Transcripts For CNBC Squawk Box 20180129

Le we have the editor of the book report thanks for joining us were going to check on markets see how were set up heres the futures dow down 15, nasdaq down 20. S p down 5 coming off the huge rally to close on friday, another strong week of gains for wall street. How about the tenyear, 2. 65 last week. We begin the week at over 2. 7. Did you see that i think the futures are down. Thats a sticker shock to people tenyear at 2. 72. 30year, just a hair under 3 fiveyear under 2. 5 twoyear, 2. 15 wow. Lets get you caught up with stories were watching perhaps the biggest over the weekend, saudi arabias prince alwaleed has been freed. He was detained. We talked about it for the past two months with the corruption crackdown. Several other officials and saudi royals were rounded up and they were at whats known as the ritz prison. Youll get to see it the ritz prison and alwaleed described it as a misunderstanding there are no topics its just a misunderstanding its a key position we had it was a discussion with government on various measures i cannot discuss it right now because were in discussion with them and thats the whole story and im in my country, im in my city i feel at home no problem at all. Shares of the Holdings Jumped 10 on a daily limit theres a limit how the stocks can go up. It went up to that limit, 10 . Its up again 3. 5 alwaleed told that the company would remain under his ownership. And no assets would be transferred to the state didnt discuss whether he was personally transferring assets himself. Theres a lot of parsing of this interview which we will do in a bit. We will talk about this with Robert Jordan to try to understand his transparency around his arrest. And other arrests. We should note, by the way, he was released after making a settlement after saying it was effectively a grand misunderstanding so strange to let him off scotfree at this point. The question is, what were they letting hi inting him off r and the larger point, what does it mean for investment saudi arabia and ram ipo the ram ipo we talked with the ceo who runs ramco in davos last week the journal made it sound like it was sort of like a money grab lets get these guys see how much money they will pay whether this is really an Anticorruption Campaign or something to raise 100 billion. Right and well have to talk more about that anyway, in other news, the new York Attorney Generals Office has launched a probe into a company that sells twitter followers likes and retweets to people investing their popularity, following the New York Times report on sales of fake followers by a Company Called de how are people employ pronouncing that the times says at least 50,000 have been can compiled using bio information using names and hometowns. Which is the scary part taking pictures, images and actually changing the color a little bit those who bought it, michael dell, former supermodel kathy ireland. A statement says these tactics violate policies and working to stop them. Most said they had pr or staff trying to boost their numbers. What are they going to say, oh, yeah, i did it myself. There was this whole move where celebrities hired social media managers to help them. And then if you hire them and your twitter followers dont go up, what do you do so, i can understand why these folks are doing that i want to know how many more little bots and firms are out there. And by the way, what does it mean to the advertising businesses of facebook and twitter. Sanofi striking a deal to buy ablynx, 2. 6 billion sanofi paying 20 of the Closing Price on friday. That deal coming after ablynx had rejected a bid from novo nordisk earlier. And shares of wynn macau down more than 6 in hong kong win resorts down again slightly premarket. The top of 10 after the wall street journal published the sorry of dozens of allegations of Sexual Misconduct by wynn contest that brewer is here. The wynn resorts launching their own allegations against steve wirn the only women on the board who chaired the Compliance Committee has been tapped to lead the inquiry. Well told it will include outside counsel. And the Republican National committee has accepted sieve wynns resignation with a very brief statement. Steve wynn is largely seen as the emperor of this company that bears his name making the decisions even to the tiniest details even on room design. Wynn has called these accusations preposterous he blamed his exwife elaine wynn for sparking these comments the journalist who broke the story said she was not behind it the company has raised a statement calling into the question what elaine wynn knew and why the board was not alerted. And they blamed and finger pointing directly at her am i wrong at least from the earlier reporting of the wall street journal there were allegations of this in some of the divorce proceedings, or some kind of lawsuits between her and him. More illusions than flatout laying out the details okay. Because thats where the wall street journal began their investigation effectively . Exactly they said that they looked through the documents and started asking questions and i did some of my own reporting on this, and you cant find anyone, a longtime person in las vegas who is surprised by the allegations. And there are people who worked closely with wynn himself who say, oh, yeah, it happened all the time so, now, the question is, how would wynn resorts operate without wynn, morningstar analyst says that wynn resorts has a deep sort of talent. That there are Design Development executives who could lead the company in the future ian coughlan was on the earnings call, and when steve wynn was asked about possible successors in 2011 he himself pointed to linda chan who is the cheeief operating officer about wynn and there are questions what the board knew, if they knew anything, and if they didnt, why didnt they. Okay. Heres the complicated part, right. I was thinking about this over the weekend. Theres a huge valuation ream thats be premium assigned to this company. Historically, people thought he was the magic sauce in this company. So, he goes does the value of the company go or come down because of this. Flip side do we believe that companies and or individuals wont stay at these hotels as a function of these s th s th thats what i was going to say. As a function of these allegations. Meanwhile, not to make it political, weve had allegations against our own president and there are questions whether companies or charities would do events at maralago you raise two points. On the one hand what happens without steve wynn and boston and the projects hes spearheading, as for people who show up, do they really care to say the conventions should some place else. Right if you dont change management, what do you do what do you think . The pressure is on the corporate boards already there are womens advocates calling for him to be fired. But this is a board that is notoriously powerless. In fact, elaine wynn said in her corporate deposition that this is a powerless board she herself felt displaced from the board because she dared to speak out against her husband steven wynn. In the meantime, you brought up those other projects, wynn Boston Harbor is well on its way. A Company Spokesman says they will inquiry opened by the massachusetts gaming commission. And nevada its important to know theres a new product thats in his infant stage. Im interested in whats happening in japan where all of these Gaming Companies are applying for a license to operate big casinos should that go to its final stages of passage. And here, theyre so concerned about the reputation of gaming, this is where it could have a big impact thats a good point any licenses they could lose here in the United States . Thats the other piece of this at this point, it doesnt look like i mean, the licenses are well established in massachusetts, mississippi and nevada could they revoke them . It could happen, its possible dont forget how many people are employed by wynn properties. If youre a municipality or a state looking at this the most important thing is for tax revenue or the jobs. Its unlikely theyll take that punitive action. In theweird way, what your raising is an interesting point should the company itself be punished for the ceos behavior . Right or should the ceo be held accountable. It reminds me of issues weve dealt with in the past ten years, should he personally, the investigations or whatever, should that be separate from the company or not when they say is this a corrosive culture from the board of on down and other employees, or maybe jaufust about him. And there are past who have been deposed who said out in the decisions im sick of acting like a pimp for mr. Wynn they went on the record. And then there were punitive actions taken by taken by the ceo mogul. I imagine every other gaming country in the world is going to be doing internal investigations as every company in Corporate America. I would have thought every company in Corporate America would have already got in there. I had a long conversation with jim learned about this in december because there are other allegations coming to light, not in gaming but other ceos, like Harvey Weinstein he was very clear, he said this is why i have women working in my company i want diversity in pay. Were coming off another week of record breaking wall street futures still pointed a little bit lower and that tenyear treasury yield over 2. 7 lets talk about this with kathy jones who is Senior Vice President at schwab. And peter is here as well. Peter, what are you thinking when we cross that threshold this morning well, its a breakout weve got to go back a few years to see a level this high and i think its reflective of hopes of growth, with see the index close multihigh friday rising wage pressures. And the german tenyear is breaking out over a multiyear level. So its a global thing what do you think, kathy . Is our yield pushed higher because of positive developments around the globe yeah, i think a couple things, Global Growth and reflected in yields but inflation is coming back people forget, last year, we had a dip in inflation, this year if nothing happens but how much higher above 2 for some measures, certainly can get there for the core numbers as we progress through the year Energy Prices are up commodity price, up. Wage prices are up the dollar is down its lifting import prices and the Global Economy is doing better sa all of that combined on friday, inflation closed at the highest level since 2014. Its beginning to get reflected to at least the tips market. And that feels like its tracing the oil price a little bit. Yes you got to go back to 2014 before the price is that level maybe wages look better this time than the last time . I think the wage story is sustainable. Even the commoditile story lili commodity story. We saw a dramatic pullback in mining in Industrial Metals and drilling and a little demand and less spy where do you think the tenyear is going . I think the surprise is on the upside i think the rapidity in the move is also on the upside. Because its not just whats happening in the u. S if the german tenyear all of a sudden goes to 1 , 1. 5 by the way that would almost be a tripping. 2016, six bases to 200 in two month. Kathy, where do you think its going . I call this year for the tenyear to grind higher probably test the 3 i agree the era of easy money is ending and i dont think the markets have fully discounted that i think the fed can surprise on the upside and yields can surprise on the upside so, when we were talking in the last couple months that the curve is flattening. The twoyear moved a ton but the 30year did not. What do you see with the hikes coming out its more for the fed to tighten. And its looking for a little steepening in the short term and ultimately going back to flattening because the tenyear rarely goes above where the fed fund terminal rate is where you think it is now 2. 75. Were probably getting close to that i dont think we can stay above that unless the expectation that the fed is going a lot higher . Would you agree with that yeah. Historically, tenyear was nominal gdp. Imagine if that happens. That hasnt happened in a long time. Gdp, 4. 5 . Yes, are we built in a economy thats so particular to lower Interest Rates is how sensitive are we going to to be to these changes in Interest Rates . Probably more so than people believe right now. Guys, thank you kaen kathy, thank you coming up, prince alwaleed releas released what really happened were going to ask Robert Jordan what really happened in a couple minutes. Nobodys putting their money into equities. Theyre not investing in commodities 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. I thyou never got the brakes looked at . L. Oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading companies see it and see it throughwith digital. We use so why do we pay touters thave a phone connected. When were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Box, the top story, saudi arabias prince alwaleed has been freed joining us now former u. S. Ambassador to saudi arabia Robert Jordan. Weve been speaking to him for many months now, agen shg, as ta gone on. Alwaleed at the center of it, at least the most high profile. Ambassador, help us understand with that interview what prince a alwaleed with this release from the ritz, hes at home now. He called this thing a misunderstanding could that jb. Probably not. I think the saudis need prince alwaleed just as he needs the good graces of the government. Hes the symbol of the new saudi arabia hes a very vested foreign investor people call him the Warren Buffett of saudi arabia. He need to get this over apparently hes going to maintain control of Kingdom Holdings company which is extremely important. They dont need a bon fire this is good they have moved on the former finance minister, Board Members from aranco, if theyre going to do an ipo for aranco, they have to show they have a rule of law ambassador, to that point, i spoke to a very large well call them the money manager for now, does a lot of business in saudi who saw this news over the weekend. Who saw this ideas it was a misunderstanding and also saw reports that said there was a settlement, at least suggested in that interview by prince alwaleed was that there was no Money Transfer of any sort. Vest it makes me feel less secure this is tape of an interview i did with alwaleed just days, week before arrested back to the issue of it, ambassador, if there was a settlement and both side as agreed to keep it quiet to protect the reputations of both, doesnt that leave people even more skittish . I think thats a good point and yes, it should i think we need to have more transparency here. Thats what the outside Investment Community is going to want and we dont have it so, i think its very important that we understand exactly what has happened but if we dont, meaning is your expectation that were going to be hearing from the saudi government that there in fact was way settlement . Or do you believe that prince alwaleed is going to come forward and say there was a settlement or do you think the whole idea everybody is going to call this a misunderstanding and perhaps there was a settlement and we wont know exactly what that is about . I think thats the scenario i think we will not know, they have said they will have made their peace and going on their way. Remember, prince alwaleed is refusing to settle thats why he was incarcerated so long. He said he would be happy to go to trial so, he was a holdout and hes held out longer than many of them did at the same time, you seem to be quite supportive of both the settlement or the fact that hes been released calling this a good thing what im trying to understand, if you were an investor, i think we talked about this the last time, when i left riyadh, literally a week before this Corruption Campaign. I thought the amount of goodwill they generated out of that conference was remarkable. 150 billion had flown out of that country in six to 12 months obviously a little bit of skittishness by the way, money is starting to come back into that country anyway does this change that . I think it may slow it down a bit. I think its going to cause investors to be a bit more cops about whether there really is a rule of law in saudi arabia or whether this is simply a money grab by the crown prince we really dont know, i think theres also the possibility that several things are happening at once. Clearly, they have a corruption problem that need to be addressed. Right this is a fairly heavyhanded way to go about it but they did address it secondly, the crown prince wants to consolidate his power two things are happening now ambassador, let me ask you this, prince alwaleed often watches this program if youre watching were happy youre home. A number of the royal court also watch this program if you were going to offer them advice what they should do in terms of settlement or the Corruption Campaign itself, you would tell them what i would tell them that they need to be more public about what the decisions have been and what the charges were. Apparently, many of these people were really without charges, perhaps for the purpose of investigation. Perhaps for the purpose of identifying other targets. But we need to know more about that secondly, they still have several dozen incarcerated some of whom will actually be going to trial rumors aretheyll be transferred to a prison before that happens we need to know exactly whats going on here. I think the outside Investment Community, the public larcht, does need to understand whats happened here. These people need to also maintenance their reputations, if they have been released without charges at all difficult thread, need to thread there right former u. S. Baemambassador t saudi arabia, Robert Jordan. We appreciateyour time nafta talks, the state of the union, much more and talk about big events investors need to watch with axios editorinchief nick johnson as we head to break, heres a look at fridays winners and losers were back in two. Obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. nadia white the moment a fish is pulled out from the water, its a race against time. And keeping it in the right conditions is the best way to get that fish to your plate safely. dane chauvel sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. tom villa we took our world class network, and we developed devices to track environmental conditions. This device allows people to understand whats happening with the location, but also if its too hot, if its too cold, if its been dropped. Its completely unique. dennis woloshuck if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. Who knew a tiny sensor could help keep the food chain safe . You deserve it all im gonna give it to you announcer welcome back, youre watching squawk box live from the Nasdaq Market site in times square. Good morning, welcome back to squawk box right here on cnbc were not live in davos, switzerland, this morning, were right here in times square u. S. Futures, well show you how monday is setting up i cant believe this, one of the first monday mornings that weve had red anywhere dow off by 39 points nasdaq off by 26 points. And s p 500 off by 7 points. Making headlines this morning. A couple of things going on, a group of activist investors calling on Avon Products to putting itself up for sale a combined 3 of the company is planning to send a letter to the board. They believe a yearlong effort to turn around the board fails and. Have you bought a product in a long time . I dont think ive ever owned one, no. It only would have been from a Department Store its an old school thing. Multilevel marketing brand as well i wonder what they think the fed of ford China Division has quit just five months after on the job site departure a blow from the automaker that has fallen behind its rivals ford china fell 6 last year the Trump Administration is considering a takeover of parts of the countrys broadband network. Documents obtained by axios and confirmed by reuters saying u. S. Needs to central the next 5g network to prevent china from spying on mobile traffic the move would be unprecedented. Current Companies Currently buy their own networks under the plan, the u. S. Would build and pay for 5g and wireless providers would rent for access. What do you make of this, by the way . Is this a true nationalization i agree its empathetical to anything of anything that i think smacks of the way the Trump Administration has thought about business but then it goes to big brother that the federal government is taking over the airwaves right theyre seeing everything that youre doing. There are multiple levels of of complexity of what theyre doing. And there has been real question, you talk to the folks at verizon or at at t about how quickly 5g can really roll out by the way, it could it have implications to this network theyre not saying its a Huge Investment. People are upset with how much theyre investing. Its a Huge Investment and will take a very long time and how do they price the product if they dont own it anymore . Is the government going to set or at least lease it to the private companies. Yeah. And that would put the 5g folks with the cable folks people talk about fixedline 5g in cities that could offer things like cable tv because its so fast i dont believe anyone thinks that the government would accelerate this. I think were a long way from this happening its the weirdest surprising story this morning were going to have axios on meantime, president trumble ba President Trump for the state of the Union Address. There he is nick is here. Axios editorinchief good morning to you. Why dont we talk briefly about this cable situation yeah. Or rather, this 5g situation. Realistic, whats going on here . I think the keyword to know about this is china. This was a National Security document not an Economic Policy doubt the first page of this document we got, of course its live on axios now. In running a system, remember, a National Security, a way to move military units around the country. So this was all framed within the context of china chinas growing power in developing the networks. China wants to build an industrial bridge to do this i think its very much a National Security issue. Handicap the realistic nature or not so realistic nature of Something Like this actually taking place we are at the very beginning of a very long process remember, is this just a discussion draft thats a number of options, i think its a long way before this becomes actual. Were go to be hearing from the president on tuesday give us a little bit of a preview, if you will, curtain raiser as they call it in the journalist world andrew, you just came back from davos, look for trump to be on the davos stage hell be using his inside voice. The growing economy, the great tax bill he does not want to go after democrats as well. This will not about a campaignstyle speech attacking his opponents for things he wants to fight for such as immigration and taxes. There will be much more sort of building bipartisanship. Lets talk about that, what do you think his infrastructure plan looks like . How detailed will he get some numbers are tossed around with federal help which im told 200 billion which 00 hes even called small and then trying to create a Public Private partnership what can 200 billion do draft of this, they expect 200 billion in public money to encourage 1 trillion in private money to follow it again, we havent seen any specifics or lettingive language tomorrow night this will not be a state of Union Address where in days old where the president would lay out dozens of proposals. Have you heard, from democrats, about the infrastructure plan . Its fascinating, democrats have historically wanted infrastructure and yet when you the second it gets private, they Start Talking about toll roads owned by private companies and things like that, it gets complicated quickly . Right a lot of it, theyre waiting on details. These are bullet points. Remember, we still have to solve immigration and a Government Shutdown coming back in a couple of weeks and the last shutdown really poisoned the well between democrats and republicans on the hill so optimistic on a deal structure. Nick before we let you go, he did have what was a very wellreceived speech in davos. Right a lot of business folks talking about that over the weekend. Did not, thus far, hes been on twitter, i guess has not upended that got into a spat over jay zs comments, if you call it that. But what i was going to ask is, where you do think were on this mueller investigation, because that did at least take over some of the headlines of what he said on friday and saturday theres a cloud hanging over everything that the administration does. Like Jonathan Swann reported last night theres a lot of people in trumps circle worried about trumps impending conversation with mueller. Trump has a gift for the use of language and that in a very legal context could be somewhat dangerous. Nick johnston, great to see you. Absolutely. Coming up, the new tax law could have a big impact on super bowlgoers. We are seeing red following on a weakness in asia and europe. 25, the tenyear over 2. 7 this more stay tuned youre watching squawk box on cnbc 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. Welcome back the Grammy Awards left to the confines of california set up shop right here in new york city last night for the first time in 50 years thats why the knicks had to be on the road. And theyre not good on the road anyway, the events 60th edition wound up being a memorable night for one former some particular nbcs mark barger has the details. The grammy goes to 24 karat magic bruno mars reporter musics biggest night, bruno mars, six grammy sweep. Album and record of the year for 24 karat magic. And song of the year for thats what i like. I love you guys so much its incredible. Reporter the night began with a stirring performance from rapper Kendrick Lamar which included dancers symbolically gunned down bone by one lamar won best album its a special thing in the rap world. This is the thing that got me on the stage, this got me to tour around the world support my family and else everything reporter also earning three grammys, Chris Stapleton and alessia cara best new artist and white roses on the red carpet a show of support for me too and times up movements spirit which carried into the show. We come in peace, but we mean Business Reporter and extended into an emotional performance by kesha. Changes reporter joined on a stage by a chorus of women for her praying. Another one reporter and artists reading from fire and fury included a cameo from Hillary Clinton the bruno mars domination of grammys return to new york mark barger, nbc news. Did you stay up late, you guy . Maybe a second. There was some weird performance. Its bedtime for squawk box. Im on european time which actually is working out very well right now are you getting adjusted now for the olympics we actually have to start well, now, i have to start going to sleep earlier doing in olympics three weeks from now were going to be on the air at 8 00 p. M. At night were going to be on 8 00 p. M. To 2 00 a. M. Thats local time. Which is our daytime here in the u. S. Meantime, a story of intersection of sports and business in washington this morning, all three at this intersection there are a lot of hidden details in the tax bill. And one big provision impacting a lot of people who bought super bowl tickets whats going on . Thats right. The new tax on the super bowl tickets are no longer deductible the new tax bill eliminated the undermight for taking a client to the super bowl. Now, they cant deduct anything. Same thing means no more deductions for golf with a current or perspective Business Partner thats causing grief across a lot of industries but forcing stadiums and teams to get creative with how their biggest buyers spend money i together to the ticket manager and he told me youll see different definitions of what exactly a company is page. Instead of buying for tickets you could say you spebought a v expensive meal with the club seats. Maybe the club would kick in a few tickets with your meal and companies jumbotron and a marketing expense. And lets say the sponsor happens to get free tickets with that sponsorship with the tax gains. Let me ask you about this, on the food, i dont think thats 100 deductible anymore either, food itself. They kept the meals 50 its 50 which is better than zero which is what the tickets used to be, 50 . Also note, by the way, meals inside of your own organization like google doing launch, thats off the table now . Its different if its for your employees or nonemployees there. Current or perspective clients what is the golf thing happening . So, before, you and a business client could go play golf together, youd say were doing business and you write off the expense. Right its the equivalent of going to the super bowl. Which a lot of small and medium businesses do, they take their biggest client does the irs sit around saying you went to the super bowl, youre in the box, i see theyre charging you as if its food, but really, we, the irs, can decide on our own. Absolutely. That this is worth 50 of the cost right thats what tony was talking about. All of these oauditors go throug and want to see your receipt is it one ticket outside the box or a club ticket that came with a bunch of meals that could be a 70 ticket or 400 ticket. When you think about the boxes at the garden or any stadium across the country, when people have to reup in the next couple months for next season or whatever its going to be, what do you think happens thats why theyre all calling him to say what do we supposed to do he said why dont you say youre buying meals or sponsorship. Or everyone buys a box, youre on a sponsorship what im saying, the irs is ultimately going to seethrough that thats the next step. This is step one, that will be step two do you think its likely that every Company Going to have auditors going through these receipts he said the Biggest Companies actually never took the deduction because the fines and legal penalties to fight this were so expensive because the irs did check all of this. It was the small and Medium Companies to use the deduction they would get hurt more by this there was more risk there is, by the way, among a lot of tax shenanigans going on right now that you actually do what you want to do and then have the irs come to you and pay it penalties are really high good faith, thats what they say. Anyway, im going to be heading to the super bowl on friday, an were going to be hosting squawk box on friday morning joined by some very big guests then, of course, you can capture the game on sunday on nbc. Thats exciting are you going to stay there for sunday for the game . You know, going back and forth about that rightow n a little bit its going to be cold, plus we were just in sold in davos 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. Like you do sometimes, grandpa . And puffed. Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. 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Lately there was a story about star wars stuff, movie toys arent selling as much. Hasbro, toys r us, the bankruptcy. We think that the future of toys is an educational toys. Not toys that are top down, condescending, they lead to fun and have learning experiences and where technology develops learning experiences we developed a partnership with star wars where we invented this droid inventor kit. Kids get to build their own r2d2 from scratch, they get to build the electronics, make everything snap together, raise their mental through the process and it teaches them what theyre learning during that experience and they love it. How much does that cost this is 99. Okay. Selfish question for what age group the sorkin family has kids. Our sweet spot is 8 to 12 but weve seen kids much younger and older. They create, customize and color and give different functions they love how reactive it is. Where do you where does it work to sell this these days does it work to just put it in a Traditional Store and say, you know what, a parents going to walk down and pick this thing up off the aisle . Do you have to do social media, on amazon, whats the strategy last year when we launched it, our two big partnerships were amazon and walmart in the u. S. , and thats kind of the big focus that we had. Online were seeing pickup and pick up bigger share of sales. Walmart was a great partner. We won top three sellers with walmart. We were on top hundred of amazon toy list it was exciting throughout. Can i ask you about the partnership with star wars yes. You go to them, they come to you. How did that happen . We participated in disney accelerator. Myself and three colleagues of mine last year basically moved to l. A. For 3 1 2 months we sat in disney campus. We went around and met all different departments and franchises and they became equity owners in little bits. Tell us about that. I didnt even know about that. What is the disney accelerator its a program they launched three years ago. They started with tech stars they took it on their own. What it is, an accelerator for disney to be able to work with startups. Thats very cool. Exactly. On anything on anything so things that are related to the Disney Company in general. So some companies are ticketing companies, some companies are software or media or distribution and then some companies are more Consumer Products and toys related. So to be part of that you give them some equity in this . Yes. Do they take a royalty piece of the margin on this product . The accelerator, there are different business models. The accelerator they take return, its a very big deep partnership. They give you access to Senior Executives including the ceo, they give you mentorship. I want to do a whole show with all of that its super fun. Honestly, it was great it was access that was incredible mentorship was amazing you have to do a partnership. Can you speak to this, by the way, given what youre doing with coding, but with hands on things with kids youve heard all of this talk over the past month or two now about how these devices are addictive to children. I mean, truly addictive. And adults. And adults. Do you think that Tech Companies whos responsible the parents or the Tech Companies when it comes to trying to avoid this addiction i think every time a new piece of technology emerges society has to wrestle with the idea of what do we do about that how do we adjust how do we now change our behavior how do we create new products and new experiences to match it. When the internet came out with the same thing when tv was out it was the same thing. Now its the phone. Right. Its our responsibility as media and product makers to adapt to it. For us, what we do is incorporate the cell phone in toy learning. Weve got to go thank you. You have to come back but longer. Andrew is walking up. We veha to thank peter bukfar a huge two hours coming up on squawk box when we return. 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. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. 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. 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Kevin has set is going to join us on squawk to discuss the president s tax plan and message at davos that america is open for business the second hour of squawk box is on right now. Live from the beating heart of business, new york city this is squawk box. Good morning and welcome back to squawk box here on cnbc were all live at the Nasdaq Market space in times square. From hq. Of course. No, he was doing wex. He was on wex. On hq. Easy journey if you leave early enough, no traffic. No traffic. Get it all going. Double duty. You can tell us everything that happened overnight. Well, thats yeah, thats the idea. Thats the idea lets start with u. S. Equity futures at this hour well see where we stand dow is down 32 s p, on that note we were down 75 points at the start of wex. Were they citing the ten year. They, being me . You know, you its obviously picked up a little bit as well but, yeah, improving momentum over the last hour. All right apple is said to be cutting its First Quarter iphone Production Target in half according to japans nikkei news service. Apple has told its producers about the plans. Not seeing too Much Movement in apple shares civil arrests are reportedly here in futures market manipulation former employees of ubs, dooush a deutsche and hsbc. Now this weeks first economic numbers about 90 minutes away. The government will be out with personal income and spending for december income expected to be up. 3. Economists predicting income of half of 1 . Prince al waleed have been freed. Describing his arrest as a misunderstanding speaking to reuters just ahead of his release saturday night. The ritz is known as the royal prison no charges have been filed against him following his arrest as a nationwide crackdown onc corruption last november. There are no charges. Okay. Theres just some discussion between me and the government. Rest assured that this is a clean operation that we have and we are just in discussion with the government on various matters and that i cant divulge right now because we are in communication, discussion with them, but rest assured we are at the end of the whole story we are very confident because im in my country, im in my city, so i feel no problem at all. Senior saudi Officials Say he was freed after reaching a financial settlement lots of questions about what that settlement is up 10 it was freed its up 3 1 2 questions persist about western investors about whether they want to invest in the country. We should say there has been a huge amount of investment even in the past two months during this Corruption Campaign. Your point about how western investors think about this ahead of saudi investors f. It does end up as he said there, quote, just a misunderstanding, thats quite a scary factor for Foreign Investors if this could lead to you being imprisoned in a hotel for weeks and months when theres nothing that comes out of it. I guess people are expecting its more. Thats the question the other piece of it is in terms of turning the page and starting a whole new chapter for saudi whether mbs, saudi, both of them need to speak, there wasnt that much. I was amazed there was not more International Push back to everything thats happened i assume its at the same time that they are making all of these reforms, like letting women go to soccer games, maybe drive and everything, its muddied the picture. I expected everyone was hold up at the ritz there was going to be outrage and you didnt hear a lot of it. Inside of saudi there has been a huge enthusiasm really for this campaign and huge enthusiasm for the changes taking place look, im not going to argue the point, but it clearly clearly saudi is reforming itself one way or the other the question is, is this one piece that people are not happy about. Yeah. We shall see. Some stocks to watch. No, were going to switch focus. No, i dont know are we going to were going to move on investors need to get ready for another megaweek of earnings Economic Data and possibly more record breaking sessions on wall street dom chu has joined us. I have, not fresh off of Worldwide Exchange i have a little bit going for me it is in fact the super bowl of earnings because this week alone one out of every five companies within the s p 500 will announce its Quarterly Results. 110 companies at the last check. If you take a look at the calendar, it is pretty huge. Were talking about the likes of apple, amazon, facebook, mcdonalds, ups, you name them as we talk about what we should expect, lets set the scene by saying this has been a pretty darn good earnings season. If you take a look at the beats, misses, meets, its been pretty impressive 80 of stocks that have reported so far to this earnings season have actually beaten analysts estimates. Thats slightly better than the beat rate. 8 have met expectations and 12 have missed. Thats over 25 of the s p 500 already reporting the numbers. This is a huge week overall. If everything goes as planned given that particular set of circumstances we could expect to see again double digits earning growth if every Single Company in the s p 500 thats left to report reports as analysts expect, you will see 13. 2 Earnings Growth youll also see 7. 3 Revenue Growth so as we talk about the way that things are shaping up for the markets overall, yes, we are at near record highs again. There might be a fundamental reason why a lot of these companies and the economy is going to do well Going Forward 13. 2 Earnings Growth is pretty good. An obvious point to make, dom, this is coming before the effects of the tax rate come in because this is q4 numbers. These are q4 numbers as well. It will be about outlook it will be about whether these companies go in there and say, hey, because of this we can expect to see even better results Going Forward. Right. Weve seen some people up their forecasts, pay out the bonuses, make the wage increases tied to the tax reform legislation. If Companies Start to feel as though theres a Better Business outlook, it may speak to the President Trump theme about america is open for business again. Well see if corporate ceo is there. A lot more companies to hear from dom, thank you. Lets get to the broader markets. Coming off a slate of record highs, brett ryan is here. Hes senior u. S. Economist at deutsch bank and we have jason trener welcome to you both. Brett, what do you think is the significance ten year is over 2. 7 this morning. Is that why futures are lower or how significant a move is that the ten year is going to trade. The immediate statement the european language will be removed. Theyre improving inflation. Its below target. Market based inflation and compensation have moved up a bit. Theyre still low. The second thing is does the government tax reforms present up side risks to the economy. Right. Does that change their balance of Risk Assessment from roughly whats your forecast for rate hikes this ear were at 4 this year. Youre at 4 yeah. Were already ahead of the fed. Youre ahead of the market, too . Yes the market has three full hikes priced in. So you could argue that this meeting statement will probably add another couple of basis points to peoples expectations by the end of the week. Do you agree on all of that, jason . Youve been pretty bullish about the impact of the tax reform and so much more here . Yeah. Quite bullish. To doms point as far as earnings, if anything, Fourth Quarter earnings are lower than they ordinarily would have been because of the tax because of the charges . Because theres a lot of charges takings place. What you cant know is what the second order of fact or the supply side effects of the tax cuts will be, but in my opinion you could get something close to 4 real at some point this year. Could we get 4 you mentioned the supply side is important. If thats expanding outward, does that mean you dont really see inflation pressures coming you dont think the fed needs to be worried first of all, the fed you still have negative real short rates. In my opinion, you still have at least 50 to 75 basis points, three hikes that the fed needs to do just to get Monetary Policy its something thats not exsession civilly accommodative. Thats why im not particularly worried about stocks, because by almost any standard the fed is Monetary Policy is still extraordinarily low. What about the u. S. Dollar in terms of how big an effect that had on gdp last year, likely to have this quarter given its weakness if we saw it turn around and strengthen again, would that downgrade what youre seeing in the gdp . Yeah. Stanley fischer has done some good work on this. It takes about a year to really fully kick in and the move has to be sustained, but about a 10 move in the trade weighted dollar is usually about 20 basis points to core inflation within a year or two and similar number on growth as well. So thats another tail wind that the fed at some point may is going to acknowledge i would say its a he going to be in the march statement. Does it also impact the equity market valuation significantly, or not really i dont think so. At the margin it could impact certainly could impact earnings. 40 of s p 500 operating earnings come from outside the United States so there might be some foreign currency translation effects. But i think not to sound ethnocentric, i think the center of gravity is in the states as far as growth is and where the reforms are coming so the dollar certainly is a worry. My own particular opinion, our opinion as a firm is that the dollar is probably over done to the down side. I think theres been some Interest Rate differentials that have probably gone into maybe weakening the dollar a little bit. From now on my own opinion that Economic Growth differentials will make more of a difference. Its been so weak its just been so weak right one would expect, you know, of course with repatriation, the expectations of repatriation and all the rest of it exactly. It suggests that a lot of those deposits were already in dollars. They were in foreign accounts but they were already in dollar deposits. Brett ryan from deutsch bank. Thank you nice to see you. When we return, steve wynn resigning if from his position of rnc chair and Kevin Hassett will join us to recap the president s message in davos and a preview of the state of the Union Address which were going to hear on tuesday night. Stay tuned back with Kevin Hassett in just a bit. Today, innovation in the finger lakes is helping build the new new york. Once home to the worlds image center, new york state is now a leader in optics, photonics and imaging. Fueled by strong university partnerships, providing the worlds best talent. And supported with Workforce Development to create even more opportunities. All across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov. To grow your business with us in new york state, wow record time. S. At cognizant, were helping todays leading Life Sciences companies go beyond developing prescriptions to offering subscriptions with personalized, realtime advice for lifelong, healthy living. Honey . You almost done . Nope. Get ready, because were helping leading companies see it and see it throughwith digital. Welcome back to squawk box. Steve wynn out as secretary. Wynn told the journal gnat allegations of assault were, quote, preposterous. We wanted some input on how a brand thats built around one persons name reacts when that person is accused of wrongdoing. Joining us is eric diezenhall. Hes the author of glass jaw, a manifesto for defending fragile reputations in an age of instant scandal. Good morning to you, eric. Good morning. So help us with this very question what should if youre the board, do it this way, if youre the board of wynn, whats the right outcome . Well, remember, this is a high profile ceo he is not the whole brand the way he was when i was a kid growing up in Atlantic City area and he was on tv every night in the ads. Theres a difference between when you are the whole brand and when you actually have a real company and wynn resorts is a real company and i do think that it can recover. If you are the board, your objective is different than it is if youre steve wynn. If youre steve wynn, you want to keep your job if youre the board, you want to get the stock back up, you want to save the company and you want to make sure you dont get sued for knowing about something that you didnt act upon. So thats really the priority of the board right now. And so what do they do they do what they announced. There needs to be a Blue Ribbon Panel of sorts that investigates this and then action taken if it turns out that there is a lot more to this than we currently know, if steve wynn reseeds from leadership, i think the company can come back but maybe not right away. Lets talk about it right now. The brand damage for this company, meaning youre a corporation, youre a nonprofit organization, youre somebody who wants to book a Big Convention at one of the wynn hotels and we saw this, by the way, frankly, with our own president with the maralago situation and some of the allegations that have been made against him, and a number of big organizations that effectively dropped their plans. Does that happen to wynn what are the economic ramifications . Well, i think it i think it can happen. I think it probably will because, you know, in this climate, its an interesting thing. Were dealing with an inverted power bubble the more power a person has, the less power they have to combat allegations like this and the less power a person has, the more power they have to bring somebody big down. So the biggest thing that the board is worried about right now is that there is going to be a cascading reaction of people running away from the company. And the fact that wynns wife or that there is litigation that is bringing this in the fore, nobody really cares who is bringing it. They care that this is hot companies cannot are simply not equipped to deal with controversy, so the sooner they get to the bottom of whether or not this is endemic to his behavior in the company, and if it is, hes going to have to recede from having a high profile or this stuff, the drip, drip, will never end. Eric, whats your advice to a board with dealing with the question of whether things are accused or proven . Clearly mr. Wynn denies that any of this ever took place. Does a board, therefore, still just have to act because the messaging around the company is negative based purely on trial by accusation or should they wait until they get fundamental evidence that something has happened or not . My advice in this climate comes from alice in wonderland where the queen of hearts says, sentence first, verdict later. We are not dealing with a due process climate. Nobody cares about due process they care about seeing a head roll they dont care about the data yes, its terribly unfair but a company is simply a company is set up to make the products and sell the products they make. They are not set up to manage controversy. So on a moral level there should be due process on a realistic level, if youre dealing with convention bookings dropping off, if youre dealing with what theyre dealing with now, a 10 stock price, makow just downgraded their stock, in boston theres questions about their casino license review. If that stuff continues, the truth doesnt matter as much as the allegations and the affect that they matter. Does this affect license reviews . Particularly important in makow, 62 or something of earnings, and in 2022 their license to operate in makaw comes up. Ongoing investigations are going to be crucial to the stock Going Forward. Does this affect those negotiations it absolutely does. It already has the question is even if you think steve wynn is a genius, and he is, your loyalty as the board is to the future of the company, not the ceo who built it and i think one of the things ive seen in having managed these situations is that the ceo tends to view this as my company, and when Something Like this happens, that status ends at lightning speed and so the ceo is often shocked that the ultimate allegiance and the objective is not to the survival of the ceo, its to the ongoing survival of the enterprise. Eric, thanks very much for joining us this morning. Much appreciated. You bet. Still to come, the Grammy Awards being held in new york city a big rundown. Check out futures as we head to brea cerad. The dow down 40 points down 20 a few minutes ago. Lets begin. Yes or no . Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. Bruno mars winning big last night at the grammys. He beat out the likes of jay z and Kendrick Lamar he won song of the year and best r b. Hillary clinton made a surprise cameo. She pretended to review the book fire and fury. Cher auditioned. Clinton was the final candidate sending the crowd into a shocking frenzy. Unsurprising that crowd welcomed her presence. Thats what im sayings a few stocks to watch this morning, the new York Attorney Generals Office has launched a probe into the country that sells twitter followers likes and retweets to people looking to boost their popularity online the investigation follows a New York Times report on fake sales by devume. They have been compiled using real bioinformation includin names and home towns those who bought twitter followers include michael dell and kathy ireland. In a statement twitter says the tactics violated policies and its working to stop them. Twitter shares, as you can see up, 0. 6 sanofi is trying to buy biotech ablynx its a 21 premium to the Closing Price on friday. Ablynx rejected a lower deal earlier. Jason trennert for just a minute im still shocked by that grammy thing, by the way its still blowing my mind fire and fury, its not surprising. Not supporting the president . Shocker. It would be like guan tan him in Guantanamo Bay heres what i want you to help me with having just got back from davos. Maybe i have stockholm syndrome, but when i left there the amount of enthusiasm and optimism among ceos, Business People was so off the charts for the president or just in general . For the president but what i would by the way, the president did a remarkable job to his credit, everybody was worried that he was going to stick everyone in the eye and try to humiliate speech was his speech was about as good as it could have gotten. Ill tell you for all of the skeptics, including myself, he won a lot of people over with that line about not that America First does not mean america alone. And it was very, very powerful it was not just the public setting that everybody saw but he did two private sessions with ceos, one group of u. S. Ceos and another group of european ceos people wanted selfies with him by the time the thing was over he introduced his team to people. He brought a big team. It was it was really something. My question to you though is and, of course, one of the things he talked about, we all know, he talked about the success of the market. Do you look at that and the feeling out of davos and say the market has so much more room to run or do we look at davos as one of the great, you know, contraindicators of our times . Thats what im trying to understand its a great question my opinion, the more important i would say more important than the sentiment at davos would be the sentiment for the National Federation of independent business, Small Companies right. Which spiked the day after the election and thats because as a Small Business person myself, even the knowledge that taxes and regulations wont get worse is a positive development for confidence. Okay. Were going to come back in just a little bit Jason Trennert, thank you. Thank you. Kevin hassett is coming up next after this. Welcome back to squawk box. We have a breaking news. We have a deal, a merger taking place right now. Dr. Pepper snaple and Keurig Green Mountain are merging this transaction worth about 11 billion in what theyre calling combined pro form ma revenues. Lets tell you what the terms of the deal are here. Its literally just crossing as were looking at it. Dr. Pepper snapple shareholders receiving 103. 75 per share in a special Cash Dividend and retain 13 of the combined company. Youre looking at dr. Pepper snapple, up 15 just in the premarket alone based on this transaction. Let me just read to you what larry young, president , chief executive of dr. Pepper snapple has to say this will deliver significant and immediate value to our shareholders and the long term up side potential of our new company and track new brands to a platform in a fastchanging industry landscape. So, okay. Keurig is owned by j. A. B. Yes. This is the European Company that has assembled this kind of drinks and coffee empire wasnt panera their most recent acquisition . Indeed. We think of them in the hot drinks space now theyre absorbing dr. Pepper, snapple into that private company . Yeah. Wow we should say kdp targets realizing 600 million in synergies, they say, on an annualized basis they say that will happen by 2021 its going to take them a couple of years to get there. Dr. Pepper snapple expects to pay its First Quarter ordinary course dividend of 58 cents per share. At the close of the transaction they expect to deliver an annual dividend of 60 cents per share. The share prices reacted well above the 103. 75 that theyll receive in cash per share because theyll also receive a stake in the combined Company Going forward. Were up to 117 now on that share price. Up a nice 23 . Its not as if keurig makes those pod coffee hot drink dispensers werent they working on a keurig cold for a while almost like a soda stream kind of product. Right it was a bust, right i thought they shelved that product. Kold with a k to the synergies and the kind of company it is, its not that j. A. B. Is why is keurig buying dr. Pepper snapple . What are the cold beverage brands going to bring to the pod . The combination of these two companies is going to put together brands like dr. Pepper, 7up, snapple, a w, all part of the current snapple, mox and sun kis with Green Mountain Coffee Roasters and what theyre saying is the innovative keurig single serve coffee systems 75 owned, licensed and partner brands in the keurig system. Give some scale at the grocery store. By the way, thats what so many of these transactions are about. Ferrero is another example of a company that is essentially buying u. S. Assets or what you would think would be almost they just bought nestle, right . Thats right. A lot of their u. S. Brands so perhaps its also a way to get in the United States. If you know that walmart and amazon if theyre trying to put the squeeze on pricing, shelf space, whatever the case might be, it reminds me what we talk about in media but perhaps scale is a huge asset. In the meantime, President Trump taughting his tax plan in his interview with joe that took place in davos listen to this i think that the tax plan has has been even better than we thought, joe. What did happen that nobody considered is that at t started, but they immediately followed suit hundreds of companies are giving thousands and thousands of dollars to their workers, and now you have almost 3 million workers that are receiving thousands of dollars nobody ever thought that wa not like in the plan. Starbucks people at starbucks. Yesterday disney and others i mean, by the way, the ones that arent doing it. Yeah. Those employees are going like, how about us guess what right. Theyre going to be doing it too. Joining us to talk about the larger effects of the tax plan that theyre going to have on the economy, Kevin Hassett at the white house this morning. Good morning. Kevin, i dont know if you got a chance to hear it earlier. We were saying the president really did a remarkable job in davos. Of course he did. He surprised and won over a lot of skeptics. I want to talk a little bit about that trip to davos and i want to try to talk a little bit about what we might be hearing on tuesday night from the president during the state of the Union Address. Right in terms of what took place at davos, were you surprised one of the things we kept hearing, a number of european ceos, asian ceos were saying were going to make Huge Investments in the u. S. As a result of this were now hearing that some of those countries, meaning foreign Officials Saying we may need to change our own tax strategy to avoid this right yeah, you know, there are a number of things that have surprised us the president highlighted the biggest one which is when i at cea gave the estimates to the president of the wage effect that we would see, we expected to see 4,000 bucks over 3 to 5 years. I think i might have broke the news here on squawk box about five months ago. As soon as we said that, everybody is out there, the ceas lost their professional lifl, hassetts a liar now we passed the bill over three to five years, well see the 4,000 bucks. That was hard science. All of these bonuses that have come up front have been surprising the people have moved faster than we expected certainly before the capital that we think is going to drive wages higher is in place i think the best economic explanation for what were seeing is firms know ev elerybo else is going to be investing like crazy theyre expecting a high gdp result and unemployment is low and theyre worried people are starting to poach their workers. Before you know it, joe will have an outside offer from hbo so you better give him a pay raise right now. Kevin, help us to understand what you think the rationale has been for the speed with which these companies have provided some of these raises of course, we should note some of them are one time theres been a critique of that as somehow just a soft either to the administration or sort of a publicity stunt, but starbucks and disney is doing something on an ongoing basis we heard why when we were in davos people said, look, in the next couple of quarters were going to have huge profits if our employees see us with these huge profits and were not sharing it, we have a problem. Others are saying theres now Competition Among Companies Given that at t came out and comcast has to come out with their own plan. You know, just after i was confirmed i gave a talk at the Tax Policy Center across town where i went into this effect and basically the bottom line is if the tax rate is going from 35 to 21, that means the after tax cash flow from these firms is skyrocketing historically, if you look at what happens when after tax cash flow is located in the u. S. Versus somewhere else, we see 1 3 of that going to workers. It will be interesting to see at the end of the year, watch the wage increases and profit increases and tax and compare the two. Ill put a number on there that you can hold me against. I think 1 3 of the extra profit located in the u. S. Will show up in bonuses by next january for the firms. Theyre going to start to drive those wages higher. Mr. Hassett, this is jason shinerd. I was wondering if you can talk about Capital Spending for a lot ever that on the street, that will be the litmus test for how successful the economic plan is sure. Productivity will be higher, inflation will stay lower for longer what are your whats your outlook there . And then secondarily, can you talk a little bit about infrastructure as well sure. So Capital Spending by the way, you have to call me kevin mr. Hassett stuff just doesnt work so the Capital Spending story is something that its true so the Capital Spending story is also something that is very clearly in the data now. Dont forget the Capital Spending went negative at the end of the Obama Administration because of high regulation and high taxes and an antibusiness climate. Its gone quite positive its one of the big stories for the last threequarters. I like to see the orders above shipments because that means theres going to be more shipments next year than we had this year in their delivery lag. Its showing a Capital Spending boom in the next year. The Capital Spending boom that one would predict if you looked at the 15 on average reduction because of the tax bill is exactly in line. We saw it in the december orders for delivery this year yeah, its definitely something we expect to see its one reason why you should be optimistic that growth this year is going to be sustained at least the 3 that weve seen on infrastructure, the president has a lot of news to break on infrastructure i think you should watch closely because it will probably come out some time soon. Kevin, should we be optimistic about gdp growth because of the weak u. S. Dollar . The dollar, i know the administration supports a strong dollar policy. We understand thats been a key component of our Economic Policy for a long time. Certainly if the dollar got a little bit weaker in the quarter, there are fluctuations with imports and exports i think the dominant factor on the trade balance this year is going to be all of this inflated trade deficit that weve seen because people transfer price their money off shore and then instead of making it here, they make it in ireland then the moneys in ireland, theres a trade deficit because we have this higher import i think thats going to be derailed a lot by not just the lower tax rate, but if you look at the tax rules, the deemed tangible income stuff, you need Steve Liesman to do an explainer on i think that will fundamentally change the transfer price data for folks. Theyll move what used to be imports back into the u. S. Dont forget, the trade deficit, 50 is transfer pricing by u. S. Multinationals. If they reduce that by, say, 10 youre looking at a serious change i think thats going to dwarf Everything Else. Back to infrastructure. From what weve read in terms of drafts, were talking about 200 billion of public federal money and then really some pressure to create some kind of Public Private partnership and a lot of pressure effectively on states to pony up themselves is 200 billion enough well, you know, there have been a lot of leaked documents im not supposed to comment on leaked documents, but if you look at the sorry state of the infrastructure in the u. S. , you say the government has to do something about it then if you look at the existing data you can see that a big chunk of the Infrastructure Spending in the u. S. Is done by state and local municipalities and by private firms if youre going to have a 21st but public federal money is not going to be the only part of the picture. The question is politically do you think the democrats will get on to this idea of a Public Private partnership for example building toll roads given the position that some of the democrats have had over all of these years i guess politics im an economist. Politics is hard to predict. Theres so much going on that we should all agree about if you look, i know we had disagreements about the tax bill if you look at all of the capital coming home, wage increases that people said couldnt happen, theres a lot that we should start to agree about. Infrastructure is one of those things you drive around italy in a car over a bridge that was built by the romans and our bridges are falling down weve got to do something about that. Kevin, talking about infrastructure i dont know if you saw the report or saw this from your own National Security reports that you get internally, this idea that at least some folks in the administration have talked about nationalizing a 5g network, effectively having the government build the network and effectively rent it to telecom companies. What do you make of that what do you know about that . I cant comment on leaked documents. Im sorry. Its something you guys will have to continue to cover. Its not my area. But does that make sense to you either from a National Security or Economic Perspective . I have not seen the purported leaked document. I dont know what were talking about so im sorry, i have to decline. It did come up in davos multiple times, this idea that other countries may follow suit in terms of their own tax rates. What do you think that does in terms of investment in the United States . Can they act quickly enough and are we creating a race to the bottom s. So the good news is weve just lowered our rate a lot and so that that factor has driven so many countries around the world, even those to the less of errands those countries have cut their corporate rates and we havent that should give us confidence that well get the positive effect for sure, i would expect to see other countries respond in kind. Theyre going to respond because they see that when we do this its good for our economy and its especially good for workers. Think about it, the corporate rate reductions are good and the governments that do it are popular. Thats happening because were not racing to the bottom, were racing to the top. Fair enough great to see you, sir. Great to be back. Thank you appreciate it. Coming up, mcdonalds serving up Quarterly Results oll find out if the returnf the dollar menu helps the bottom line or not. 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. Theyre not investing in commodities or fixed income. What people areally 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. 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. Kohler is an expert in bathing, so you can count on a deep soaking experience. Are you seeing this . The kohler walkin bath comes with fully adjustable hydrotherapy jets and our exclusive bubblemassage. Everything is installed in as little as a day by a kohlercertified installer. And its made by kohler americas leading plumbing brand. We need this bath. Yes. Yes you do. A kohler walkin bath provides independence with peace of mind. Call and ask about saving 1000 on your walkin bath, or visit kohlerwalkinbath. Com for more info. Welcome back to squawk box. We have a big deal in the Beverage Industry that broke just a few minutes ago dr. Pepper snapple is forming with Keurig Green Mountain the shareholders will be paid 103. 75 per share in the form of a special Cash Dividend. Theyll retain 13 of the company. Dps is up 40 to 135 which is trying to account for some of that value both companies are the result of prior combinations i mean, certainly this one felt like it came out of nowhere. Absolutely. Big move well ahead of course is the Cash Dividend. Mcdonalds will be the big report tomorrow morning. Kate rogers joins us with a preview for the golden arches, what to expect on those numbers . The street will be looking for etfs of 1. 59. Same store sales will be in focus. U. S. Costs are 4. 3 . Worldwide comp at 4. 5. A big thing that analysts are looking to hear more about will be mcdonalds new value offerings on the 1, 2, 3 menu the competition for consumer dollars is, of course, fierce. Many fast food and Quick Service chains are offering value deals. Another item on the board, mobile ordering. Mobile is available to all 14,000 u. S. Locations and 6,000 around the world analysts want to know how many members are using this technology finally, tax reform. What will mcdonalds tax rate be and how will it use the proceeds from the tax break the company did not respond to cnbcs request on any plans for bonuses or wage increases. Any comment will be of note. 5 comps sounds very impressive is that mainly driven by the online home ordering now or what factors . So mobile and delivery and their partnership with uber is a huge, huge growth area for them. This new value menu is something that analysts arent quite sure. Franchisees are feeling good about it for the first half of the year might get expensive in the second half of the year. Kate rogers, thank you. It is super bowl week and advertisers are gearing up for the big game what you can expect to see and some of the messages they will be sending thats next. Take a look at futesur weve been lower throughout the morning. Dow still implies 42 . Squawk box will be right back. Your lineup. P the alerian mlp etf can diversify your equity portfolio and add potential income. Bring amlp into the game. Before investing, consider the Funds Investment objectives, risks, charges, and expenses. Read the prospectus carefully at alpsfunds. Com amlp welcome back to squawk box. This mornings super bowl is bound to bring in big ad dollars. Joining us for more is the chairman and ceo of Global Ad Agency good morning to you. Good morning, andrew. What are we going to be seeing when it comes on sunday most of these ads start to run even before the actual day. This week youre going to see quite a bit start to break out we take advantage of social, all the different channels my guess is almost every day youre going to see ads begin to break. What are the one or two ads from your only agency or others that will make the most noise . By definition, were proud of all. I will say this years ads will be more interesting than other years. A lot of social dynamics figure out where corporations are. Youre saying social, what are we talking about any elusions to Colin Kaepernick i dont think so. What we will have is people trying to demonstrate corporat responsibility, trying to demonstrate to their employees, consumers, value structures. Jason, are your eyes rolling yet . A little bit. Any yucks . Any laughs how about we have 111 no, we had 111 Million People that were going to be able to advertise to 70 of all households will have tvs and tune in. Three out of four people tell you they like the ads. This is a great opportunity that some will be funny. I know all of these are your children you have to give us a couple of names to look for. I would obviously look at mr. Mucinex man when people have a tendency to call into their businesses and claim that they are sick. Thats the yucks. I think i imagine. That will be informative. On the social side you were talking about earlier. Taking that issue . Making some changes, the collides dale horses wont be there . Do you think thats the right decision i think that is something that is beloved. I have always loved the horses. Me, too. I will miss them myself. Are they gone forever can someone else use them i cant comment on what another agency or another client is thinking about doing, but i think those horses should be rented out for other people. What about the revenue perk ad. Its about 5 million a spot for about 30 seconds, maybe a little bit more than that. But at the end of the day, it is still a great buy for an advertiser it is an opportunity where 98 to 99 of the public who watches an ad in a super bowl stays for the entire 30 seconds. Thats unique. Do the math were not talking about 5 million for the 30 seconds its the plus plus of social media. Plus plus of running that ad continuously for two weeks. And also the plus plus running into the olympics which is going to be the second great event of this year. So the true price of whatever that 5 million 30 seconds really is is what . A multiple of the 5 million. 14 million, 20 million . Most will be spending about 7 or 8 because television is still the most expensive component people will be taking advantage of twitter to a large extent, on facebook to a large extent. Can you speak to the twitter controversy over the weekend. Sure. All of these fake followers even fake followers potentially on facebook. Do you look at this and say we dont want to be there anymore we do look at it. We are beginning to question much more seriously than we have in the past the Value Proposition of facebook, youtube. Are you reducing your budgets on those platforms we are going to be talking to them about whether or not what we pay for is what we think we are getting and what we are delivering to them has a guarantee. Long, short, facebook, twitter, snap, all of these guys youre paying a lot of money. Long time i would be long short term i think there are a lot of questions right now about what they are actually delivering. Fake followers though has been around for a while. Youve known about that for years. To the extent what were seeing now is mechanisms that are basically multiplying those fake followers so its gone from the proverbial person on his bed to now organizations that basically are taking advantage frankly, its fraud. Harris, great to see you, sir. Pleasure. Are you going to be there miss a Football Game . You were not watching on tv we see the ads ahead of time. More squawk box straight ahead. Theyre not investing in commodities 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. 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Breaking news. Air deal in the beverage space dr. Pepper snapple will merge with Keurig Green Mountain. Al waleed released im in home in my city. No problem. The saudi prince freed. And elon musks new product has the internet aflame. The billionaire cashing in on flame throw mania. You wont believe how many hes sold the final hour of squawk box begins right now live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box this morning right here we are live in times square this is squawk box. Were not in davos anymore andrew ross sorkin, wilfred frost and kelly evans are hanging out with us. Joe and becky are off this morning. This hour we are playing all the losers from last nights Grammy Awards youre listening to desposito. Was that a tactic, were playing all the losers consolation prize. I have heard a lot of bruno mars. The dprgrammys, we do it here we thought desposito was going to kill. Were a business network. Thats a good point to make. Theyve just got the ultimate consolation as well . Squawk. Top of the atm now. Bingo. Some say its better than the grammys. Our guest host is Jason Trennert well hear more from him check on the markets lots going on. The futures we should tell you literally all week last week was green, green, green. This morning we have a little bit of red dow opening off 46 points. S p 500 looking to open off 6 points breaking news in the last half hour dr. Pepper snapple merging with privately held Keurig Green Mountain forming keurig dr. Pepper. Theyre receiving 103. 75 per share in cash. Mondolese will exchange that for a steak in the new company youre looking at that stock ready for this, 34. 5 . You would have loved to have owned this stock on friday joining us is ahled dbog i apologize if i didnt get it right. What do you make of this headline look, its a little bit of surprising news, i would say, in terms of keurig getting there with dr. Pepper. Clearly theyre talking about synergies about 600 million which certainly sweetens the blow in terms of the cost of buying dr. Pepper. But i think what theyre really underlyingly looking for is the distribution that dr. Pepper has into almost every retail store in america for the keurig products as well. So is it i mean, at this price tag nobody else is going to come in over the top and try to break this deal up, right i mean, its unlikely well see. Weve written and talked to them that perhaps theyre looking at this we didnt anticipate keurig taking a look. The way the deal works, it is 103. 75 in cash. Thats 8 higher 13 of the company will still be public thats what the shareholders will have as well. Were going to have to figure out how to value that 13 . It seems like an interesting deal structure. We feel a surprise in much of the market is there logic to it look, i think theres distribution for sure. Financially as well from a cost savings perspective theres probably some logic there. I would say we have to fwig oig out what theyre going to do with it. Theyre very good operators and financial folks, the j. Ama. B. People its not one i would have argued for. If youre coke or pepsi this morning, what are you thinking look, i think youre thinking that theres more consolidation in the space i think youre thinking that theres more opportunity to put similar beverage products on the same truck weve talked a lot about beer and carbonated soft drinks potentially going on the same truck. This is coffee and carbonated soft drinks on the same truck. This will continue is probably what this is suggesting. Thank you for your perspective. Well keep an eye. Youre looking at coke and pepsi both. Yeah, its fascinating. Anyone else could have gone and grabbed dr. Pepper it is surprising that its keurig. Apple is reportedly cutting its First Quarter production of iphone x in half theyre citing slower than expected holiday sales the report said apple is expected to maintain a total Production Target of 30 Million Units like the iphone 8, 8 plus and 7. Shares are down 1 2 percent. Market gearing up for a very big week from the tech titans. Amazon, apple, alphabet, microsoft and facebook all reporting this week. Joining us right now to break it all down, ed lee and ann winblad. Cofounder and managing director were so happy to have both of you here from the west coast and from help us understand how you think what are the big issues you would put on the table for all of these guys right now . Well, super bowl is coming up i think for facebook and google in articular, digital altogether, trust is a main issue. For advertisers theres still a big audience there. Theres bigtime story over the weekend about fake followers and how thats amplified its going to take a while for these guys to win back the trust of advertisers theyre going to spend theyre probably going to hold back a little bit. I think thats something wed like to hear more on the earnings calls. This trust issue . Will that be on the call i think people want to talk about it i think theyll try to avoid talking about it and focus on the numbers. Facebook doesnt want to avoid it theyre out there saying, maybe were bad for democracy. Theyre issuing privacy rules because they have the big privacy acts coming up in may. Theres a lot going on around social networks. Linkedin is pristine from microsoft. Right for the most part, amazon has been relatively pristine on the trust side. Yes. There might be questions about whether theyre getting too big, too this or that from washington, but on the trust piece theyre still trusted. Yeah. The companies you have amazon and microsoft are the loveables. Amazon when were talking about advertising, here they come right into the advertising sector theyre trying to break this duopoly between google and facebook theyre a very opaque company. We wont be know how theyre doing there for a while, but ill bet you theyre doing great. Of the companies, which do you like the most as an investor amazon. Amazon followed by microsoft. Where is apple . Neither of you mentioned apple in this whole conversation apple still has theyve got its so unclear. So despite sort of the ten sales and what the forecast might look like, theyre still going to sell millions and millions of iphones. They still have this massive ecosystem. They have a huge, huge user base i dont know what theyre doing to boost their overall business. Theres a big tv thing that theyre doing. At least eight tv shows. Thats interesting. What about home pods . Thats just a trojan horse for siri thats the main play if it works well there are a lot of homes that dont have an eco device this might be a way in for that. Its not about that one device how can i own the home ultimately are we expecting a huge improvement in the Siri Technology itself as part of this device . The reason i ask good question. They need more heres the thing. Its the first device where the primary input is siri, is voic unlike your phone where youre still tapping away, maybe some people use the siri part i think they need more data. They need more actual experiential data to tweak it. So siri has always sort of been dogged by the fact that it doesnt work as well as it feels on the amazon device or google device i dont know where Microsofts Cortana fits in that at the same time, i think its trying to do a lot more to its credit i think that those other services are much more limited am i wrong well, i think people are in front of their phones all the time so their expectation of siri is high at the same time, the bar is rising on all of the natural language technology, all of the a. I. Technology and the data you need to drive these things when you look at how amazon is using it, theyre driving commerce theyre going to use it to drive advertising. So theyve got a broader platform so the platform more is on the voice input, natural language processing and a. I. Are really racing forward by the way, there was a study. We talked about it on the show maybe three weeks ago. Most people who have an alexa at home, apologies if we just turned everybodys on, theyre not using it to buy things theyre saying whats the weather . Whats the news . What time is it . You have a timer, youre cooking something. You say, tell me ring in ten minutes. Yeah. Theyre using the dash buttons to buy Laundry Detergents and things like that again, amazon has lots of places in the home where theyre learning thei leveraging their inputs into their platforms. Back to apple, i think this quarter does demonstrate that as a Fashion Company you can only sell so much chanelle. 1,000 a phone. The gloves justcame off starting a Fashion Company. Ive always called amazon a Fashion Company. I keep having to buy, you know, more stuff. They will say look at the services. Look at me. Im wearing the watch. I have this. Youre very fashionable. Youre very fashionable exactly i love those. The best product. Exactly totally agree. It works for what its intended to be i think its still a niche thing. Its an expensive pair of wait. Fast action in technology. Throw away phones thats what it is exactly youre doing that, right . Theyve been sort of coming out with these iterations . I think well get that. I think thats really a challenge to apple. Right final question twitter, give me we were talking about the trust issue. Would you even want to own twitter . Yesterdays news. Yesterdays news . Does anybody buy them out after this news story over the weekend . Does that change the dynamic i dont think that changes the dynamic. If anyone was interested, they still are interested i cant see a u. S. Company that wants it that adds something to them there is an analyst note out saying that tencent might be interested that makes sense in that oh, thats part of sort of a larger global network. Trump administration allows it. I think it doesnt pass regulators i think thats the problem there. We have to run. Interesting appreciate it. We have a big hour ahead up next were counting down to President Trumps state of the union. What will the president say and what will it mean for issues like immigration well speak with luke messer after the break. Plus, a busy week for Economic Data personal income and spending in 20 minutes time well bring you the numbers at 8 30 eastern still to come, elon musk, flamethrowers and Zombie Apocalypse well explain the billionaires new obsession when we come back. Whos the new guy . They call him the whisperer. The whisperer . Why do they call him the whisperer . He talks to planes. He talks to planes. Watch this. Hey watson, whats avionics telling you . Maintenance records and performance data suggest replacing capacitor c4. Not bad. Whats with the coffee maker . Sorry. We are not on speaking terms. Whats with the coffee maker . sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. 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Pepper snapple, you are not questioning the logic of it. The stock is up 37 in a very big way. One piece of the rationale which might explain some of this is that if you were keurig which is privately held, this is effectively an end run around an ipo. Part of this combined company is going to remain in the Public Markets. If keurig was thinking, for example, about an ipo, you didnt want to have to go through the motions theyre not going to buy it and take it off the Public Markets . Theres still a stub effectively in the Public Markets. Percent of the combined company hangs out there. That might actually explain some of the rationale this morning . If keurig wanted to go public, couldnt it go public . It could have but its expensive. I would be surprised as a private company that youd want to the costs arent just the initial up front costs going public, its the continued regulation, scrutiny, costs of being public. I wouldnt buy a company that you otherwise wouldnt plan to buy just simply to go public its got to be a small possible spinoff benefit. Im suggesting to the extent that some ceos talk about the brain damage that takes place during an ipo process, the lack of focus that you have to sort of readjust to a road show. What about spotify doing a direct listing and avoiding some of those fees . Is it perhaps avoiding some of that, too . If spotify does a direct listing theyre not paying 6 or 7 to bankers. Right. There are still some costs. You have to get lawyers involved. Right. Youre still talking to bankers to try to figure out what is a smart price. On which note goldman sachs, jpmorgan and bank of america are listed as the advisers. They might end up with a 2 or 3 instead of 6 or 7 . Theres still a cost associated. I have a lot of questions. Everybody here knows, but if keurig sort of keeps this stub public as dps, what regulatory requirements does it face in terms of filing . Does that make it public it makes you wonder why they wouldnt take the entire just buy the entire thing and not have any stub thats public at all . Youre antipublic. No. If youre already a private company, i dont know why you you certainly have no problem in terms of what your costs of capital is. In terms of acquisition i dont know. Thats a good question. Im not sure what the Disclosure Rules are around that. Theyre basically buying control. Theyre not buying the company if theres a Certain Company thats openly traded youre not technically buying it. Just note, at 37 with that stock up 37 this morning, thats not just a bet on the price the takeout price but its really also a bet on what the combination looks like and the synergies and Everything Else involved here. And a bet saying that b. A. B. Can continue to exit another sign that they are very, very active, continue buying assets and people backing that they can execute. Well continue to follow this one. Its a big week for President Trump in the meantime. He is going to deliver his first state of the Union Address tomorrow joining us is congressman luke messer of indiana and gop policy chair. Congressman, good morning. Thanks for joining us. Good morning. Glad to be on. What would you like to hear from the president what dont you want to hear . I think youre going to hear the president say the state of the union is strong. You have unemployment at record lows you have the stock market at record highs which means 401ks are booming. Im a congressman from indiana back 234 indiana Small Businesses are investing in Capital Assets and investing in employees with bonuses and raises so theres a lot to be excited about. I think the president will be talking about that tomorrow. What do you want to hear on immigration . I think the president has laid out a serious proposal and the president s been very clear that if you have no border, then no daca. You know, this president is known for his negotiation powers he wrote a book called art of the deal. He just advantage wivanquished s in the shutdown. Come next thursday will you face another shutdown . Whats currently being negotiated is it still about immigration and d. R. E. A. M. Ers . Because as i understand the court stay means thats not that urgent of an issue is it about funding issues for defense, nondefense is this another tenday extension . Whats your feeling on this . Listen, the government needs to stay open i think Chuck Schumer learned a few weeks ago that the American People want the government to stay open. The rest of the negotiations, particularly the immigration negotiations can happen outside of that. Lets figure out a way to get the government running and get a little more certainty. Youre right, these tenday extensions are no way to run a business and theyre no way to run a government so we need to get through it im optimistic we will congressman messer, im sure youre very excited about the tax bill by the same token, there was a provision for 529 plans, your provision that was ultimately taken out. What are your expectations for that eventually being expanded in another form of legislation yeah, look, the 529s should have broader use because of some opposition from democrats, positions were taken out that would allow home School Families to utilize 529s thats common sense. We have legislation that will work for that. There has been progress on taxes since the tax plan passed. The most recent government extension got rid of medical device taxes which is important for that industry, important for all the folks served by those devices and more can be done weve got a great start at the end of last year i think thats part of what youll hear President Trump say in the state of the Union Address. We can do a whole lot more and i think the American People expect that you know, im just going to throw this in there. We were just talking about companies and whether theres any incentive to be a publicly traded company these days. As the stock market goes up theres a lot of talk about there being a shortage of companies out there. What could be done for Corporate America . Is this a problem . The biggest thing we have to do is get government out of the way. I think we have to have a United States senate that can function. Its become a black hole for bad ideas. I think theres been some big events that should excite every american the passage of the tax cut the fact that the shutdown ended so quickly because the democrats figured out thats not what the American People want we can do a lot more congressman, thanks for your time this morning. Thanks. Coming up when we return, new york and newarks battle for amazons hq2 can one of these cities come out on top our own scott cohn has been following this story cseloly hes got the inside line were going to check in with him after the break. Welcome back to squawk box this morning amazons search for hq number 2 has been narrowed down to 20 cities we have been looking at the pros and cons of the many choices for mr. Bezos, including new york where we are and newark across the ridge. Yeah, good to be on this coast. Amazon as a company is 23 years old. Like the millennial it is, it december have the choice of living it up in the city or saving money in the suburbs. On amazons list of 20 finalists there is new york city and newark lets look at our report cards on both. Spoiler alert, they wont be pretty theyre offering 7 billion in incentives it has the populations a stable, business friendly environment, not with some of the worst state finances in the nation lots of talent in the nation but a heavy union presence, quality of life concerns hurt. New york train, high costs and bad roads overall. We give newark a d plus. Lets look at new york city by the numbers. Again, not pretty. New york state comes in 45th in our top states for business rankings for business friendline friendliness quality of life here is an acquired taste you might say and there is a relative shortage of s. T. E. M. Workers a lot of tech workers but not as a concentration. Transportation, not good a d for the city well have more on the east coast on power lunch well talk to cory booker and on closing bell, phil murphy will tell us once and for all i have questions for phil murphy were going to talk about property taxes, were going to be talking about no, im kidding, its your interview. Whats your handicap . Its been interesting to look at all of this when we did these grades and, again, we dont know how amazon is measuring its criteria, and there are a lot of intangible reasons why a lot of people and Companies Live in new york raleigh, north carolina, did very well. Atlanta clearly has the work force. It has the Critical Mass austin, texas. Anyone gotten an a . The highest grade was raleigh which got a b. A bunch of b minuses. We have to go if theres a leak in the process, do you think amazon kicks you out . Theyve been very tightlipped and told the states if you start leaking, youve got problems. They want to tone everything down now and do it much more traditionally as an Economic Development process where theres confidentiality. We have to go, scott. Theres breaking Economic News on the other side of this short break. Oh, manatees. Aka the sea cow oh theres one. Manatees in novelty ts . Surprising. Whats come at me bro . Its something you say to a friend. Whats not surprising . How much money matt saved by switching to geico. Fifteen minutes could save you fifteen percent or more. I thwell wait. What did you meetthink 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. Were just seconds away from december personal income and spending futures, of course, have been pointing a little bit lower as we approach this Rick Santelli joins us with the numbers. Hey, rick. Good morning, wilf. The numbers are better than expected up. 4 on income. 1 better than expectations and also up. 4 on the spending side down close to expectations if you recall, last month we had up. 6 on spending. That was a biggie. We held it on the revision we actually gained. 2 up to. 8 lets look underneath the headline numbers, shall we on real spending it was up. 3 and following the upward revised half of 1 the deflator month over month up. 1. 1 cooler than our last look deflator year over year,. 1 cooler personal consumption expenditure, core month over month, well, its up. 2. A little hotter than expected but actually, exactly as expected. 1 hotter than our last look maybe one of the numbers that many fed followers pay close attention to personal consumption expenditure, year over year core, up 1. 5, up 1. 5 last time you can see that the pricing aspects arent too hot but theyre not cooling off. And on the headline, both numbers are pretty solid were into the 2. 70s 65, 66 and twoyear shots almost up to minus 50 basis points. All the sovereigns around the globe are moving higher. Right on schedule in front of a u. S. Fed meeting kelly, back to you. Rick, thank you Rick Santelli. Steve liesman is here with more in terms of reaction to the data not just this morning, steve, but we have the ism, the jobs report. Big week. Big week i am just looking up a number here and i can do that maybe during the discussion, but the savings rate has plunged to 2. 4 , and be thats going to be the lowest i was trying to figure out in how long whats happening here is the wealth effect is coming forward in a big way people are feeling flush in their accounts and i think the best argument here is that were spending morethan our income coming in because were doing well in the market and other places its an interesting idea because obviously it affects a portion of the population more than others, but the effect of this appears to drive down the savings rate for years it was personal savings rate, solo now its negative. Then the revisions the consumer stretch, its not sustainable, no, it is its the exact same phenomenon. Im worried about publicly answering the question im having flashbacks. I wont do that. I will say there are some likenesses to 2006 and like i went to the boat show this weekend. I also went to the fly fishing show these are places where you see people doing stuff that they otherwise wouldnt be doing. The lines for the big boats at the boat show were very long the guys who were thinking about going to exotic places like koshocka what im waiting for is the ivan bosky moments where they order everything, taste them and predators ball. The key things all the banks would say is credit quality and credit worthiness. Its up. Its up but it is very low compared to 2006. Credit quality . The level, whether its quality, provisions theyre having to make either way they stand there and say im very confident. Credit quality is good. Happened at the peak last time. Right were not at a place where it seems as if these excesses are inside the Financial System in terms of leverage. Thats what the fed looks for. Let me just go on and do a quick thing about what happened this weekend and the week ahead. Oh, please. 3s are wild i dont mean about a poker game but growth after fridays gdp miss, several economists upgraded their forecast to 3 noting that inventories and trade combined, i told you this friday, they took off 2 full Percentage Points of growth and theyre not expecting that to continue heres jpmorgan. A short fall in inventory accumulation boasts well and forward looking indicators remain up beat we, thus, raise our forecast from 2. 5 to 3 heres what kellys talking about. Here comes the week ahead. Theres fmoc, tomorrow well have the cnbc fed. The decision comes wednesday treasury refunding announcement, put that on your calendar. Looking for a trillion dollars we have a higher deficit well see how markets reacted. Adp pay rolls, productivity, ism appears to be kellys favorite construction spending. I like that you put the cnbc fed survey. Absolutely. See the red arrows down, theyre less than the prior month of growth rates theyre still from higher levels going from 17. 5 to 17. 3 on cars. Payroll exchange. Give me one more second and ill show you about the payrolls coming up this weekend 180 on adp 175. 4 Unemployment Rate average hourly wages, the wage number this morning, half a point higher which is good. Steve i want to bring in seth carpenter whos with us on set seth, jpmorgan up again to 3 for q1 this year does that sound about right . Thats a little bit higher than our forecast. I would say clearly coming into this year nourt quafourth quartn third and Fourth Quarter, but one story people are missing is oil. Its counter intuitive weve been pushing the story Rising Oil Prices gets more production in the u. S. , more investment spending in front of the energy sector. Thats one of the more up side risks. I need to follow up on that theres some work thats been done that shows almost the entire increase in equipment spending, which is flatter gdp over the past year is a result of spending in the oil and gas. You might have gotten that from ubs research. Thats the line we took. That wouldnt have been true 10 or 15 years ago thats purely the result of the fracking. Higher oil prices. There are a couple of other things i would say one, my own opinion is that 3 is way too low for this year if you look at 2003 as a if you look at 2003 as a proxy, theres no perfect analogs, but the demand side effects were 1 and the supply side effects were an additional 50 basis points. So that would be smaller tax Something Like 3. 7 another thing i would argue as far as energy capex is concerned is that its down substantially from where it was three or four years ago. So in some ways youre in the early innings. The last thing i would say, another three is wild idea in my opinion is that people will get their statements at the end of this week or the beginning of next week. Their pay statements . Their pay statements. Withholdings thats another thing that will change another thing that will happen. Their financial statements. I think the other thing i think you have to look at people arent looking at that online come on, jason still using paper . In terms of what people are looking for in terms of their bond market matt actual funds. The only other time youve seen redemptions was in 2013 during the taper tantrum. Most people in my opinion are looking at bond funds as a proxy for cash they are unaccustomed to losing money in bonds unfortunately on paper theyre going to have to start getting accustomed to it. Are they down last year what . Are they down last year theyll be down this month versus last month. Well, yeah. Jason is not sitting in a chair, hes levitating there was also a sense that people or Companies May have held back in the Fourth Quarter some of the equipment spending because it was hugely advantageous to do it in this quarter because of the tax break. Right we could get a surge in that regard. Thats possible i guess in terms of the fiscal policy impact on this year, were not at 3 thats the imagination i would say the bigger risk to getting much higher growth this year, the tax cuts, theyre going to help. We put in Something Like a quarter percentage point extra growth this year, a little bit more next year right now with the way the conversation in washington is evolving with the spending caps, i think thats one of the risks to the up side that people arent necessarily paying quite enough attention to. Clearly everyones got through the fed rate hikes of last year fairly easily. The longer end of the curve is reacting does that have a negative effect past certain levels . Absolutely. I think it has to be the case that higher longterm yields, higher longterm rates has to have a dampening effect. You are not going to see a massive selloff because the long end is driven by what you think Monetary Policy is going to do over the next five, ten years. Then inflation, inflation expectations, volatility, all of those fundamentalless tends to pick it up. Still thinking about the savings rate. Come back to that let me follow up on this with the fed probabilities here. Yeah. Yeah two things, first of all, the fed probabilities were looking at, here we go 88 chance for the first hike in march. 60 chance in june by the way, thats a little bit earlier than previously thought. 57 december theres the flirtation with the fourth hike, 21 now is where we are. Thats higher than it was sometime last week its not in there yet, but the markets beginning to think about that full percentage point. Zero chances this week . No, its not going to happen this week. Were in this consolidation period were going to be transferring i forgot to mention that wednesday is Janet Yellens last meeting a among all the other work out there. He starts february 1st. Saturday theyll right i dont know. Were having a maternal policy if its jerome chairman is the right name. Chairman. Its his choice. Thats not the title, he gets to choose. Between chair and chairman. Yellen decided it was chair. Thats almost like a social political choice. Almost . Exclusively. You go to the fed press conferences. What is your probability on chair or chairman powell going to press conferences at every meeting . I think thats something under discussion i dont think j. Jerome is going to make any particular changes very quickly if i do know him, and i do know him a little bit, its going to be slow and steady but people said that his first thing that he has to deal with is this fourth rate hike i think thats wrong the first thing he has to deal with is the first rate hike. Thats what hes going to do he has no particular reason to push ahead the agenda here at all. Slow and steady. By the way, turn to the camera and say get that vice chair in place. They need an economist, Monetary Policy expert. Thats worked out so great. Whats that over the last seven and eight get another ph. D. In there. Lets not denigrate ph. D. S. Hold on, jason. Wait. Wait are you saying fed policy has been wrong yeah, i am. Oh, really . 26,000 on the dow, no inflation, a 4 Unemployment Rate which problem do you have with fed policy, jason . The average person has gotten zapped on their interest income. They also have lower Interest Rates on their mortgages and credit cards and everything like that its just wow. A crazy argument. Were going to continue that debate after the break you may have to stick around coming up next, what will President Trump say and what should he say at his first state of the union areddss were going to ask former Senate Majority leader George Mitchell next where can investors seek predictable income in an uncertain world . 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 one hundred fifty billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Your but as you get older,hing. 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. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Senior officials have it. They describe the arrest im not sure this is it on various methods the name of the whole story. Were very competent im in my country, im in my city i feel at home no problem at all. The shares of al waleeds kingdom are jumping to 10 shares up again close to 2. 5 . Lots of questions though continue to swirl about what took place, what potential settlement may have been reached, at least privately, and of course we hope to hear from the prince and also from the royal court at some point very soon joining us right now, George Mitchell the dla. Good morning. What do you expect to do . Every president talks about great things i expect youll hear the same tonight. The economy is strong and unemployment is down and so i think that will be the high point and the feature of the president s address tonight. I think hell make the case for his plan on immigration. I hope very much that they will work out a bipartisan immigration plan and i think negotiations now, of course, are underway in that regard, particularly in the Senate Whether or not Immigration Reform does occur depends upon the house of representatives for years the house has operated under a rule under which the republicans will not bring a bill up unless a majority of republicans in the house support it, which means immigration may die the same way it did a few years ago when a bipartisan bill passed the senate with strong support from both parties. I think the president also and i hope very much will present a comprehensive plan on infrastructure i said about a year ago i think on this show that i hoped he would bring it up first. Right. Had he done that, the politics of last year might have been different nonetheless, i hope it does come forward and i think it will have broad bipartisan support. Let me ask you about that youre already seeing some reaction among democrats saying, look, if its 200 billion which is the number weve seen in the drafts, at least from the federal government, thats going to put a lot of pressure on states to pony up and perhaps obviously on the private sector and as you know, members of your party, dare i say, say to themselves, i dont want a toll road thats going to be opened by a private equity firm well, nobody begins a negotiation with their end position, be it the president or those who are on the other side of the aisle you present your plan as you would like to see it and then you accept the fact that nobody gets 100 of what they want. If you have a goodfaith negotiation, you come up with a good result. Thats the process of legislating, and particularly in a large, diverse country like ours where there are many competing interests. So i think if they sit they both set forth their positions and you cant take the words of one or two members of congress as representing everybody in that party theres a tendency in our politics to pick the most extreme statement by someone on the other side and try to suggest that thats the view of everybody on the other side. Thats not the case in this instance and i dont think it should be and i hope theyll have a good faith negotiation and produce a good result for the country. Senator, i wanted to talk about two issues im sure you may be i dont want to say be unprepared one is you saw before you came on we were talking about prince alwaleed being freed. Yes. He said it was a misunderstanding there were other reports there was a settlement it sounds like we may not find out the answer either way and thats how they wanted to set that up. What does that mean for investors who might want to invest in saudi or not based on all of this . Well, i think it will have a depressing effect on investment, at least for some time, because its just that you dont have the rule of law in the way that we in the United States or in the western democracies think of it and you have a process thats been so far highly secretive, not open apparently those who enter into agreements to give back a portion of their fortunes to the government include a provision that they cant talk about it, and that appears to be the prin. I think overtime, it will have a depressing effect. On the other hand, many of the reform that is the new crown prince and soon to be king is under taking a positive to open up society absolutely. Recognizing womens rights. So i think we are seeing a mixture of policies and i hope that the positive ones will continue and the negative ones will obviously not continue. Senator, great to see you we are jealous of the location you are at this morning. Given the salt issue, are you looking for real estate at the moment actually, i am heading to maine tomorrow so i am seeing the best of both worlds. Good to see you sir thank you again jim cramer is joining us live from the New York Stock Exchange well be back. Advanceil techno. All with support from a highlyeducated workforce and vocational job training. Across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov. To grow your business with us in new york state, Flexshares Etfs are built around the Way Investors think. 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. Breaking news snapples will merge with doctr. Pepper. Right now the ceos of both companies will join david faber on squawk on the street. Jim cramer is joining us big week earnings for the tech company. This is gigantic. The markets have been so strong. If there is a chance to stop 2018 tracks, it would be this week a possible misses is some of the big guys which ones do you focus on or constructive on all of them . I am constructive but i understand the analysts have said apple and talked end lessly from a super cycle now when you do that, you are creating a level of expectations all right, apple is not going to deliver for next quarter because of sales you know you got a gigantic possibility in terms of tax reform you are selling here and ending to have to buy it back thats the focus trying to get people in and out of that. I think it is foolish. The super cycle talk the barriers are just too high what do you think of the a snapples deal and keurig dr. Pepper. These are two companies that are just made for each other i it is just a bunch of winners. I understand why the zstock is up jim, great stuff. We look forward to seeing you. Next here on squawk. Elon musk. Well explain more finally. Hey ron theyre finally taking down that schwab billboard. Oh, not so fast, carl. Oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. Elon musk claims his business is on fire. The billionaire, hes now sold 3. 5 million worth in just 24 hours. You may remember says that if the boring Company Sells 50,000, it will start selling more al rumor that he was secretly creating his on apocalypse demand i have to be honest with you. It looks like a machine gun ai am a huge fan of elon musk but, this thing is dangerous it is like i am not saying it is a gun. It looks like one think like people are going to want one of these and running around with fire maybe focus on the core business thats another thing. He needs the attention. This is all about staying cool what is this . This is dangerous when somebody burns our house down because of this how much of a Shareholder Base between 13 and 34 when people get injured or i or worst well, they think it is cool elon musk, if you are watching us, email us or something. In the meantime, sqwauk on the street, thank you guys. Good morning, i am Carl Quintanilla and david faber and jim crame jim cramer with the Stocks Exchange a lot of news headed our way and yellens last fed meeting and the busiest week of earnings and a global bond sell off our ten year hitting 271 a slew of corporate news, th