Transcripts For CNBC Squawk On The Street 20171214

Bob iger is about to join us as disney buys a big chunk of 21st century fox. Retail sales up 0. 8. But we know what the lead is today. Yep, we finally got the deal weve been talking about now for more than a month, of course disney buying those fox assets that weve detailed time and again over this last, lets call it, five weeks or so since we first brought the story to you of the talks between the two it is a large deal, to say the least. Depends on how you want to value the equity right now, at current prices, and if you take into the considerations that minority interests, its about 55 billion in equity. Some 515 million shares of disney will be exchanged for the fox businesses that are going to be sold to disney. Were talking about a deal with an enterprise value of 69 billion. Theyll take on 14 billion worth of debt. Tax liability which i finally got clarity on, 8. 5 billion to fox. That is the spinco, could come down as a result of tax reform, the lower tax rate and that will have the effect of delevering what will be left to fox and the questions there, what will they pursue in terms of their strategy, as i reported earlier on squawk box, the possibility of fox going back out there into the marketplace, perhaps even buying a studio, i know that sounds strange, and some digital assets. But theyll be inquisitive with that newco or spinco, as we call it and disney itself, of course, an enormous company now, guys, in terms of its scope and most importantly, its International Assets some 40 of this company will be international if the sky deal is completed. Not their purchase of the 39 , but the additional purchase of the 61 that fox has in front of it, in june. So many issues here and youre going to get to iger in a moment and talk about the regulatory picture what becomes of sky, people are talking about hulu for europe. Igers tenure, James Murdoch future, theres a lot. The impact on sports on netflix and amazon, on the content theyll ostensibly not get you can go 100 Different Directions here with this one story. It really is. And i think you also have to step back to just the origins of it, itself i mean, ive shared this a few times in those first days when i knew i had the story, sneak, still wrapping your head around this idea that Rupert Murdoch would retreat in this way, is hard to imagine. But he has, to a certain extent. Lets get to the story itself and get to the man behind it bob iger now joins us from disney headquarters. Good morning, bob. Thank you for being with us. Good morning, david thank you. Good morning let me start off with risk. You know, a deal of this nature, and all deals, of course, come with an inherent amount of risk. Youve done deals in the past, but nothing approaching the size of this. Nothing approaching its scope in terms of geography with the International Assets and i know youll make a different argument, but also on antitrust so i guess my question is, why is it worthwhile for disney to undertake this risk, to give 25 of its stock to fox shareholders for this deal . Well, i think it has to start with the quality of the assets that were buying. Rupert has managed over time to assemble just a Stellar Group of assets, and as youve pointed out, before i came on, theyre global in nature so were getting highQuality Content, were getting global reach, were getting access to new technologies, and were also getting great talent so we believed in looking at the opportunity that we had to acquire all of that and considering what the world looks like today in terms of media, that while theres risk associated with this, whether you look at the price or the regulatory side or whether you look at the complexity of integrating companies this size, that risk was well worth taking on because of the tremendous opportunities that lie ahead for this combination and i think rupert, obviously, saw that, too, to own equity in this combined company. And you pointed out that fox shareholders own roughly 25 of disney should provide the fox shareholders with substantial upside, particularly when you look at all the disruption that exists in todays world of media. And you consider what this combination might be able to do in terms of not only cob the ntg with that disruption but actually thriving in such a different world. I think its very attractive, again, to start with well go back to the question you asked, work the risk associated with it bob, take me back a bit, if you can. I think the genesis of these conversations and where we are today is important to understanding it from its whole. My understanding is, you and mr. Murdoch, you meet occasionally of ceos of your like do, have known each other for a long time, and he was starting to broach some of the challenges he sees in the future and you seized on that for at least the opportunity of a vision you saw. But tell me why, a, he saw it as challenges to his business and you saw it as an opportunity to get a lot bigger in a lot of different areas, if the opportunity actually, as it did, came to the fore well, i dont want to answer the question on his behalf except to say as i mentioned a few minutes ago, ive had Great Respect for him, particularly given the array of assets hes managed to put together and how theyve been managed and we get together occasionally, because we genuinely like each other and respect one another, and its great to be able to spend some time musing about the business and in a meeting we had, a casual gettogether, this summer, we both talked a lot about the Disruptive Forces of the business and where it might be going and i think generally agreed with one another on what we were seeing and when i left, i just felt that i had the impression that maybe, maybe, he would be open to doing something together. So i called him a few weeks later after thinking about it. And posed the notion of taking this very seriously and possibly considering, you know, the two of us merging or us acquiring their assets and he showed a willingness to take a look at it. We put pencil to paper, spent a lot of time on it, and came back to him and said, we think this is really worth it, and off we went and its been an interesting, but a smooth and cordial negotiation. Were both very pleased with where we ended up, both in terms of price, but also in terms of the assets that were putting together and i think you have to look at this in terms of a global perspective. Not only does this give us great reach globally, but if you look at the world today, consumers are consuming far more content, Entertainment Experiences than ever before. Quality really matters, but so does the means of access it has to be user friendly, it has to be navigable, it has to be accessible in frictionless ways and we love what theyve been able to do in terms of delivering content to consumers, both in europe and parts of asia and india. We like the idea of being able to control hulu through this acquisition and providing consumers with more opportunities to access great content under compelling experiences in the United States and we love the brands that were buying and the combination of their brands with ours and what we might be able to offer consumers and the production capabilities and weve also got great talent thats coming with this. And i truly appreciate that. Yeah, well, weve spent, of course, the last few weeks talking about the possibility of the deal and focusing, in part, on the international, but also on the directtoconsumer effort that youre going to be undertaking a little more than a year from now. Was that the key to this deal . Was there any one . And on directtoconsumer, bob, its, you know, something that tough some experience, but not perhaps as much as the people youre going to be or the companies youre going to be fighting with. What gives you the confidence that you are going to be able to succeed in this increasingly competitive environment . Well, they have a lot of directtoconsumer experience, particularly in europe, where they have roughly 23 million subscribers and in india and we believe that well be able to take full advantage of the experience that they have. Hulu has been building that experience here in the United States, as well. And we think by controlling hulu, well be able to accelerate its growth in the directtoconsumer space what does that mean, bob . On hulu, when you say, control its i want to stop you there, because i want to understand more what your strategy is going to be for hulu which, by the way, i think is losing 1 billion a year and youre going to have to consolidate that on your Balance Sheet. That cant be necessarily a pretty picture well, well be buying control of hulu, because well be buying out foxs stake. With that, well have the ability to direct hulu in ways that we havent been able to, as essentially equal partners but well also be able to infuse hulu with even more content. We will actually invest in content from both entities for hulu our goal on the directtoconsumer front in the United States is to go out with essentially a familyoriented product with disney and pixar and marvel and lucas and thats going to launch in 2019, a sports product from espn in 2018, and well probably be a more adultoriented product from hulu and give consumers the ability to buy all three or to buy them individually. But its still a bit early right now to determine fully what direction well take that. Well obviously use one engine, one consumer acquisition engine and consumer retention engine, one technological platform to essentially flow all the content well create to consumers. And we think its actually quite a compelling opportunity for the company and we think its really compelling from a consumer perspective. You know, on hulu, again, you bob, you competed with comcast, of course, weve reported on this, for this asset. They are a significant owner of hulu, as well, a Consent Decree comes off, middle of late or next year. Do you anticipate any trouble from the minority investors in hulu, as you sort of take control of that company and dictate its future no, we certainly hope not we think its going to provide comcast with an interesting opportunity, as well, as we seek to grow hulu in even more compelling ways. I have not spoken with Brian Roberts about it today i plan to give him a call at some point to talk about it, but its still kind of early but to go back to one of your questions in terms of whats the most compelling aspect to this, david, i think you have to look at the content were buying, you have to look at the global footprint, at the access that all of this going to enable, and you have to look at the people you are on the hook for a reverse breakup fee of 2. 5 billion should the antitrust authority say, we dont want this deal to happen. There is some, at least, concern in certain quarters about the bringing together of the Regional Sports networks with espn, and as well, two studios together that would represent as much as or more of 30 of the annual box office. Why are you willing to bet 2. 5 billion that you can get this through antitrust well, evening that this is very consumerfriendly the aim of this combined company is to create even more highQuality Content and then to distribute it in ways that consumers prefer and consumers demand in todays world. And we think that this combination is going to enable even more of that. And we hope that regulatory authorities both here and the United States look at it with a consumer in mind thats primarily why on the sports side, i think you have to look at the Regional Sports networks as a compliment to espn, not an overlap in the sense that, like a Television Network has television affiliates, where a network is a National Programmer and the affiliates are local, the same thing is the case here, where espn has essentially a National Program footprint and the rsns are more local in nature, and theyll be able to complement one another. Therell be a sharing of product, so we can infuse espn national with some more local content and infuse the local Regional Sports networks with more National Content and the result of both will be better for the consumer than it is today, than they are today you know, on the antitrust front, ive reported, comcast, our Parent Company has competed for this asset, but there was concern about its antitrust profile when it came to being a potential buyer of them pb aandt may have been one reason comcast did not emerge with this prize are you concerned at all, bob, that there might be an interloper here . That there might be a company, whether its a comcast or another who says, you know what, youre paying too low a price. We actually think youre getting away with something that fox gets more money for. And were coming over the top and were going to make a bid to try to take this away from you well, i think when you enter into an agreement like this, you have to have your eyes wide open to all kinds of possibilities, whether its the Regulatory Risk or the risk of getting topped. I think you have to look at whats best for the shareholders of the companies were quiconvinced this is goodr the shareholders of disney but if youre a shareholder of 21st century fox, and you suddenly combine assets that includes disney and the heritage of its brand and the 21st century asset, particularly the International Side, but also the intellectual property and the people, you end up with something that i think is very, very compelling, as an investment to create longterm value. And if youre in it to create longterm value, we think that weve got an extremely good argument to make to the shareholders, as to why this makes the most sense for them. Speaking of longterm, your term at the company is going to continue beyond what had been originally intended, as a result of course, the integration that will take place and youre overseeing it. I had heard that youve thought about a run for the presidency why is staying at disney worth not making a run for the president of the United States well, i hadnt made my decisions about what i was going to do when i left disney in 2019 i believe strongly in this combination and knew that if we pursued it, that it would require me staying longer. And i thought that was the right thing to do, both for me personally, but also for the shareholders of the walt disney company. This is going to take a lot of energy and a lot of focus. And i look forward to rolling up my sleeves and getting involved over the next few years and putting together a company that, i think, will be both compelling to shareholders, but also great for consumers around the world and finally, bob, in terms of that effort, of course, youve referenced James Murdoch in an earlier interview and on your call, as well, and the help that hes given you or at least that you anticipate as well with the integration, that will prove so important to success here. Is there going to be a role for mr. Murdoch in disney in the future james and i have had a number of conversations, and he will be integral to planning the integration of these companies weve talked about a potential role for him have not really concluded anything, but were going to continue to have that discussion so, still unclear, but were certainly going to talk about it and finally, just your reflections at this point. Did you think in that latesummer conversation with murdoch, youd ever actually get to this day, announcing this enormous and really seismic deal no, thats a good question to ask. No, not really i thought it was a long shot but the more i thought about it, the more rupert thought about it, the more we talked about it, the more it made sense and when we were able to agree to the terms, somewhat complicated in nature, but still, i think, compelling, we got it done. So im certainly excited to be here today i think if you were to ask me in august as whether i would get to this point, im not sure that i would have pbet that i would have, but glad that we have reached this agreement and really looking forward to the future as are we and i think many of us would have shared those similar sentiments early on. Bob, thank you so much for taking the time with us this morning. We appreciate it appreciate it happy holidays bob iger. And you bob iger, chairman and ceo of the soontobe farlarger, farlarger disney. And while youve been talking to iger, Rupert Murdoch is on the call talking about what he calls a momentous occasion, saying the new company will be called new fox for now and he says, i know a lot of you are wondering why did the murdochs come to such a momentous decision, are we retreating no, we are not thats going back to in murdochs words a lean challenger mode. So the murdoch part of the story is an important one, too so important. And i think that was you know, iger referenced it in terms of murdochs view of the world changing and the competitive challenges and weve talked a lot about them we know the names. They have access to endless amounts of capital, as well. Theyre google, its alphabet, its facebook, its netflix. That changing world. And i dont want to dismiss the family dynamic my own reporting would indicate that was an important part of this, as well. Rupert trying to figure out his two sons and how to deal with sort of some struggles there some struggles there and maybe this is the best way to have accomplished it. But in terms of putting yourself directly in the crosshairs of competition, youre also playing against depocketed players who are willing to lose. Cowens doug kreutz had a very interesting critique of the entire deal saying those competitors are in the long game of lost leadership so disney is jumping squarely into a potential situation where margins will continue to be under pressure the only way to win the game, they say, is to not play its an interesting sort of take on this whole thing. It is although, i dont know how you dont play if youre disney. Like, the world is changing and ive had this conversation with iger youve got to change at some point, youve got to say, okay, weve got to change this up, because its a different world and we need to figure out a way to compete. And you cant argue, melissa, with those brands theyre going to have at disney. Its going to be pretty powerful and what happens with hulu, that was a fascinating part of the discussion, especially from the comcast point of view. What happens with comcast . Do they still want to play in that pool once theyre clearly the minority it will be very interesting we didnt get a lot of detail on hulu, but thats an important point of this and a platform theyll use very aggressively. It already has some momentum, but some losses, too and all the jokes today about Marge Simpson now being a Disney Princess a lot more on the disney fox deal including some reaction from former tv ceo mark white. Markets look pretty good more squawk on the street from post nine in a minute. Is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. [ mouse clicks, keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] good questions lead to good answers. Our advisors can help you find both. Talk to one today and see why were bullish on the future. Yours. Seven minutes to the opening bell lets bring in art cashin. Disney is the big story of the morning. But ecb stays unchanged. And weve been watching over the past 24 hours how markets are reading this tax bill in conference, art. Its been a little confusing. I think the futures will help this morning by overnight chatter that the republicans may have enough votes to actually get the bill passed. Thats a little confusing, because there are also reports the that mccain may be hospitalized and if hes not there for the vote, thats going to make things even tighter. But theyre up and theyve got even though the european markets are down, draghi seemed amazingly dovish he was getting ready to scale back, but said he could still add assets if it was needed and, so, hes supposedly weeks away from tapering and tightening, and yet hes still talking dovishly art, you pair what is happening in terms of tax reform along with what analysts are finally coming around to and companies are finally coming around to. Theres this big question as to whether or not the markets are pricing in tax reform. And all of a sudden in recent days, weve had a verizon upgrade recently citing in part the impact of tax. Delta at its investor meeting today saying it could see 1 to 1. 05 positive impact on yearly eps because of tax for all those people who thought tax wasnt priced in, maybe not the case i dont think its fully priced in. And there are other potentially disruptive things, this passthrough for independent operators may heavily impact the brokerage business you might have a lot of the financial analysts determined to go independent and pass through their revenue straight to them thats going to be a challenge for lots of places and may change the figure of the brokerage business finally, the data continues to look strong claims 225 retail sales are the real thing. No, things are good but again, that pesky inflation doesnt get out of the way of the core inflation yesterday was weak and actually prompted a minor rally in bonds so, we look like were in pretty good goldilocks shape. They need to get up above 26675 to get through some resistance here well see if we get there at the open art, thanks so much. In fact, the opening bell just a few minutes away ive asked chase sapphire reserve cardmembers to find my next vacation. Uganda, what are you up to . Thats a real silverback gorilla. Im freaking out 3x points on travel and restaurants. Sapphire reserve, from chase. Make more of whats yours. Directv has been rated number one in Customer Satisfaction over cable for 17 years running. But some people still like cable. Just like some people like wet grocery bags. Getting a bad haircut. Overcrowded trains. Turnstiles that dont turn. And spilling coffee on themselves. But for everyone else, theres directv. For 1 rated Customer Satisfaction over cable, switch to directv. And for a limited time get a 100 reward card. Call 1800directv youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell about 2 1 2 minutes. Big day in media, in hollywood, in Silicon Valley, as disney buys an awfully big chunk of 21st century fox, a deal thats going to reshape the way you consume content no matter where you watch it, really well talk about that. Ecb leaves rates unchanged were going to get a Net Neutrality vote, which is getting buried today in all of this otherwise would be a very big story. The abandonment of Net Neutrality, what that will mean, whether or not its going to impact peoples access in a certain sense to their favorite things on the internet yeah not unimportant. And not unimportant for many of the companies we ended up talking about today, whether its disney and fox or comcast, certainly our Parent Company, as well, which conceivably would b a beneficiary. And the ones that would be dinged by Net Neutrality, by google and amazon and apple, which might stand to lose. Its interesting to watch the reaction to some of the competitors. Comcast, the parent of this network, had been higher by about 1. 8 just a few minutes before your interview, its paired those gains in the free market it looks like its going to open higher by about a half a percent. It will be interesting to see how the chess pieces play out. And particularly, the trading action in 12in 21st century fox, which is higher than what it was yesterday. Is that why you asked about the interloper no, its not. Youve got to remember its worth about 29. 50 in disney sp stock and youll get the fox spin is it worth 10 bucks a share, 8, 9 . Most people coming in somewhere between a value of 38 and 40 overall. But youre not going to get that right away youve got an antitrust review that is not without some questions. Certainly that will take time. And you pointed out this morning, a buyback to offset some of the dilution 10 billion . 10 billion right away and another 20 20 minutes after close. People wonder if 12 to 18 simmons a long time to expect closure. These things seem to take forever. Even though they will argue, as you heard iger, it is easy theres the opening bell and the s p at the bottom of your screen at the big board this morning. Blank Check Company gig capital celebrating its recent listing at the nyse. Over at the nasdaq, atlassian. A number of sellside calls on all kinds of retailers today tiffany, for example, gets up to buy over at citi lulu gets up to buy at deutsche. Gap cut to market perform, i believe, over not sure which firm, but oppenheimer talking about struggles at banana and the flagship. Watch retail today the banana rory will get pushed out farther a lot of upside at old navy as well as athleta and how thin those margins are and it wasnt entirely a surprise, given how much 40 coupons you get in the mail for everything at the gap. The disney fox storyhas lon tentacles. But as we look at charts of netflix and to a lesser extent, amazon, its curious to see whether or not investors see liability or vulnerability now, as a result of this netflix has been a bit weak on occasion, after we started talking about this as a possibility, given the idea that disney is, of course, withdrawing its content from the platform when is it next year, when they have their own directtoconsumer offering. And then, well, theyre going to control all the fox content or a great deal of it so will the same fate happen there . Dont know, you know didnt ask about the contractional arrangements, but the idea being, netflix is going to have to be more and more reliant on its own productive capacity, which we know theres plenty of web spending 8 billion next year, as they will, on content but this is going to be a new competitor, disney and they, of course, hope in a very, very significant way time reminds us when iger started to hint at the streaming strategy his quote was, were going to launch big and were going to launch hot a few months later, those words rang very true we werent sure what they knew back then. And im not sure he knew in september, wasnt clear. He had an inkling this might happen we spoke to bob iger a little earlier on the program and here is his rationale, to a ecerta certain extent, on the deal, and the worth hes taking and why he feels its worth taking on behalf of disney shareholders. It has to start with the quality of the assets were buying rupert has managed over time to assemble just a Stellar Group of assets and theyre global in nature were getting highQuality Content, global reach, access to new technologies, and were also getting great talent so we believed in looking at the opportunity that we had to acquire all of that. And considering what the world looks like today in terms of media, that while theres risk associated with this, whether you look at price or the regulatory side or whether you look at the complexity of spe gra integrating companies this size, that risk was well worth taking on and they have got it to the finish line, of course, with the deal itself the stocks, we spent a lot of time talking about this potential deal and the market has already adjusted to a certain extent, to many of the economics that we had already reported on. And so youre not seeing a big move although both have now gone into the green, slightly. Disney and fox to me the pbig question at this point is what happens to the rest comcast was a known bidder for these assets so what other assets could they possibly be looking for . And what was the rationale that Brian Roberts had in looking at those fox assets and engaging in those talks with Rupert Murdoch. And can those goals be fulfilled with another view. Listen, the International Assets, as we said many times, represented a significant prize for comcast. And were talking about star in india. I cant tell you how many times talking about this deal mention the power of star and how valuable that can be sky, of course, also, assets in latin america that are important. So those International Assets were a key reason for comcasts interest, given it is largely a Domestic Company we cant rule out the possibility, guys, that at the very least, youre going to have other companies, including comcast, continue to take a look at this. And while i am told by people familiar with the situation that comcasts antitrust liability, so to speak, was one key reason why murdoch chose disney, it doesnt mean that comcast might not make a decision to sort of put it to shareholders, particularly if they view this as being a low price and i think they do. I think there was a higher price out there that they would have been willing and able to pay for these assets that said, they may not have had any break fee included in their deal, to account for any trust risk so i dont want people to jump to too many conclusions. Sorkin, though, was referring to this earlier we cant rule out the possibility, certainly, that this thing is not yet all done that theres an auction in a sense that has begun and that somebody might come along, willing to pay 2. 5 billion reverse break free 1. 5 billion, excuse me the 1. 5 billion is reciprocal, 2. 5 reverse on regulatory. And say, hey, we think we can pay more lets put it to shareholders and murdochs, your vote is only 8, 17 you dont have your voting shares when its a merge eer deal to rely on. Its going to be fascinating. And people asking probably questions that are a little too simplistic, but questions about murdochs relationship to the president , would that impact the regulatory picture iger also has had some runins with the white house, leaving various business counsels early on would that be a factor as well in the regulatory scope . Unknown. Unknown wouldnt come up were it not for the conjecture around time warner at t and the reasons behind the dojs decision to block that deal. But it does come up. And certainly we know that murdoch is close to trump or has what we think is a pretty Good Relationship there comcast does not, it is believed, have a Good Relationship might have faced a tougher time in washington, it is argued, but with the Domestic Networks that could have been a problem, but maybe there would have been a willing tonnes diveness to dive. Rich greenfield tweets, the key question from you, david, was about iger anticipates any trouble among minority investors of hulu, as he takes control of that company and obviously tries to alter its future. Heres what iger said. Well be buying control of hulu, because well be buying out foxs stake. And with that, well have the ability to direct hulu in ways that we havent been able to as essentially equal partners but well also be able to infuse hulu with even more content. We will actually invest in content from both entities talked about hulu sort of being a grownup streaming service, as they have espn for sports, maybe a disneyfamily familyfriendly service, so you can start to drawbroad brushstrokes here. People who try to figure out numbers will note that hulu has fairly significant losses. And those will have to be consolidated on disneys blealae sheet, and it has a 30 owner in our Parent Company, comcast, which really cant do anything in terms of exercising its ownership rights, but that ends. He says hes going to call to ryan today so expect that phone call but he did seem pretty exclusive, saying that comcast would continue to benefit. So it seems like he was extending an olive branch, so to speak. But who knows if comcast actually wants to play that game they were certainly rivals for this asset those are going to be the key stories. By the way, teva, the other story today, up pretty sharply on those jobs cuts and pier 1 got the wind knocked out of it as they missed by a couple of pennies. Lets get to bob pisani at the dow at a record. Zplodisneys helping the dow were only about 300 points awa from dow 25,000. Those retail numbers this morning were terrific, up 0. 8 month over month, that was a surprise, way better than expected retail is again rallying, banks are having a good day. The passage looks like imminent passage of the tax bill, a big help there techs leading energy has been lagging generally this month, but you see fractionally to the upside its good now that the tax bills are reconciling and were getting very close its good to remind everybody exactly whats at stake here so the reason the markets been rallying here in these last incremental part in the last few weeks is that it helps earnings, overall. Without taxes, most analysts have 8 to 10 gains in the s p 500, on earnings for next year with taxes, and these are strategists putting in the numbers now, these are different kinds of people, but most have numbers up 11 to 15 thats a significant difference. And this is why the market has been rallying recently, a good part of the reason the market has been rallying. Banks are a particular beneficiary. Banks have relatively high Corporate Tax rate they are a big tax cut beneficiary. Theres the bank, the kbe in the last few weeks, as weve had the Senate Budget committee advancing the legislation. You can see a white line, way outperforming the s p 500, thats on the bottom line. Banks have been up almost 6 the s p is only up 2 since the end of november. Thats tax cuts. So banks in general have got a lot of tail wind going for them right now. Theyve got the tax reform theyve got rate hikes, potentially, next year, thats going to help them out theyve got some Bank Regulations that theyre hoping will help them out the credit quality, generally, has been very benign, recently and yes, if you want an issue, loan growth is kind of lacklust lackluster and thats true and a little bit of a mystery, frankly. But overall, pretty good for the last few months for the banks. Disney, i hope youre watching davids terrific interview with bob iger i watched the shares, outstanding. So, yes, of course, theyre issuing new shares and turning around and doing a buyback on top of that, but disney has been very aggressive in its buybacks for many, many years in 2011, they had about 1. 9 billion shares outstanding very notably every year, with about 4 , theyve been buying back today, 1. 5 billion shares outstanding. This is before the deal. So were talking about a 20 reduction in the shares outstanding over the last five or six years remember, overall, Everything Else being equal, that means the earnings have looked 20 better. There you see disney helped the dow maybe 15 points. Important things elsewhere as those retail sales numbers, did you see the numbers overall . I tend to look year over year, not month over month, but furniture sales have been doing well, we know that, Building Materials and stuff have been doing well, we know that electronics, a very good number year over year hasnt been that strong in a while. And here, wait, Department Stores are showing growth . This has been a laggard all throughout that number has been negative all year, practically, and all of a sudden, now, were seeing a little popup. Yes, its true, the comps are bad, but i think thats very encouraging and maybe one of the reasons why weve seen a nice little rally recently in some of the retailers. Have you noticed that . We talk about the xrt, but i just want to point out what some of the retailers have been doing so far in the month of december. Nice moves up by macys, kohls, l brands, gap, very large parts of the Retail Market elsewhere are up 3 to 5 the bottom line is, yes, weve had a terrible year. Yes, all of these companies are still down for the year, but still some glimmers of hope as numbers are a little bit better than anticipated right now, dow up 70 points. And remember, carl, 24,700, 300 points away from dow 25,000. Melissa, back to you thank you, bob pisani lets head to the bond pits. Rick santelli is at the cme group in chicago hi, rick good morning, melissa yesterday we saw 177 settle right back up to 181 in twos the long end was hit a bit 273 wasnt a terrific close on the 30s. Theyre coming back, but eversosploevers eversoslowly lets look at a twoday chart of tens certainly, it looks like its going down, okay and tailing up a bit, because after yesterdays fed statement and premany Central Banks, like the European Central bank today, rates did come back just a little bit at the end, but not much now, if you look at a oneweek chart, here we are pretty much at the same place weve been doing the bulk of our trading, kind of in the mid230s or a smidge higher. Look at a one week of bunds. Their oneweek chart looks a little bit more aggressive, because they traded a little lower in yield, higher in price and now theyve grabbed on again, but once again, it wasnt that long ago we were 45 to 50 basis points now were hovering around 43 foreign exchange, mario draghi doesnt seem to be moving the market much, but it definitely had a firming effect, whether it was nervousness going in you can see on a oneweek chart of the euro, it is moving higher now lets get to the real steak and potatoes here. It is rather significant, even though these currencies havent really broken out of a range, but theyre trying to. Were above 118, as you can see on this chart starting in october. That seems to be rather significant resistance and finally, to flip it around, back towards the Vantage Point of the dollar index, it continues to drift weve lost 94 handle hovering at some of the lowest levels in the last trading days. But its still up about a sixth of a cent. N until it gets above 94, down close to 6 to 7 for year, it doesnt seem as though our fed is being as aggressive as they have you have to give them credit theyve raised and have some Life Insurance on a potential recession, which is going to come at some point, but it still doesnt seem to be reflected at least in 2017 in the investor value of the dollar index. Carl, back to you. Rick, thank you very much, rick santelli. When we come back, former direct tv ceo mike white will joining us and react to the disney fox deal dow record high up led by boeing and disney, back in a minute 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. Jack and jill went up the hill to fetch a pail of water. All because of a burst water pipe in their house that ruined the Hardwood Floors in their kitchen. Luckily the Geico Insurance agency had helped them with Homeowners Insurance and the inside of their house was repaired and floors replaced. Jack and jill no longer have to fetch water. They now fetch sugarfree vanilla lattes with almond milk. Call geico and see how affordable Homeowners Insurance can be. Disney fox, a big story this morning, obviously lets bring in the former chairman and ceo of directv, michael white. Its great to have you back. Thanks for calling in. Good morning, carl. On the spectrum of historic media deals, where does this rank and why well, you know, its certainly, i think, a brilliant strategic combination. It really has got significant top and bottomline synergies. I think, maybe, some of the things you havent focused on is the diversification in both audience [ inaudible ] millennial capability [ inaudible ], and importantly, i think the international play here is not as well understood, particularly visavis the netflix challenge. And lastly, i think the technology capabilities, you know, we studied both hulu when i was at directv, and we know the band tech engineers quite well the engineering capabilities of those two organizations are superb and i think will be a huge plus for disney Going Forward. Yeah, were being asked to think about disney now as a Truly Global Company i mean, star india, over 1 billion in revenue people are coming around to this and it does remind you how every quarter that netflix posts, we watch international subs, maybe more than domestic subs. Well, absolutely. I think thats the hidden story of netflixs capabilities. Look, netflix is great, a wonderful business in the u. S. But the game changer for content is selling internationally theyve got 54 million subscribers internationally. And there are so many components to this business deal that are going to enhance disneys ability to go after the International Audience if you think about it, you guys havent even talked about foxs capabilities in latin america, foxs capabilities in europe, star india has doubled over the last seven or eight years. You know, i think this really provides a tremendous capability and talent internationally that will really propel disneys ability to be even more global media world. With this deal, michael, disdisdisney has the competitive lead when it comes to the technology embedded in it has the Competitive Edge when it comes to International Distribution where does that leave comcast, in your view comcast is a completely different animal cop cast has incredibly powerful cable and internet capability delivered to homes its too is suburb. If you look at what brian has done, the engineering capabilities hes built in Silicon Valley theres plenty of room for both a pepsi and coke and dr. Pepper in this industry i dont think you know, in that sense its an apple and an orange so i dont really think of it that way i think comcast will continue to mike, we have spoken about the International Power of the deal, believe me, to a certain extent though. Reporter think youre right in saying people may not under the underlying economics some of those businesses back to domestic, the rsns are the biggest single price tag, over 20 billion for the Regional Sports networks does that make sense to you from a disney perspective, and do you think it does aid their direct to consumer strategy when it comes to sports . Well, yes, but so i think you put your finger on the single biggest exposure everybody an antitrust standpoint is clearly the Regional Sports networks if you think about the bundling and tying that goes on this in industry, i think there will be a lot of focus on that by the regulators i presume this goes through both the fcc and doj. You can never take for granted anything in that process. So yeah, did i ves tours, perhaps . I know its too early to know. These days with antitrust, we really know nothing. You seem to think theres a possible impediment there, dont you . Thats an area of focus for sure again, in a different world, there would be remedies. You could do allah cart pricing and offer that up. In this word where they dont seem to focus on behavioral revenue im into the sure. Most of the other areas from an antitrust standpoint, i dont think arent as compelling with significant market power to move things around. Its a very strategic deal youre right, the Regional Sports network is as bob said very comremt complimentary to espn but i noticed they didnt put the Big Ten Network in and probably for exactly that reason it would have put more attention on sports. But to that point, mike, why do you think iger sees synergy between the rsns and espn and murdoch didnt see it between the rsns and fs 1 . Fs1 is still kind of the new kid on the block and its starting off if you think about the rsns and bam tech, bam tech did all the technology for baseball. So the ability to do direct to consumer i think is significantly enhanced by uniting disneys ownership of bam tech with the Regional Sports networks. So i just think theres way more ways to play it and enhance their direct to consumer strategy than you would have had at fox alone one last thing, a viewer asks, it says that this reminds them of walmart, amazon, that you got a competitor a lot of distance between you and that competitor, but youre making moves to cox press that distance does that make sense to you . Well, you know, again, i think iger is a very, very smart separatist in how hes looking at businesses. Historically, i think disney has been very good at integrating acquisitions over the years. I think this will make disney a much, much more Capable Company on top of a company thats already word class so i just think its a terrific move for disney. I think it also is a terrific stock forthe Murdoch Family an fox shareholders to own long time i think as you pointed out, this is not done by a long shot from an antitrust and regulatory review in todays world. There will be Political Considerations as well as substantive stuff, particularly i think around the sports aspect of it. Well have to see. Its going to be a long regulatory review process. It will be fascinating for all of us to watch mike, appreciate your insight. Good to talk to you. Happy holidays, everybody david, nice job. Thank you, michael. Dow is up 54 points back in a minute see thats funny, i thought you traded options. Im not really a wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade were going to have more reaction to the story of the day, maybe the year. Disneys megadeal to acquire various assets from fox. Dow up 49 points were back after a short break 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. Notheyre not investing iney commoditiesies. Or fixed income. What people are really putting their money into is what they hope to get out of life. But helping them get there requires a real refusal to settle for average. Because when you approach investing with a tireless desire to beat the status quo, Something Wonderful can happen. Those people might just get what they wanted out of life. Or maybe even more. [ click ] [ keyboard clacking ] [ clacking continues ] good questions lead to good answers. Our advisors can help you find both. Talk to one today and see why were bullish on the future. Yours. Welcome back to squawk on the street. Breaking news. Our october read on business invento inventories, were expecting down. 1 of 1 and thats the way it turned out. Down. 1 of 1 . Being an october number, this will affect the gdp readings that will probably change in a positive way due to some of the better retail sales this morning. But on this number specifically, this is only the second drop in business inventories all year at minus. 1 the other was in april down. 2 thats the last time for a comp were down here. Market doesnt seem to have reacted much to that but it did with deals moving higher on retail sales carl, back to you. Rick, thank you very much good morning welcome back to squawk on the street. Im carl ki marks up 66 as we watch disney, ecb, the tax bill, Net Neutrality and more. Weve got a deal disney is buying foxs film and tv assets in a 52 billion stock deal what bob iger told us about it, the future of media and more. Lawmakers reach an agreement on a sweeping overhaul of the tax system well take you live to washington. And ready, set, hike, the fed raises rates and signals more hikes to come. First disney and fox. Lets get to the financials of the deal itself and move on from there. We did speak with bob iger, ceo of disney and share his thoughts, as well. It is as carl said, 52 its about 515 million shares exchanged for fox. The assumption of net debt of 14 billion from foxs Balance Sheet adds up to a deal worth close to 69 billion when you actually take the value of the 515 million shares at disneys current prices thats unadjusted total for various considerations fox shareholders you see at. 74, 2745 shares of disney. That amounts to the around 29. 50 bucks per fox share. What will be the remaining company, what theyre calling the spin company be worth as weve said in our previous reporting, some put it as high as ten bucks a share, 2. 8 billion. And what its future will be. It is not going to stand still it will be taking on a Tax Liability of what could be as much as 8. 5 billion given tax reform, maybe lower perhaps as low as 6. 5 billion that will dramatically lessen debt load at the company allowing it to potentially pursue other acquisitions. None of this can happen anytime soon given the regulatory review that will take some time to get done here. But it is a seismic change in the media landscape. Of course, giving disney so much more content and perhaps even more importantly from its perspective, significant size in terms of International Distribution one question, is there still interest from others our Parent Company which did bid aggressively to buy this asset but was i am told not looked on as a at the briefed bidde due to concerns about the antitrust and regulatory review that comcast would have to undertake in order to get the deal done. Does that mean comcast is done and others wont see an opportunity here to try to take a shot even though there is a 1. 5 billion break fee that would go to either side if they took on a superior offer i dont know i asked bob iger his thoughts on that were convinced that this is certainly good for the shareholders of disney if youre a shareholder of 21st century fox and you can suddenly own currency that combines disney and all of its assets and its heritage and quality of its brands and the 21st century assets particularly the International Side but also the intellectual property and the people, you end up with something i think is very, very compelling as an investment to create longterm value if youre in it to create longterm value, weve got an extremely good argument to make to shareholders why this makes the most sense for them. This deal born out of conversations that mr. Iger and Rupert Murdoch, the man behind 21st century fox, have from time to time, and they had one towards the end of the summer in which murdoch started to talk to a certain extent about, well, some of the gating issues he saw in terms of it further expansion, the need for more scale, the competition against the likes of google or alphabet, facebook, apple. Amazon, netflix and what seemingly is their unlimited supply of capital to continue to take it the fight to the likes of 21st century fox. Iger senses an opportunity there to think is it possible he would consider selling some of the key assets of the company. That is why we got to this point, not a point either thought they would get to but one they did mr. Murdoch have been motivated in part by the continued struggles he was having within his family his two sons, loughlin and james ceo of 21st century fox, his hope perhaps this is also cos help on that front and so a deal was done James Murdochs future has been something of a question mark will he be a part of future disney i did ask mr. Iger his thoughts on that matter james and i have had a number of conversations, and he will be integral to planning the integration of these companies weve talked about a potential role for him, have not really concluded anything but were going to continue to have that discussion fox shares now over 2 , interesting how the market with so many different moving parts here dilution on disney given the enormous issuance of shares but at the same time, theyll be buying back 10 billion worth of stock using their Balance Sheet as the cfo said on the call for what they see is obviously a great opportunity here still questions about regulatory, still questions about integration and so many other things but market taking it in stride this morning and perhaps starting to try and understand what a new fox will look like, whether or not theres a chance for an interloper and what company may do when it is independent given its strong Balance Sheet and unlevered Balance Sheet. For more on all of this, ross gerber, ceo of gerber kawasaki whose Largest Holding is disney as long as brian cheeser its good to see you both. Ross, your largest position, how important do you think this deal is for disney . This was the deal we were praying for. I cant tell you how this will reshape the Entertainment Industry i want to congratulate bob you finally have become the king of hollywood for sure now. And by combining all this ip together under the stewardship of iger and the disney team, they will maximize the benefits of these synergies between all the characters and different stories they can tell among all the Different Properties not to mention they got an international piece with the india and the European Assets which gives them distribution to a huge new group of people that i think will be enormous consumers. When you couple that with the new ownership of the disneyland in paris, for example, and also in china, theyve got every region in the world now covered. This is the transformative deal in the entertainment business. Im super excited about it. Yeah, we havent talked about parks set. The impact on parks and Consumer Products we didnt mention last jedi. Its opening weekend. Cant wait. Brian, you go through a few different parts of this. Market concentration in terms of content. The add market sports rights, and direct to consumer overall whats the most important die nap mick to you right now . Frankly the value they generate from operational synergies is probably the single most useful thing. Getting many different kicks at the can how to figure out the right direct to consumer approach this could offer great leverage for the bam Tech Acquisition but the one commonality may we be bam tech. Thats a positive thing. You know, i dont think that the advertising market, their market power doesnt increase in a meaningful way because of the nature of the assets changing hands. It is a negative that they do not have the fox sports 1. Not a surprise here. But to be clear, theyre going to be bidding against fox when it comes to sports rights. You would want to expect 15 annual inflationings in sports rights when the next round you have rights go up for bid. Thats not a positive thing. But generally speaking its certainly positive for disney and fox. So brian, youve got accelerating on disney. Thats correct. Does this deal move you fort away from sell ratinging and closer to neutral. Lets just say that the synergies are real and very positive you also write hope to that why would you ever say disney ive known them for 33 years at the valuation of the market today and with the assets it owes, they just built a moat around their business nobody else can get in. You cannot start a studio in hollywood easily with the two dominant producers of content now together, this is just a huge thing. I dont knowian youd ever sell the stock right here. You dont, ross, you dont see any risk in the direct to consumer strategy . You know, its a huge undertaking for them, not to the mention the integration. Theyve done large deals, marvel, pixar but nothing close to approaching this. This is not without significant risk. Of course, once again, disney would have been acquired by somebody else if they didnt do this because they were starting to look vulnerable in a world where it is about ott. So for me, the risk was them not getting into ott or not having good enough or compelling content when they had ott other than childrens content. Now by getting adult content, not to mention the huge library of the simpsons and everybody else, you know, this is gives them the ott dominance to take on the netflix of the world. Let me tell you, apple and facebook and everybody else now, theyre done they just missed the boat. And now theyre just picking little pieces off the edge and its all about netflix, disney and hbo. Why do you want to compete . Why do you want a disney to compete . Brian, im going to go to you with you question. Why do you want disney to compete with amazon and netflix . Why do you want them to go head to head on the direct to consumer do you want them to go head to head with companies willing to lose money on this business . That sounds like a losing game. Thats an important point i think a lot of lot of folks long and positive on disney dont consider a lot of the new initiatives will be substantially less profitable than the old ones thats not necessarily a bad thing. A stock around 20 years from now, obviously disney will be healthy. That speaksings to why they should invest in these spaces. With every passing year, an encreasing share of consumption and spending will relate to content delivered over the top direct to consumer that is a bad thing for espn the world that is ala carte where individuals choose if they want espn is not a positive for espn that said, if theyre a bigger player in direct to consumer offerings, that is a positive at a lower margin. Finally, those to the degree there are skeptics about this, they sometimes point to dismys history on the web, on the internet, in technology. I mean, Park Technology set aside, lets say and they argue its been checkered. Do you disagree with that . No, i agree with that bob will tell you that hes not a tech guy hes an entertainment content guy. Thats why they bought bap tech. It gave them the technological edge they need second lid by controlling hulu they get ott experience that they can build from. I dont look at disney as a tech company. Its a content company so i think with their acquisitions and strategy now, they will be able to compete on that technological level we expect them to do more in the Technology Space to bolster that area guys, just the first of many segments were going to do talking about implications of this deal. Ross and brian, thanks so much see you next time. When we come back, a lot more on fox, disney plus the gop agreeing on a final tax bill as Congress Races to get it signed, sealed and delivered by the end of the year look at stocks at this hour. Dow is in a pretty narrow range, up 5 points but hit a record at e opening bell more squawk on the street in a Minute Energy is changing fast and were changing with it. Building a smarter grid, investing in new technologies, thats aeps road to the future. And the International Brotherhood of electrical workers helped make that happen. The ibews Outstanding Union professionals have the skills and training to get the job done right. Thats good for our customers and for our bottom line. Ibew members are our power professionals. They should be yours as well. Ronoh really . Gs going on at schwab. Thank you clients . 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 . If you dont like their answer, ask again at schwab. Schwab, a modern approach to wealth management. Weve got a deal lawmakers reaching agreement on a sweeping tax overlaw plan. Elon joins us now from washington with the latest. Republicans do have a deal on the tax bill the big question is do they have the votes to get it passed in addition to the corporate rate, landing at 21 , i have confirmed from sources that it would take effect right away also from businesses the alternative minimum tax would go away but one source tells me the individual amt would stay in only with higher exemptions. Another change coming in the bill deduction for state and local taxes would be capped at 10,000 but you could apply it to either property or income taxes. Republicans are still betting this deal with rank and file members and several swing voters have told us theyre still undecided. The full text of the legislation wont be released till later this week. House ways and means chairman kevin brady said he is encouraged by how far theyve come. The final agreement wont be done till the Committee Conference Committee Report is filed at the end of this week. Were making very Good Progress on all the key issues driving the rates, tax cuts for middle class families, making sure businesses of all sizes see tax cuts and become competitive worldwide right away. The republicans are hoping to start voting on this bill as soon as monday and nbc news reporting guys, the Vice President mike pence will be delaying his trip to israel by a few days so he can be there for that vote. Back over to you. His vote might be crucial elon mui in d. C. Were joined by pam olson and sean head of politic policy research at barclays sean, when you take a look at this and the numbers at this point, the possibility that senator mccain might be in hospital right now and not able to vote, where do you see this coming down. On the senate side its going to be close. Theres still a few key issues staying within your 1. 5 trillion budget cap, the cost, the issue on sequestration that has to be weighed and thinking about the aca impact nor collins, mccain, jeff flake, cochran of mississippi who hasnt been in the senate, these are all key individuals assuming corker still votes no. Pam, what are you telling your clients in terms of planning for what seems to be in this deal at this point . Well, theres certainly a lot of things still a bit uncertain. Its hard to move forward clearly at this point. We think that a lot of companies are getting ready for the expected cut in the rate to 21 . The expected repatriation of foreign earnings, as well as some of the other more complicated provisions theyre trying to understand what the impact is going to be. On the preprosecutioniation front, what are clients indicating to you theyre planning on doing at this point . A lot of companies are still evaluating what theyre going to be doing, but it is certainly going to be a good thing to have the cash thats been locked up overseas come back to the u. S. And be able to be used for investments or to return to shareholders in the form of either dividends or stock buybacks in either event, it gets recycled in the u. S. Economy in ways that add to economic growth. Thats a real positive thing jamie dimon had comments on this yesterday said think of it as qe4. It doesnt matter whether its a dividend or buy back or a cap x investment, its going to sustain economic growth. How much of that would you expect to be a mix of return of capital and actual investment. For some ceos theyll see this as an opportunity for buy backs or dividends for others its thinking about expanding operations our economists thinking up to a half a percentage point of additional growth. Temporary boost over the next couple years the fed yesterday, yellen said close to the same thing in terms of a temporary increase to gdp, as well. In terms of s p 500 stipulates not necessarily in your direct bailiwick, but over at barclays are you factoring in the impact from tax yet or waiting still till that passes we should see upward revision . I dont know if well see upward revision. Thus far theyve been farcing what the progress would look like ive said Fourth Quarter of this year, First Quarter of next year, this is faster than i thought. 21 , they settle on 22 , thats lower on the corporate side i expected all year because its expensive that to go that low. As they do the back and forth on property tax and seed to find additional money, thats something they may move on. We mentioned the diamond comments, pam. Gund lack yesterday saying youve got gdp running at a 3 rate for three quarters. Why would you stimulate when youre finally busting out of the twos does the timing make sense or are we not going to worry about that. I think our tax code is so out of what can with the rest of the world it has distorted Investment Decisions and caused the u. S. Economies to lose out on a lot we would have otherwise gotten so getting that corporate rate down closer to the global norm fixing our International Rules to provide some incentives more companies to do more in the u. S. Are all really good things and things that will put us on a much stronger course on a Going Forward basis. Its important to get this done as soon as possible. Fed chair janet yell condition indicated that tax could have a marginal upward impact on growth but essentially said its probably not going to jump start inflation it was almost a goldie llocks scenario is that the view of barclays that the feds paths wont be accelerated because of the impact of tax. Theres a possible fourth hike if we see growth accelerate we put out a big piece call whats priced in we saw a tenyear deficit increasing tax cut, what would happen if we see acceleration of gdp, we could see the fourth hike. Sean, thanks so much. Pam, our thanks to you, as well. Thanks. When we come back, ready set, hike the fed raising Interest Rates signaling more to come what that means for the markets and your money in 2018 right now dow coming off the p 66tsndhighs up 43 poin a s 26 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. Dow hit another record high up for a sixth straight day upbeat Holiday Retail data this morning as the ecb and fed paint a pretty optimistic picture of growth steve liesman, our senior economics reporter morning. Phil, melissa just said the word goldilocks to describe what we heard from yellen this week and data is pretty good. Tax bills coming together. What should be are we worried about going wrong as we move into 18 i think yesterdays press conference was just a great blueprint for investors. Basically what the fed is telling us is not only are you going to see an upgraded growth forecast next year but not the inflationary issues that will push them to speed up an the tightening cycle at the end of the day she also said that global risks are balanced so this sets you up we think for a pretty nice scenario where the fed doesnt have to worry about the economy run too hot to hurry up and tighten at this point the probability of get two consecutive quarters of negative gdp growth is also a low probability event and its all about the earnings and data which is such a great story were telling buyers steve, it wasnt just the cool inflation picture yesterday. It was also her unwillingness to say asset prices are out of what can. You know, just to carry the metaphor, she said nothings flashing red and possibly not orange. And all thats left, guys, is green. Right . So you dont want to have the fed chief saying its a green light to buy stocks but she said it wasnt red and wasnt orange. I think that was definitely part of the bull case getting back to the retail sales numbers, i was doing a little work on it were up 6. 4 of retail alleys this is november compared to a year ago thats the best year on year gain for retail sales that i can find going back to 2004 and one of the best month on month gains compared to october that i can find going back to 2009. So these are strong numbers. I was about to do a little bit of work on whether or not that be bodes well for december or not. My early read is that it doesnt seem to hurt it if you have a strong november, you can still have a strong december question of whether or not we borrow forward some of the spending that would happen but were about to i think and im going to get this for later today upgrade the Fourth Quarter gdp. Im thinking that number comes in throwser to 3 than it does 2 1 2 or certainly 2. Phil in, this sort of environment, it sounds like you think of is coming up roses for equity markets how do i infest . Do you stick with the rotation weve seen unfolding or buying financials, trimming technology and going into industrials good question one of the risks is just inflation turning not to above targets but if inflationings were to slip so a deflationary risk that would take the feds food off the pedal on this normalization kind of process. We still think were in reflation. There should be a rotation here in companies that are doing well cyclely. This is not the qe story of a multiple expansion what we believe is this is a story built on earnings. And that leads us i think to some of those pro cyclical names. Financials make a lot of sense for us here. Were also not calling for rapidly higher Interest Rates but financials do really well if the fed stays on course and then some of the nice to have from the tax bill that we heard in the last segment. Yeah. Guys, were going to keep on it. Pretty interesting day for data. Phil and steve, well talk to you later. Thank you now lets send it over to Contessa Brewer for a news update. North korea warns President Trump is taking a dangerous step toward nuclear war by seeking a naval blockade of its country. It said it would see that as an act of war in tokyo, the u. N. Chief Antonio Gutierrez says its crucial the Security Council stand united against pyongyang. It is very clear that Security Council resolutions need to be fully implemented by north korea first of all, but fully implemented by all the other countries whose role is crucial in order to make sure that the sanctions are put in place. Israeli police say 67 palestinians were arrested pore clashing with security forces. Theyd been demonstrating against trumps recognition of jerusalem as israels capital. And the former home of nfl hall of Famer Dion Sanders is up for auction. The 29,000 square foot margin has nine bedrooms, 10 1 2 baths, 14car garage and three swimming pools not to mention a barber shop its last listing price was 14. 5 million. Apparently not flying off the market but it should be. Its known as the crown jewel of prosper, texas i dont know how many crown jewels prosper, texas has but its a big one. Contessa, thank you we want to take a quick check at a live shot of the fcc were watching fcc commission her speak. Were expecting a decision on open open internet regulation which could have tremendous impact on a lot of players in the media and Telecom Decision and well monitor that as it comes. When we come back, iger strikes back more on the megadeal, disney de dng fox assets. A epive on the antitrust angle. Squawk on the street returns 21st century fox Rupert Murdoch speaking with investors this morning after announcing that deal to sell a lot of assets to disney Julia Boorstin joins us now with more on that good morning to you, david. Rupert murdoch saying this deal unlocks the next great leg of foxs journey. He says he is pivoting to make new fox a Growth Company focused on news and sports the company which theyre calling for now new fox will include fox news, sports and Fox Broadcasting saying the company will have a strong free cash flow, at least 2 billion which will provide it with the flexibility to maximize near and longterm shareholder value. That includes the potential for acquisiti acquisitions seems like were missing a sound bite here. What he said is this would be a Growth Company centered on live news and sports brands and the strength of the fox network. He said hes a man with a competitive spirit ru per murdoch as well as lack lynn murdoch made a number of comments about their interest in going direct to consumer and lever anding Technology Assets theyve been developing. The Digital Strategy for the new fox is the same as for the old fox. Weve been pretty open for some time in saying we believe that you know, all of our content and channels will ultimately have a direct to consumer distribution element as well as a traditional distribution combined. And so and thats very much the same here. Ruppert murdoch said theyll be in a mood to expand and to do new things as for the question whether that could include recombining with news corp. , he said if it does happen, it would be years away we have the sound bite from the murdoch. Take a lis. And this will be a Growth Company centered on live news and sports brands and the strength of the fox network. Those of you who know me know im a news man with a competitive spirit of course, david with all those comments about him being potentially inquisitive and having a competitive spirit, it will be interesting to see what he goes after next over to you. Yeah, as we pointed out the Balance Sheet will be delevered. There will be a financial opportunity for them to do some things thank you. We have concerns surrounding the issue of competition and regulation in this deal with disney earlier i spoke with disneys ceo bob iger about the regulatory hurdles the deal may bring up key amongst them the merger of the Regional Sports networks with espn. Heres his response. We think that this is very consumer friendly. The aim of this combined company is to create even more high Quality Content and then to distribute it in ways that consumers prefer and consumers depend in todays world. We think that this combination is going to enable even more of that we hope that regulatory authorities both here in the United States look at it with a computer with consumer in mind thats what hes hoping, of course specific to those Regional Sports networks. Lets get more on the antitrust concerns bring in former fcc commissioner Robert Mcdowell and former u. S. Deputy attorney general paul mcnulty. Paul, when you look at the combination of assets here, anything that would concern you from an antitrust standpoint . Well, i think that its probably going to be an easier deal to try to sell to the department of justice because its largely horizontal. Its largely bringing together two big content providers and yes, it will make for one very large content provider but there are other players and there are emerging players with this sort of over the top Silicon Valley Companies Involved in content development and providing consumers with more choices so i think largely speaking this is about bringing together horizontally some really strong content. Yeah. Robert, been talking a bit more about the antitrust side via the dojs point of view. On the fcc, given your experience there, if there was an area of concern, what would it be . The fcc may not have much of a role here because the broadcast assets owned and operated stations will stay in murdoch hands. There arent any major license transfers here it would be pro forma into the new coor spin coand the fcc doesnt give companies when its a pro forma, no substantial change of ownership. Its going to be an antitrust question but keep in mind, this is also a defensive measure. There are new companies intending billions of dollars like amazon and netflix on new content and User Generated Content these companies have to compete against. So the denominator the definition of what youre competing against is growing thats something the doj has to consider when its reviewing this. Yeah. There has been a specific focus on two areas the merger of the two film studios given their preponderance of the percentage of overall volume at the box office and Regional Sports networks being added to spen robert, is that an area of concentration of power ta might be a concern to antitrust regulators when it comes to sports programming you can make a claim. People will be looking at it when you look whats happened to linear cable channels, theyre under a lot of stress and competitive threat right now and viewership declining nbc and a lot of layoffs at espn for instance with all the fragmentation and over the top plays, the fact that nfl and mlb and others are looking at different Tech Companies to have their content carried over, theres a lot of competition between the content producers as well as the Delivery Systems for that content. So i think doj has a wonderful opportunity here to look at what does this deal mean in the digital age with all this fragmentation. And lets actually be realistic how were defining competition, who is competing against whom. As a defensive play because there is competition and i dont see this doj giving the sports combination much trouble at all. Although its very difficult to ascertain exactly what the motives of the doj are these days paul, comcast also bid on these assets was in there fighting to try to own them one of the key reasons it doesnt is antitrust concern. Would it be your belief that a comcast acquisition of these assets would have represented a larger anticipate trust hurdle than a disney acquisition . It might have you see the concern about the vertical versus the horizontal and the way you combine content and distribution which is whats going on with the at t, time warner litigation. That could have been a more complicated question to look at than i think the more horizontal combination of big content that we see here. So neither one of you thinks theres much of an issue here, do you i think the force will be with disney on this one. It wont be a problem. You going to go see the movie later . Midnight. If i can stay awake till midnight i would this weekend for sure. Well leave it there for now. Thank you. Thank you. Youre welcome. Lucky you got tickets are hard to get right now. Shares of teva, surging after announcing it would cut a quarter of its workforce about 14,000 people and suspend dividends. Shares up almost 15 stocks at this hour it, dow slowly losing gains of the day, ckn mite5. Ba ia nu hey. Pass please. Im here to fix the elevator. Nothings wrong with the elevator. Right. But you want to fix it. Right. So who sent you . New guy. What new guy . Watson. My analysis of sensor and Maintenance Data indicates elevator 3 will malfunction in 2 days. There you go. You still need a pass. There you go. Let out your inner child at the lexus december to remember sales event. Lease the 2018 es 350 for 319 a month for 36 months. Experience amazing at your lexus dealer. Netflix. So why are so many analysts missing the mark on a hot group of stocks . Good question. The answer is in tradingnation. Cnbc. Com more squawk on the street straight ahead they came out of nowhere, sir how many of em . We dont know. Dozens. All right lets teach these freaks some manners good luck out there, captain thanks but i dont need luck, i have skills. I dont have my keys. on intercom all hands. We are looking for the captains keys again. They are on a silver carabiner. Oh, this is bad. As long as people misplace their keys, you can count on geico saving folks money. Fifteen minutes could save you fifteen percent or more on car insurance. Fedex forecasting another record break agseason expecting to deliver between 380 to 400 million packages between now and years end morgan brannan is live from one of the busiest distribution hubs in the country with more morgan thats right. Fedex races to get a Record Number of packages to delivered to doorsteps this holiday season, its getting creative with how its getting some of those packages to consumers. One example, a partnership with wall greens giving consumers the option to pick up and drop off packages at a more centralized location for fedex, this eliminates delivery reattempts and means more delivery density cutting down on time and costs going versus going to individual homes and creating more capacity for consumers, packages are safe from pirates and walgreens its a way to drive foot track from its target customer which is middle aged working moms this is really around how we continue to evolve to meet consumers needs. And were able to offer an safe and secure package pickup and dropoff as well as access to convenient locations all across the u. S. So we checked this process out ourselves in manhattan last week ill say theres only a few customers had sent packages to the store we visited keep in mind this partnership which includes nearly 8,000 locations is still very new and fedex says this is all part of a longer term plan they have similar partnerships with albert sons and krogers to broaden and expand the network and all the delivery options worth noting, fedex is not alone. U. S. Has taken similar steps in recent yearsand analysts say that amazons purchase of whole foods is expected to be leveraged in this way, as well back over to you. Morgan, thank you morgan brannan from a fedex hub here. Now over to john with a look whats coming up on squawk alley. Its a big day for Net Neutrality the fcc voting on rules that are going to change the way the internet is regulated. Were going to dig into that with reddit cofounder Steve Hoffman coming up on squawk alley and, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from Td Ameritrade. Lets hop over to the cme group and get the Santelli Exchange hey, rick. Good morning carl and thank you. Id like to welcome my special guest on this central banking week, dr. Judy shelton thank you for taking the time, dr. Judy my pleasure, rick all right, so weve had a lot of Central Bank Meetings lets look at the top three and see what your thoughts are ours yesterday, of course, and today bank of england, European Central bank any thoughts not many big changes on the latter two i think were going to see a lot of Foreign Investment money come into the United States, because its clear that we are going to proceed on raising rates. If we get the tax reform package, and were awfully close, thats going to be very good fundamentally for the performance of our companies, but i think that foreign money will be chasing not only that, but also the higher Interest Rates and theyll see an appreciation of our currency, the dollar, relative to the pound or the euro. You know, and its very interesting thats your synopsis, because many are nervous that if the equity followed Balance Sheets, as theyve had since the crisis, both moving up highly correlated, what happens when one starts to go down . Youre offering a parachute, saying the capital flows could save the day, which is kind of the way the oped today by, who was it, phil graham and tom savings wrote in the wall street journal. In the 80s you saw a lot of money coming into our markets, so that was very good for growth and we benefit from that, and i think it is a saving grace now, when it comes to tax policy, which youve already kind of included in your last discussion, is there anything specifically that you would point to i know the effective rate was a big deal not that big of a deal, nobody pays the effective rate, but many big and Smaller Companies did and they are going to have a tremendous savings, are they not . Yes, and thats really a structural improvement when you see the Trump Administration working on reducing the Regulatory Burden and improving the competitiveness of our tax environment, those are real things, has Intrinsic Value and can generate real growth what the fed does is artificial, kind of monetary slight of hand. So i dont Like Central Bank machinations as much as i do real policy changes that improve productive growth for the economy. Well, you used the term Intrinsic Value. For the last minute, that word has been associated with bitcoin a lot this week by many traders i rub shoulders with on the floor. Hard to say what the Intrinsic Value is there is one fundamental, supply and demand your final thoughts on bitcoin generically . Well, when you mention supply and demand, its nice to be thinking about it in terms of free markets my favorite economist from the austrian school, he said decades ago that you really should have private competitive currencies so i think that even though theres a certain investment mania now surrounding bitcoin, there are some implications for what people are looking for in money. They like the idea of a common currency, they like that its private and not subject to manipulation by government, and i think thats sending a message to Central Banks around the world. Excellent answer, and ill tell you, ive asked a lot of questions regarding bitcoin and i think that was the most interesting. In a way youre thumbs up not diminishing the risks associated with it. Interesting. Thank you, dr. Judy. Carl, back to you. Thank you very much from bitcoin to the tax bill, Jpmorgans Jamie Dimon weighed in on the plan yesterday at an event and talked about Ways Companies could use their newfound tax savings on the corporate side, the benefit is not going to be, like, immediate. You do have the reduction of taxes, companies will retain more capital and start to use it over time. Youll compete away the advantage, so some will raise wages, some will buy companies, some may do dividends and buyback. Dont act like thats a bad thing. That is their money. That money gets recirculated into the american system as for changes for individuals, dimon said he thought carried interest is not proper and he would double the earned income tax credit, a benefit for working people with low to moderate income senator cornyn is on the tape saying mccain should be available for a vote next week timing is still unclear. Weve heard anything from tuesday and wednesday, possibly monday well find out more next week. One of the key things, of course, important to listen to mr. Dimon, how much will find its way back into the economy in significant increase over time in corporate spending and capital expenditures, not just returns of capital to people who conceivably are already benefiting from the cuts themselves starting to hear companies talk about the actual impact eps. Delta, for instance, up sharply in todays session saying it could be a benefit next year of a dollar to a dollar 25. Their total is 5. 75, so that is a big impact on eps. Well hear more and more Companies Come out with some more clarity around that now that we know the tax rate. Even on fox disney, the potential taxable amount to fox could go from 8. 5 to 6. 5 billion. And theyll recalculate right prior to close thats right. 2 billion in savings right there as a result of this tax bill for them. Wow a lot more on disney fox, obviously, when we return. Leo hindry going to bring us his insight when squawk alley starts in just a couple of minutes. 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. Welcome back to squawk on the street. Im dominic chu. Stocks are trading higher today. One of the biggest gainers is the financial sector, up about a percent or so in early trading, half a percent at this point raised its price target on the stock, up by about a percent or so other leaders include brighthouse financial, goldman sachs, keycorp. And sun trust banks. That does it for squawk on the street. Back downtown for the start of squawk alley. Back to you. Thanks so much. It is 8 00 a. M. At disney headquarters in burbank, california, 11 00 a. M. On wall street, and squawk alley is live good thursday morning, welcome to squawk alley. Im Carl Quintanilla with melissa lee, john fortt at post