do you do it well, first of all, present law allows for the stepped up basis. When you do away with the estate tax, then the stepped up basis could be done away with, but the way we do it in the senate increasing the or doubling the exception, we keep the stepped up basis, but i would like to look at the whole issue of estate tax is, first of all, death ought to not be a reason for having taxation. The people that saved are punished and we have so much in our tax code that encourages savings, and we ought to have that there because we need to be a saving nation, but the estate tax works against that philosophically it makes no sense, but it does affect very few people, and even the people it does affect are the rich ones they seem like they got second to die insurance or something. Theyve got ways of getting around it. Anyway if it needs to be paid for, then you are taking away from something you do positively somewhere else its a matter of priority sometimes too. By just doubling the exemption in the senate instead of doing away with it, we were able to lower middle income tax brackets almost every bracket. 15 bracket down to 12 25 bracket down to 22 to help middle class americans yeah. Whats the timeline, do you think . You must have been amazed when the senate came through. Or not did you really think that would be the outcome that you could wrangl wrangle them were you involved . Let me tell you why im not surprised we got at least 50 volts, got 51. Wouldnt be surprised i got 52 wouldnt be surprised if we got two or three democrats, schumer organization didnt want any democrats to help republicans get a bill passed. Let me say over three or four weeks there were a lot of people that had questions about things that should be changed but i never really heard anybody say that we shouldnt be passing a tax reform and tax cuts, something that hasnt been done for 30 years and particularly, simplification from the standpoint that probably 90 of the people will be able to make out the short form as a result of increasing the standard deduction from 12,000 to 24,000 senator, thank you. Thanks for coming on we hope to see you again soon. When we return, jim cramer will join us live from the new york stock exchange. Ank you cli . Well jd power did just rank them highest in Investor Satisfaction with full Service Brokerage firms. Again. And online equity trades are only 4. 95. I mean you cant have low cost and be full service. Its impossible. Its like having your cake and eating it too. Ask your broker if they offer awardwinning full service and low costs. How am i going to explain this . 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Get there sooner. I want to see if the colors return to jims face today if you won every game, you probably would get bored, wouldnt you thats true, its were up against the rams next week and they are one of the hottest teams and you know, i want that first i want that bye the first weekend. And were in a scrum and you cant expect that and come out. Given me watching you now i watch exactly what happens with the eagles every week its funny anyway, the dif vergence, tech stocks is that finished or can we continue to see the dow somehowdy verge from technology . Whats incredible, there seems to be so little money come in, like every dollar that came out of tech, right into some of these industrials and retailers and i think youll see that end the moment that the stocks have been going up. Im watching verizon and at t. These stocks are not gross stocks and yet they do go up pretty much every day since the rotation began you need to see those stocks slow down or start going down before you start seeing a reversion back to tech tech has been killed here. I think its a little overdone but i want to see that money flow back before i would make a stand. Good point, jim so the 6yearolds and 12yearolds, need their own texting, dont you think is it just me . Im Old Fashioned i guess, but they have been left out of the whole texting phenomenon and who wants to be 7 with not texting all day long i dont want to live in a world like that. Should i worry, jim, or not . I think you have to worry about addiction. I do too. My daughter works with kids who are addicted and its one of the tougher ones, people dont think its an addiction but it is a sickness. And i think if you get them started early enough they get sicker. And younger their brains are when they start doing these things, the more likely they are to get addicted. Theres been science i dont think people realize there is addiction and it is not opioid, but it is very, very i feel it sometimes. Its a way to fail to launch. Failure to launch. I feel it and left my phone its like, i need to check my email. And i dont because its just crap thats coming in anyway. Take a vacation without your pc, it was rather remarkable. Wlle ghba j. E brit ck when this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Before we go this morning, we want to check in with andrew in shanghai. Unbelievable lineup of guests. Whats your takeaway reporter takeaway, the scale and size is bigger than anything i ever could appreciate and being on ground mattered i will come and visit and be back with you guys on thursday morning. Ill be on a plane for the next i dont know, 15 or 16 hours and we have tape which were going to bring you an interview with the largest ecommerce or largest growing Ecommerce Company in the world. Probably do that on thursday thats all i got from shanghai. Do you spend more time in the air or on the ground this trip the air is competing with the ground probably very similar. Exactly andrew, want to thank richard. Thanks for having me. Squawk on the street is coming up right now. Good tuesday morning, welcome to squawk on the street. Looking for modest lift for stocks at the open as the tax overhaul on capitol hill remains the key story for many investors, got global pmis in focus as well. Europe i