Transcripts For CNBC Squawk On The Street 20180215

The opening 20 minutes or so from now we are positioned for a higher stock market at that 9 30 mark europe has been open for some time and over there it is also been largely a positive day so far. You can see germanys dax of course and france the best performer. The 10year note yield so much of a focus yesterday as it same close to the 2. 9 not sure we ever got there were above it now thousand. Yesterday we flowed 2. 89, 2. 915 and stocks dont see particularly concerned wti is down though, higher than it was this time yesterday this morning stocks are looking to extend their daily winning streak, five all three indexes gained more than 1 yesterday shrugging off the stronger than expected cpi after what was a sharp decline early in the session and inflation data out this morning shows Producer Prices rose. 4 in january. That was matching forecast now the core rate minus food and understand also up 4 . That was twice what many economists had been expecting. What a difference a day makes. Suddenly were not worried about inflation. Yesterday after about an hour or so trading. The vix collapsed and people are now saying, everyone is in on the vix, surprising number of people multiple hundreds the volatility might have been triggered by the 10year going up in yield but what was the tail wag the dog tremendously because yesterday was a terrible day for Interest Rates and it didnt matter. The vix collapsed and the market went up. At a certain point its going to play a role. How do you trade in this environment . In other words, the fear of higher rates, were getting when you look at that and go okay three is not far away to be the obvious and stocks suddenly dont seem to be as concerned. I think that for first time i saw a genuine issue being raised with what the cpi was really made of. How much of it is short term food i say short term because we know you get a good harvest, food goes down. It does. Yesterday, theres a protein shortage in some parts of it but how much of a parl and how much just because the inventory was lean for christmas, they can turn on the jets for apparel any given minute listen to the tang eer factory, theres a glut of apparel in the system gasoline, oil has come down quite a bit. Thats one of those things we should say wait a second, should that be included then we look at amazon and look at amazon and theres a note today about walgreens, what is that to defend margins against amazon if amazon is putting pressure on margins in so many different industries, is there really core inflation . I dont know. Youve got people like peter a frequent guest of Rick Santelli saying were on the cusp of a sicyclical upturn and weaker dollar, supply pressures, costs in particular. Transportation is real, shortage of truckers. All culprits, fiveyear inflation point up after 8. 5 basis rise yesterday, now the highest level in 11 months. Economic expansion, youll have shortages. We want endless slack in the system no, we dont. If you go to the big steel companies, theres gigantic slack in the system. If you go to a shulman, there is not a lot of slack in the plastics business but had to do with the storms and big spike and curting in margin for a lot of companies, were the storms and were finding out where does Waste Management benefit its far more fluid. Im not denying Interest Rates have gone higher im saying that the possibility of Interest Rates actually retreating has to be put on the table. Okay. Lets talk a little boeing here because of course weve talk the about that stock so often because it has been a high flyer i like that. Thank you. Dennis mulen berg joined us at post nine a short time ago and i asked him, what his reaction has been to that continued rise in his stock price. Heres what he told us the market is responding toss what fundamentally a Strong Aerospace market and we deliver on our commitment. We promised production ramp up and now delivering on the ramp up, you can see the profitability as well. Its efficiency in our production lines and efficiency in our supply chain and top line growth at the market bottom line growth it was just the Investment Community catching up to a certain extent i think part of it is the recognition that this really has changed from being a high cycle business in the past to a longterm sustained Growth Business i think thats changed the attitude and perspective on the street youve talked a lot about that higher multiple when you can show you have sustained growth as opposed to the ups and downs of highly cyclical business. We all remember the days when you would have fabulous growth and boeing would be a leading performer in the dow then just whorrendous and boeing would be the worst performer in the dow and it changed because some of the points that moilenberg raises have to do with middle classification, 100 Million People he was mentioning, new people fly every year and ecommerce. There are trends that are cois a lessing and shortage of planes and the multiyear backlog cannot be denied and you cant get a plane if youre a major airline. You cant get a plane and thats from boeing or airbus. Still talked about 80 of the worlds population never yet to fly. I love the longterm story and you can look at a day like today. What happens if Interest Rates trade at 3. 2 you can still buy boeing, even though you need financing to a buy a plane. What you need is somebody to let you ahead in the queue to get your plane even with a stock price up over 100 over the past 12 months. Look, when the vix spikes, whatever somebody does, get the dow down 1,000 points, its a big part of the dow and buy it then its going to 400, that would be night reasoning, december 7th. 279 now reiterate i was using 18month time frame. That may have been too pessimistic. It appears that that may have been the case. We got a lot more for mr. Muilenberg we had a long ranging conversation with the boeing ceo. For now lets bring in carl at the Winter Olympicsin pyeongchang, south korea lots of action overnight take it away. Reporter busy morning. Mick kay la shiffrin, coming in fifth in sochi, very big story here incredible run and emotion at the very end all of the success weve had this week in snowboarding and alpine sports, driving some sales of olympic related revenue. Our friends at fanatic are saying demand 80 ahead of this time in sochi. 300 nike jacket, a big burton jacket and top selling category is hockey merchandise. Snowboarding has gone into the number two position replacing curling. Keep an eye on that. Tyler george, a u. S. Curler, nice story about how he was once shopping for shoes in duluth, minnesota, found a pair of xechers he loved and turned those into curling shoes thats become a big story among the fanatics of curling down here at the olympics and later on this morning, well check in with a koreanamerican, famous chef, david chang, you might know his franchise. What its like scaling a business like the one he has korean food and guys his new netflix docu series which debuts next week i think, which is unlike anything netflix has done regarding food we know the kinds of investments theyve announced over the past couple of days busy day today okay, so carl, last night before we go to sleep, my wife lisa says, have you seen carls instagram today it is unbelievable and shows me where you must have been i dont know, 10 yards from the Demilitarized Zone and looking at north korea, frightening, scary or just status quo chilling. Very chilling. Youll see some of that tape tomorrow we got well into the dmz and right up to what they call the military demarkation line, stepped into north korea for a few moments then stepped back. Its an unbelievably tense part of the world and hopefully the stuff we show you tomorrow will help relate what it was like being there well, the reason one of the reasons there was a moment where the south korea soldiers standing erect but everyone was wearing sunglasses and seemed to degree almost like at the Bucking Ham Palace is it really like it was in 1953 except they have more modern garb yeah, i mean its like the armistice was signed in some ways last week we were actually told when the soldiers were escorting us up to that point, they said whatever you do, do not reach out or wave or try to communicate with the north korean guards. Youll see across the way for fear they might think youre somehow mocking them fairly tense but definitely something that all of our crew and producers are educated having seen. Well, carl, i mean the coverage has been amazing by you. Your instagram is dynamite and people are watching it all over the place. Congratulations, well talk to you soon last night cisco was out with strong earnings and Revenue Growth and actually huge Revenue Growth, announcing plans for the overseas cache and i would say kind of becoming what we used to remember about cisco, a great Growth Engine chuck, congratulations on a great quarter. Im trying to figure out the best story, accelerated Revenue Growth and 67 billion repatriation or acquisitions really coming in i want to settle on the fact you have recurring revenue that is dramatically up in ten quarters because i think that is the story some journalists are missing. Isnt that the goal to have that huge recurring revenue to be like adobe and not a Hardware Company . First of all, jim and david, thank you for having me. Its great to be here again. Were really proud of what our teams have accomplished. We had a great quarter as you sted were at a point where we have a phenomenal innovation pipeline, we have the strength and flexibility of our Balance Sheet and we have a very excited team whos executing really well. You know, when i took this job ten quarters ago there were two big things we wanted to do we wanted to reaccelerate the innovation in our core franchises and wanted to begin to execute on this transition to more software higher degrees of recurring revenue. If you look at what happened in this quarter our new catalyst 9,000, our networking portfolio, 3100 customers in a seconds full quarter of shipments and its the fastest ramping product in the history of the company so thats the first piece in our core then the second relative to this software transition, 33 of our business is now recurring. We have 5. 5 billion now on our Balance Sheet in deferred software and prescription revenue up 36 if you look at our product revenue, ten quarter ago, 6 was from recurring offers and this past quarter it was at 13 and that grew 34 as well. So were very pleased with what we did very happy with the execution as the team delivered and were optimistic about where we are right now. So chuck, lets say im a sales person for cisco and had switches and routers to sell 11 quarters ago youre giving people everything from a tie into microsoft, tie in to google cloud i was struck by the 20 million strong user base of broad soft are people selling that too . And Cyber Security Amazing Alliance here with alliance, aeon and apple for Risk Management is that all in the tool box and thats one of the reasons youre having such electric subscription growth . Jim, if you look first of all on the Core Platforms we launched our subscription on a Network Switch which people didnt think we could do and incredible uptake on advanced version of that. We have customers in that space who spends 5 on operating the network for every one dollar they spend on the equipment. If we can help them lower the operational costs what were doing through the Automation Platform in the security business, our recurring subscription business deferred grew by i think it was 34 again this quarter so we saw continued move there you talk about broad soft where we just close that acquisition and they have 20 million users where we can expand our clouds based subscription business and collaboration. We have a lot of areas and then also, the work weve done with apple on the secure connector for ios, you mentioned the cyber xur Security Alliance we built and work with google and microsoft on helping customers navigate this complicated multicloud world they live in we have we have a lot of areas that our teams can have real rich conversations with our customers. Id like you to take me through the Capital Allocation decisions youve made in part given the decision to bring back 67 billion in cash from overseas, you increased the buy back to 31 billion, a 25 billion increase and increased the dividend why are these the right moves . Take me through your thinking here in terms of how youre allocating capital given the benefits from tax reform well, david, thanks for the question we talked about this in the past were not an incredibly capital intensive business if you look at our total cap ex we spend on an annual basis. Theres several options we have. We always talked about the fact that we would leverage this capital for to reduce our share count which we announced yid, obviously to continue our capital strategy of returning cash to our shareholders and increased our dividend yet again yesterday and think we have left plenty of capacity to deliver m and a that aligns with our strategy that weve laid out over the last two and a half years. From a from the strength of our operating model right now, gives us the opportunity to also do the things were doing relative to compensation for our employees which we launched yesterday and were also working on lots of efforts around major issues in our country and around the world, some of the social issues whether its homelessness or hunger, were working on a global basis and educating refugees in germany, spending a lot of time not only evolving our employee programs and Employee Compensation but also ensuring were giving back to the community, working on skills gaps around the world. So i think its a combination of returning our capital but also leveraging the strength of our business to make sure were also giving back. Chuck, there had been a big thesis going on that kept cisc ooxt back, i dont need cisco, i can put it together. You know the risk has benefited from that and youve been complimentary of what they do. Its almost as if things have gotten too complicated and only a couple of clients that can do white box. Is that the story the complexity and how you need cisco because you cant do it yourself anymore . Theres really two places where this discussion is relevant, jim. First in the major web skill community, where they frankly wanted white Box Solutions because they built ought Automation Platforms that they needed technology that fits within that. To the extent we can take our technology and have it operate within their automation environments and at a very Cost Effective price point, then they are quite happy to operate with us in the enterprise, the issues are much different if you look at what our customers dealing with, again, its 5 per year on 3 per year on operating these networks versus the dollar they spend if a product has a fiveyear life sicycle. They will spend 15 managing it. The issue is not about how do i save 10 cents on the dollar, the issue is how do we lower the cost of operating it and thats a big part of what we launched with a network intuitive, where we deliver a layer of automat n automation. Okay, chuck, i just want to thank you so much for coming on our show and also want to say that i think that the tar heels are peaking at the right time. Thats important for you. Con gratd lagratulations on eagles. Thank you very much congratulations to you. Great to be here. David always good to hear from chuck robbins, interesting in the allocation. This is 67 billion repatri e repatriated. The quarter looks messy because of the charges and deem repatriation and tax they are paying now on the cash that comes back, jim. Over all the stock price going up. One of survivors, my microsoft, qualcomm. We havent even started talking about qualcomm we had to end with mr. Robbins because were going to have a moment of silence at the New York Stock Exchange as well at the nasdaq also of course, going to observe these moments of licenli silence to remember the School Shooting in florida. Tomorrow, its a day filled with promise and new beginnings, challenges and opportunities. At ameriprise financial, we cant predict what tomorrow will bring. But our comprehensive approach to Financial Planning can help make sure youre prepared for whats expected and even whats not. And that kind of Financial Confidence can help you sleep better at night. 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Weve got a little more than three minutes until we gets started for trading on this thursday at the nyc. Time for a mad dash. Last night we got the new the i think theres too much emphasis put on frankly because a lot of these people can trade in and out but one not to mention a lot of them have terrible track records. Why do we care we care about one only. Which is . Warren buffett. Because he does not flee with the wind or fly with the wind. He makes judgments and increases apples stake by 23 and does not care about the socalled super cycle of the ten not working well i know he does care tremendously that its a great Consumer Product with the terrific revenue stream versus ibm buying back a lot of stock. He liked that but prefer apple buying back a lot of stock with a Service Revenue. Katy uberty out with an interesting note, something she interpreted as negative, china, and maybe the comeback of the chinese players to try to take the share that apple has picked up and picked up january, maybe a little bit not off the chart but shes thinking about the grow thesis shes been right. You have buffett and uberty. The lead is fewer android switchers limits unit growth this cycle share gains accelerated by chinese vendors regained some share against older discounted iphones. You can read it both ways but when you sit down with Morgan Stanley, what you come back with, its on schedule to grow versus decline and theres a lot of the bears who at this level when we were at 170 said the best days are behind them and theyll have decline. I look at the note and say apple is not a source of funds for a lot of the big institutions anymore. Its a longer term story that is starting to become less cyclical because of the Service Revenue but also because of the share take in china. Price target does remain 203 a share to your point we can trifle with her all we want but shes been right. And the minute or so until we get an opening bell here, anything else catching your attention this morning a key to what we see for the day . Theres a company that my Charitable Trust owns we think the world of, sicyclical related to our company, Waste Management, beneficiary of the new tax code but Waste Management is a proxy on construction also, on debris cleanup in texas but construction is strong and great way to read it is slow growth and better way to read it is Waste Management and its good, its real good hear the applause building at the nyc for the opening of trade which will begin two seconds from now heres a look back at the you can see those theres going to be a strong open here heres the big board by the way. Celebrating its first listing anniversary. At the nasdaq, a biocompany focused on the treatment of aging related diseases there are a lot of those. Yeah. In fact, aging itself could considered a disease. Its amazing these inability of Drug Companies to win in alz himers. That continues to be a very difficult field but one that we know has incredible potential. They can get it right it would immediately become the largest selling drug in the world. You know what Warren Buffett invested in in teva. I regard teva as being a second rate Generic Company thats trying to be better run i was trying to get the high end develop a thesis among buffett, jamie dimon and jeff bezos putting together the coalition so important thats a coalition that rely on generics to bring down pricing i dont think the tiein necessarily fits but its amazing Warren Buffett goes with what i regard the worst of the worst. Reopen that file maybe they have more than we thought because buffett does not approach any large by lightly. No, he doesnt. They have gone through years of difficulty. Years. Management changes galore Credit Rating down, grades terrible source of sales of allergan i should say the purchase of the generics business from allergan none has gone right for a long time. Absolutely nothing. An important component of the israeli economy and employment, cut a lot of jobs in that country. All right, maybe its turning a little. Those are the two buys and they are resonating in the market today our interview with cisco, United Technologies is up and er cisco not up nearly as much as indicated in the premarket. Up 3 or 4 . Mr. Rob bins was up as much as 7 or 8 . In the end you dont have the vix trade powering things. Applied materials with a remarkable material was up a couple of bucks and that one has come in. I think there are sellers coming in and i also feel that in the end it we just arent focused on on the 10year like we were three weeks ago. I dont quite know why since it seems to be moving towards 3 . The end of the world, now a weigh station, whatever. And i think the narrative changing over and over again is making it so people are a little queesy and we dont care about the 10year, we care about the vix. The moment we are caring about the vix, well go back to the 10year is my thinking the moment we stop caring about the vix, which might be soon because vix being crushed. A name you brought up yesterday but then we ran out of time to really discuss or i didnt have an opportunity to share it all with you, kraft hines, heinz. They did this strange thing that a lot of analysts were writing about this morning after the close yesterday kraft heinz said this afternoon it will release a management slide cast to update the progress since the merger between kraft and hooirnz in 2015. I cant tell you how many of these notes out this morning, jp morgue on ar barclays which said they never seen anything like this or Goldman Sachs why . Because they are putting this presentation out tonight before earnings. Why would they do that . We dont know they have something up their sleeves. Based on their conversation this evening, the majority of investors seem to interpret the announcement negativively and told they have to wait and see what the presentation is actually about they think its going to be a prerecorded video and audio presentation that features a number of different managers or stake holders that is designed or intended to put kraft heinz in a positive light. Thats shocking. Good luck with that barclays for its point says likely to be initially viewed negative, backdrop of weaker than anticipated fundamentals through 2017 and likely suggest thoer insufficient to prove a catalyst for the shares. Well see what we get from them. Interesting story a couple of days all in the wall street journal when they seemed to have opened up. 3g is very resist aeant to shara great deal the key for the company is doing the next deal because i pointed out time and again after their huge failure with unilever, they suffered a blow this they yet to fully recover from in the ability to do that given they cant make it unsolicited or unfriendly in any sort of way. It has to be companies that will encourage if not say okay, were open to it so they got to kind of change their image a little bit. Theres been a change in the guard General Mills people are liking more and kellogg people like that quarter i didnt think that those quarters were all that special i thought that pepsicos quarter on the frito lay side was special. Analysts said it was one of the biggest decliners. I watched that group closely but they have been miserable by the way, what is that all about . Also aided by the fact that amazon buys whole foods and people feel the margins will be squeezed there thats one of the narratives that brought down treehouse that was an alternative for supermarket white label. Thats doing terribly. I watch kraft heinz, they need to make a deal cure ig got the deal to do dr. Pepper. Dr. Pepper was flat, volumes were flat but that stock obviously up a great deal on the deal itself. Nestle also since were talking about it that was not a great quarter. Continues to be a significant holder there their ceo still relatively new in the job, talking about a reacceleration of growth both here and abroad and not yet seeing it in the numbers but they were indicated down i think they were down in european trading as you might expect as much as 21 2 percent after the earnings came out. Were also in the grips of a kind of a sea change in what does animal does very well by the way, i keep waiting lily did not have a good number in their animal health. People think they are going to sell that. Their money is still going cyclical the caterpillar on table works still see back and forth in social media, facebook can be up five then the profit takers come in fang just doing okay im watching Applied Materials closely because i love that Conference Call. People are not crazy about the stock. It is a very choppy market after yesterday. We have a couple of days that are up and people dont know where to place their bets. Applied material being down is very negative for a big upgrade yesterday, this morning, very negative for lam research up 8 yesterday the areas doing the best, youll love this, where m and a was, west rock buys capstone and paper stocks go up al shulman and the consolidation in paper and chemicals is unabated, no one cares, no antitrust action, they care far more about antitrust with an at t time warner all companies that are the bedrock. No one seems to care and the mergers are extraordinary. Speaking of mergers, lets come back to our favorite topic, broadcom and qualcomm. There was a meeting that took place around 2 00. They spent about two hours talking hock tan and his opposite and all of their advisers as well in the midtown offices of their law firm there. Not getting a lot out of it but expectation that i have is youll hear something from qualcomm, not today, perhaps early as tomorrow the board needs to weigh in. The bulk of the meeting i believe was spent on talking about the regulatory i mpedimens to the deal. They did talk about value as you might expect but it does seem the bulk of the time was spent more on regulatory and basically the broad come side saying what can we do and its not clear how much they engage on exactly telling them what they can do and im getting piecemeal sense as to what went on given the reluck tans to front run what the announcement will be from qualcomm but we will see i think the expectation would be that nothing is going to change in terms of thirl resistance to the deal. The stock that reacted the worst to it was nxp. Nxp. What is going on there that nxp is giving its a 110 bid. 115 stock price, well below where it had been recently were waiting on the chinese approval and ill give you more clarity. Tell me when china is coming and ill tell you with more certainty whats going to happen. If they walk away, i still believe that the stock can go higher. I know you do weve got to get to bertha because we need more time to share with our audience from our interview with boeing ceo. Take it away. Thanks very much, david, were watching the markets rising pretty much in tandem we did get that hot number in terms of whole sale and ppi yesterday, that made the market skittish, not so much today. The yield up to 2. 94 overnight and it has since come in from there despite the fact we did get a hotter number this morning, its not as much of a shock right now. Weve now gotten three strong data points. People starting to factor in maybe the fed will have to raise rates here more than we thought. Earnings this morning, refocusing on the fundamental drivers, its not just the fact that things are rising but earnings are rising. Yesterday we saw the volatility index fall below 20. That helped provide a bit of a tail wind to stocks. Were still below that today that should give us some atrib w buted to the expiration of options, well see if that continues this morning earnings very much the driver particularly with big cap tech cisco driving the bus this morning. Not just the bottom line beat but the first year over year Revenue Growth at more than two years from the networking giant. Trip adviser also had a top line beat as well thats helping online players. Overall Fourth Quarter s p is on pace for 8 Revenue Growth thats the highest since 2011. Big cap tech like amazon, all out of correction at this point. And chip stocks which have been the big drag have now recovered about 10 from their lows last week so that is helping move things lower. Also want to mention right now halliburton, were watching those shares, they have been halted for news pending. Well bring that to you as soon as it crosses. David . Okay. Thank you, bertha. Say again baker hughes maybe sell some of baker hughes i dont know, that industry just 10 decline over the course of one week. The group has been acting poorly but we know ge has to do a deal. Ge weve got to talk more about that and whats going to come before the end of the quarter. You have insight . Not yet give me time lets head to the bond pits now. Rick, what are you working on this morning you know, just trying to factor in how todays ppi in many ways every bit as hot as yesterdays cpi but cpi seemed to have broken the veil with response to market response. Note yields are up two basis points and that makes sense with the march meeting and the fed and back to back rather warm ppi cpi data points but the 10year at 290 as you see on the next chart, it is unchanged. We have been up to a 294 yield and as jim referred to earlier, is it that were ignoring tens or have we factored in the realities of the situation and vas late between whats moving it and how it affects the equity markets. Remember, what happened with the equity markets and reversal of some of the trades that were triggered by the one dot in the solar universe that so many issues of the portfolio to volatility, maybe thats behind us but one thing that sntd behind us, the ongoing firmness and very measured pace in many ways outside much a few sessions of 2018, its been orderly. We go all the way back here on bunds to september 2015. They are getting close to 80 basis points and if you look at the difference between the two, its broken out a bit as you see on this one year chart as we sit at 213 i continue to say, mario draghi, youre in the box here, were pressuring your markets higher in the world global correlation trade and its going to make you have to back into different policy look at the twoday of the dollar indlex, spongy, spongy, it is just a whisker from testing the lowest level since the end of 2014. Back to you. Thanks, rick, Rick Santelli when we come back, were going to have more of our exclusive interview with boeings chairman Dennis Muilenburg. Squawk on the street will be right back feel that . Thats the beat of Global Markets, the rhythm of the world. But to us, its the pace of tomorrow. With ingenuity, technologies, and markets expertise we create the possible. And when you do that, you dont chase the pace of tomorrow. You set it. Nasdaq. Rewrite tomorrow. Mom anits not theirs. Car. Its mine. 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Lets get back to our exclusive interview with Dennis Muilenburg, jim and i asked him as well about the impact of tax reform and the potential of a trade war with china heres what he told us this is one of the best things thats happened in the last few months, the passage of tax reform frankly id like to thank the administration for getting that done we said this was the biggest thing we can do to unleash Economic Energy and were seeing it its allowing us to reinvest in our product lines and helping us compete effectively around the world. Im glad you mentioned that theres a perception that companies such as yours would use the money for buy back and you have a great buy back for dividend but i see building a huge number of planes which means planting equipment and putting people to work. Were reinventing the business right after tax reform is passed we announced a 3 million in our business and advanced digital training and advancement in veterans in our community and investment in innovation, factories and plants and growing our production lines, future products, future services. But on the Conference Call and this is often the case in these things in this debate preent recently, people say you were going to do that anyway . As a result of revenues it might increase given the benefit of the Business People want to know how much more incrementally are you spending this is billions of dollars over the next several years, additional billions of investment youre right, were already ramping up as a percent of revenue. When we think of future product lines, our ability to ramp the 737 production rate and make the Capital Investments to do that we made a decision to take the 787 dream liner program from 12 a month to 14 a month. Our ability to capitalize that to ramp up production and invest in the next generation product lines, its all enabled by tax reform i can tell you the number one thing were doing with tax reform benefit, were investing in innovation and growth thats going to create manufacturing jobs in the country. I wonder if youre concerned about the increasing rhetoric between the u. S. And china and the real possibility of a trade skirmish if not an all out trade war. It would seem to me were that to occur it would not be particularly good for your business. Some worth keeping a close eye on we had good die alog with the administration and Chinese Government its foreign we have a balanced approach to trade with china we need fair trade and fair competition. If you look at the china market from an airplane standpoint, those 41,000 new airplanes, more than 7,000 are in china its becoming the worlds biggest airplane market. And you expect that to continue, i would think . We do about onethird of our 737s that we roll out of our u. S. Production lines today go to china. So we have a big expert business the Aerospace Sector creates about a 90 billion trade surplus for the u. S. Every year. But a big part of that is china. So its important that we have a productive relationship with china, and free and fair trade is important and a balanced approach to it so fair to say its something you watch closely. Something were keeping a close eye on chaurm and irman and ceo of. We perhaps dont talk enough about china. Its a risk that needs to be watched closely. Hes watching it closely but the continued relationship we have with china, what this administration does in terms of trade, what their response will be, onethird of all 737s, jim, go to china. Onethird of them. I think youre absolutely right to focus on it one of the better moments in the terrific call was the idea, listen, we see a steady ramp of spending in china, which is positive because of our strong and growing market share in china. High Service Penetration you dont want to lose that edge no. It is one of those geopolitical stories, those macro stories we have to keep a close eye on. The question is, if theres a skirmish, will it really lead to an allout war, or will it be contained . Were still waiting on some sort of steel news we are. Steel is a very small industry in our country. In the meantime, those who are chartists are looking at the stock of boeing and saying, you know, here we are. We are just nine points away from the high. Will this take it out . Still yields almost 2 so i have to tell you, david, it is still this markets leader. Nothing has changed. Nothing. Nothing it is worth mentioning when you say leaders, before we head to break, apple is up almost 2. 5 this morning you know, the buffett halo. I dont think people felt he was going to buy more. The correct interpretation of the note if you go back in time to where it was 171, there were a lot of people burying it. It was a free fire zone. Once again telling you youve got to trade apple you cant just sit there now, where are those people . Theyre in hiding until the next down drift i love them. Theyre really nice. Okay. Were going to have your stop trading. Get ready. Get yourself together here you mind if i stick around . Id like you to, that extra half hour. Thats a bonus i cant get enough of. Well, curling is also great bonus. I do love curling my wife likes curling we have stop trading with jim coming up next make something for dinner. But some of us make something much more. With blue apron, any night is a chance to see what cooking can do. You or joints. Something for your heart. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. All right. Lets get a little stop trading with jim what do we got guess whos back, david who bristolmyers is back Morgan Stanley talking about optionalty for m a bristolmyers is so back that i have to resort to, yes, my time honored way of saying it, because it is back, it is bigger than ever. Bristolmyers stocks up 10 already for this year. It has been a big move m a continues to sort of be one of, as you point out, the many Different Things people talk about with that stock. Coming up, we got a lot more of our exclusive interview with ng ceo Dennis Muilenburg keep it right here suppositories for relief in minutes. And dulcoease for comfortable relief of hard stools. Dulcolax. Designed for dependable relief. On the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. Does your bed do that . Save 50 on the ultimate limited edition bed. Plus 24month financing ends monday visit sleepnumber. Com for a store near you. Two,that was awful. Why are you so good at this . Had a coach in high school. Really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at td ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom thats lesson one. Education to take your trading to the next level. Only with td ameritrade. All right. Good morning welcome to squawk on the street. Were live from post nine at the New York Stock Exchange. Carl quintanilla is with us from the Winter Olympics in pyeongchang, south korea and sara eisen is off today. Lets give you a quick look at markets. Higher on all the major averages one half hour into trading on this thursday. That, in fact, is where our coverage begins this morning ready to rally, stocks shrugging off inflation jitters. All three indices in the green and its not just today stocks are recovering back in positive territory for the year. Were going to tell you where you should be putting your money to work straight ahead and more from our exclusive interview with the ceo of boeing what he had to say about his companys stock, growth, m a, and a lot more but first, lets get to Economic Data that we have crossing the tape for that, we go to diana olick who has the numbers. Home Builder Sentiment unchanged in february at 72 according to the National Association of Home Builders hmi monthly index unchanged but up from 65 one year ago. Interesting in this morning, no mention of fastrising mortgage rates. Instead, the chairman of the naahb says builders are excited about pro business Political Climate that will support the Housing Market apparently tax cuts are a much bigger deal to builders than the concern over mortgage rates. Whats driving the sentiment future sales kppexpectations upw points to 80 thats a postrecession high buyer traffic unchanged at 54. Current sales, though, down 1. 78 expectations high but actual sales a little lower confidence is highest in the west and lowest in the northeast. Again, unchanged at 72 anything above 50, though, is considered positive sentiment. Back to you. Yeah, still very strong thanks so much, diana. Lets turn to the markets here all three indices in the green, adding to yesterdays strong gains. Stocks are on the rise for a fifth straight session, climbing back from the correction levels we hit last week markets are now in positive territory for the year we had technicians tell us back in the height of the craziness a couple weeks ago that the markets had to retest the lows then they did. Now we have people saying, oh, that was too textbook, it was too easy theyre still nervous. We got the most oversold weve been since a period in 2016 where we bounced tremendously that did matter. We ended up with really good earnings during this period. Then we realized that the vix was in charge, not the ten year. I think it took people by surprise you saw 100 million shares trading. These things were all so obscure. Yet, that had been the trade we didnt know that. Whats happening as we skcome back, we say, geez, kind of went down because of the ten year we rationalize the bottom line is we shook out a lot of people. But you dont seem to trust this rally completely. Well, i dont trust it because im still a believer that the ten year does matter. Its great to see the vix people wiped off the face of the earth. That was just something that was an aberration from people playing a game of no volatility. Its back to looking at earnings just so happens the earnings are pretty good. Where are we on the ten year, 2. 91 2. 89 right now. I think look, i speak to a lot of people who trade treasuries obviously not as sophisticated as rick. Its a crowded chain, to be sure i bet so the possibility of a 2. 7 is would create the ripsnorter rally, the rip your face off, whatever these people call it. When i look at the numbers of the earnings, i come back on a cisco and say hilton. I say, listen, those are pretty good, so i want to buy them. Is there still the core question of if Interest Rates are going up, and we dont know, what do you pay for those future earnings we dont know yet. Yesterday i mentioned tanger factory. The call was okay, but its still a read its a freefire zone. Anything thats 3. 5 that was pent to be a bond market equivalent is being executed here theyve taken a sector and decided that sector is just bad news you got to avoid it. Real estate investment, if you own those and own some preferreds, this has been a disaster disaster yeah, yeah. All right. Lets get it over to carl, whos of course at the Winter Olympics in pyeongchang, south korea. Hey, david. Busy day weve paid so much attention to snowboarding and skiing the last couple days, but continue to have some trouble being as successful on sports that require a skate. The womens 1000 meter speed skate. Women have not won a speed skating medal since Salt Lake City back in 2002. Brittany bowe had a good chance but comes in fourth. Heather bergsma finished eighth. We continue to try to put together some medals in the speed skating realm. Meanwhile, we continue to also watch the athletes its not just about watching the olympians, but also asking them, in this case, what they are Binge Watching take a listen. My wife when i watch the crown. Shameless. Either homeland or suits. Top gear, vikings, game of thrones. I like suits. Had a lot of fun Binge Watching breaking bad. I just finished stranger things. Gossip girl right now arrested development or rick mohrty. A lot of american titles from americans around the world norway continues to pull ahead in total medals. U. S. Has about eight we hope to change that in the days ahead coming up this hour and next, well talk to david chang, the creator and founder of momofuku. We went to lunch here in korea, talked about the cuisine, the culture, the olympics, and of course what its like building a business and trying to get a culture to scale thats coming up later on this hour i love his restaurants. Im excited about that a Little Pricey but fabulous. Very, very delicious. Your report highlights, carl, how International American content, media content has become, right. Absolutely. I mean, it ties right into the netflix theme. Theyre doing this with david. We saw what they are doing with ryan murphy and what theyre paying letterman and Jerry Seinfeld and chris rock. Then their ability to, as you guys we talk about this all the time their ability to refine the product for individual markets no big surprise that International Subs are the story every quarter. Yeah, i think their budget for what they spent on foodrelated programming is higher than many other Media Companies overall budget. Which is incredible. But apparently theres an audience for it. Carl, well check you out in a little bit thank you. We all love to eat. We do we love to eat when we come back, boeing is among the leaders of the dow of course, the stock well, its been on one heck of a tear. Its up 19 this year. We spoke exclusively with boeing ceo Dennis Muilenburg. What he told us about mergers and acquisitions, taxes, defense, and a lot more. And lets give you another look at stocks as we are about 37 minutes into trading this morning. You can see all the major averages higher. Were back right after this. 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. With its hightech the cameras and radar, contemporary cockpit, 360 Degree Network of driverassist technologies, and sporty performance, whats most impressive about the glc . All depends on your point of view. Lease the glc300 for just 449 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. This is like at green show here shares of boeing continuing to soar coe Dennis Muilenburg joined us here this morning and talked about the companys growth the stock price has been remarkable and yes, the race to space against a particular gentleman whos fabulous in telling you the story. Take a listen. Youve seen that change just over the last few years as air traffic has become more global in nature. We see air traffic growing, passenger traffic growing about 6 to 7 a year. Thats feeding airplane growth throughout the world we see over the next 20 years the world needs 41,000 new airplanes. The global fleets are going to double in size all of that is going to create topline growth for boeing and our entire supply chain. Youre making how many planes this month, how many planes this month, last year, and how many do you need to be making next year at this time . Just trying to get near that demand last year we produced a record 763 commercial aircraft this year weve guided to 810 to 815 aircraft by the end of the decade, well be building more than 900 airplanes a year you can see a significant top line growth. Passenger traffic around the world, we see new passengers entering thats going to drive that growth every year we have 100 Million People that travel for the first time in asia what is the cash flow as you go on . Because the leverage of being able to build three a month to five a month must be extraordinary. It is just to give you an example, our 737 production line this year were at 47 a month. Were going to be taking it up to 52 a month. Next year well be going up to 57 a month all of that is driving top line cash flow. So last year our operating cash flow was a little over 13 billion. This year were guiding to 15 billion of operating cash flow so you can see this is a yearoveryear cash Growth Business i think your fundamental point on this business is no longer a high cycle business. This is a longterm, sustained Growth Business. Which i guess deserves a higher multiple. You know what im thinking. M what was your reaction, though, watching your stock price move up parabolically were you surprised i dont think i was surprised. The market is responding to what is fundamentally a strong airplane market, Aerospace Market globally. The fact were delivering on our commitments we had promised production rampup were now delivering on that rampup. You can see the profitability thats hitting the bottom line as well. Its efficiency in our production lines, efficiency in our supply chain you have topline growth at the market, bottomline growth so it the Investment Community catching up . I think thats part of it and part of it is the recognition that this has changed from being a highcycle business in the past to a longterm, sustained Growth Business i think thats changed the attitude and perspective on the street we talk a lot about commercial, but defense also important part here. Im curious, given the increased expenditures on defense from the budget that was just passed, what does that mean . The defense business is a very important part of our portfolio. About a third of our business is in the defense arena were encouraged by the strengthening of the u. S. Defense Budget International defense is strong as well. About 35 to 40 of our defense business is now outside of the u. S. But domestically with the increase in defense budget, we see favorable outcomes for a lot of our programs, things like the new tanker program, the p8 surveillance aircraft, our fighter business, space, satellites all of those have upside as a result on your january 31st Conference Call i believe was the last time we got comments on the potential deal where youre continuing to work with brazilian regulators can you give us any update there in terms of progress you may have made . Were continuing to make progress we do see that as a great strategic fit. Weve got complementary product lines, complementary services. Embraer has vertical capabilities that fit with our strategy Going Forward its a nice strategic combination. Were respectful of the concerns the brazilian government has raised around sovereignty and their National Defense we believe weve structured a deal concept that will satisfy the needs of everybody involved. So were making progress still work to do im hopeful we can bring that deal to a successful conclusion. Sounds as though youre getting closer we are getting closer were making progress. Were not done yet we have some work to do, but were making clear progress. Last night airbus put up some great numbers. It had always been, well, zero sum. Theyre doing well you must be doing badly. Thats another misconception yeah, yeah, this is not a fixed pie business where were trying to take share from each other. Were very competitive airbus is a strong, respected competitor of ours we have strong respected competitors in the defense business as well but aerospace and defense is a growing sector its outpacing global gdp. I would argue that industrial sectors, aerospace and defense is perhaps the strongest sector in the world while we see airbus growing, were growing as well. Were going to compete and win, and were going to all grow as this industry grows. I just got to ask about mars because i asked about it last time we got an interesting dichotomy here i think musk may be the greatest promoter of our time boeing may be the greatest operator of our time is the narrative such that he gets hes always there with the best pictures. Always there with the most excitement, especially right before he reports his quarter. Is boeing too silent on the space race well, id say that, one, elon and the spacex team, theyre adding energy to the space market we like the attention thats generating i think its good for the country. I prefer to put our focus on performing, operating, delivering for our customers we are building that first rocket to mars as i told you, its about 36 stories tall 36 stories. Were going first flight, test flight in 2019. I still firmly believe first person that gets to mars is going to get there on a boeing rocket final question for me, i guess, this out there as well. Autonomous airplanes we can all remember i mean, theres auto pilot for as long as we can remember is that something you think will ever occur will there always need to be i assume there will always need to be somebody in the cockpit, regardless of whether the plane can land and takeoff on its own. That technology is moving fast the Technology Availability is there. We provide autonomous airplanes to our defense customers today you see the energy thats going into Autonomous Cars today all of that capital investment, youll eventually get to autonomous airplanes i think the biggest hurdle is the regulatory steps and the acceptance by the public but the technology is there. This is going to unleash new efficiencies were investing in awn to utono, artificial intelligence. The amount of innovation going into aerospace today is greater than its ever been. When he speaks, i always think there is a reason why this is the leading stock in the dow. Theyve got a great secular, longterm theme thats not caught up with the ten year. Its not caught up with Interest Rates. Y who else has that demand i dont know anyone. Plus, exciting businesses like the space race. He was very positive when it came to elon musk and charmingly understated. I like the energy he brings, but were getting to space first when we were growing up, science fiction. Science fiction story. Its Rocket Science right it really is. You need a Rocket Scientist you dont want to go to mars. Its hot, i hear. Its a couple years you cant really get back. I want to be the first man on the sun. This is such a good news story. I find myself listening scenand saying, all right, theres got to be something bad happening here trade war with china would be bad. Then airbus has a better story but he did say he works very closely with the president the president does not seem inclined to want to go against boeing salesperson for boeing very eager to see what happens in brazil. Weve got a new president there whos under a lot of pressure because hes also under investigation, but much more pro free markets theres still legacy people there who have those old socialist tendencies they wanted to be the national jewel, but the company would be far better off if it had more capital. If you look at his comments from the january 31st Conference Call after earnings and what he told us this morning, continued progress it does sound like theyre getting closer to that deal. By the way, not a large dollar deal, but to your point, a very big deal for brazil. It would signal a big, big change i would argue a muchneeded change in brazil part of the evergreen story you bothered to mention the president is under investigation. Is that not a requirement in brazil it feels like it when nearly 50 of congress is under investigation. The corruption levels there are beyond the pail. Youre on those stories its warm there theres three cramer cousins there ive not been able to identify youve got eyes everywhere. Its my job dont forget, i also curl at 6 00 6 00 to 7 00 i curl into my bed with my dog yes, curls tonight on mad money. Dont miss it. When we come back, a look at the state of financials, valuations, and your money the president of the institute of International Finance, tim adams, is going to join us and getting a look at where we stand this hour stocks are still higher. Dow industrial higher by 157 points s p higher by 11 the nasdaq higher by 48 points squawk on the street is back right after this feel that . Thats the beat of Global Markets, the rhythm of the world. But to us, its the pace of tomorrow. With ingenuity, technologies, and markets expertise we create the possible. And when you do that, you dont chase the pace of tomorrow. You set it. Nasdaq. Rewrite tomorrow. 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. On the only bed that adjusts on both sides to your ideal comfort, your sleep number setting. Does your bed do that . Save 50 on the ultimate limited edition bed. Plus 24month financing ends monday visit sleepnumber. Com for a store near you. At holiday inn express, we cant guarantee that youll be able to contain yourself at our breakfast bar. Morning, egg white omelet. Sup lady bacon fruit, there it is but we can guarantee that youll get the best price when you book with us. Holiday inn express. Be the readiest. And the nx hybrid with a class beating 31 mpg combined estimate. Lease the 2018 nx 300 for 339 a month for 36 months. Experience amazing at your lexus dealer. Experience amazing a little to the left. 1, 2, 3, push easy easy easy horn honking alright alright weve all got places to go weve all got places to go Washington Crossing the delaware turnpike . Surprising. Whats not surprising . How much money sean saved by switching to geico. Big man with a horn. Fifteen minutes could save you fifteen percent or more. Markets are up again this morning, as stocks are coming back from that correction low we saw not too long ago mike santoli is with us to look at some of the sectors leading this recent rally. Sectors and strategies, david. One of the things a correction and a comeback doo is ki is kin reveal the leadership of the market, test it. Once you have that comeback, you see what might be the leadership going ahead. Heres an etf i thought wed highlight under the ticker fv. It basically uses relative strength analysis to pick other etfs in certain sectors that are the leaders. This one happens to be entirely in financials, tech, and industrials. Its outperformed on a one, twoyear basis before the correction, also since its well up toward the highs, has much smaller losses in the broader market. This is essentially a fund meant to find the leadership it seems to be doing a decent job. Then of course the soxx, the philly semiconductor etf very familiar in terms of its story about semis leading. This one is done very well its basically about the same amount down from its highs of january 26th, but it was up so much more that its actually outperforming very nice. I would point out nvidia and Texas Instruments together make up 18 of this because their performance has obviously made them that much bigger over the last year or so. Finally, the social media etf, its small its also global though. Its kind of an interesting take on social media. Its actually at new highs i would say that its obviously niche. Twitter and ten cent are a quarter of this Fund Facebook and snap get you to 40 . If youre sifting around and saying what has kind of held up better or seems like it might be able to outperform going ahead, these are some of the funds you might surface. Exposure to ten cent, which doesnt trade well there you go. That first one is an etf made up of etfs five other etfs, which are sector etfs its says, i want to see whats working in the market, stay with whats strong. Do you have to worry about all the just like you have to worry with the fund to funds, the costs associated with that certainly not like a hedge fund in terms of cost. I guess theres probably some layering of fees in there. Okay. All right etfs on etfs i believe in singlestock risk the etf is a very good market. Mike, thanks. All right well, cisco reported an earnings beat after the bell yesterday. That saw the company post its first yearoveryear rise in revenue in more than two years the company also planning to raise its buy back by 25 billion. That will go to 31 billion its going to repatriate 67 billion in cash held overseas. Thats pretty much all its money overseas cisco Ceo Chuck Robbins joined us earlier to talk about the impact of tax reform on the quarter. We talked about this in the past were not an incredibly capital intensive business if you look at our total capx we spend on an annual basis, theres several options we have. Weve always talked about the fact we would leverage this capital to reduce our share count, which we announced yesterday. Obviously to continue our capital strategy of returning cash to our shareholders, we increased our dividend yet again yesterday. We also think weve left ourselves plenty of capacity to continue deliver m a that aligns with our strategy that weve laid out over the last 2 1 2 years. Jim, this would seem to be a see the scenario where the tax reform is being delivered back to shareholders in the form of buy back he said he doesnt need a lot of cash i do think the more they buy software, the less they are reliant on hardware. Theres an article in the New York Times today sorry, the wall street journal that talked about how theyre still dependent upon a particular kind of switch. Now, in the interim, theyve worked hard to be dependent, try to move that, not unlike what ibm has had to do. So if they see something strategic, they will buy it. They certainly have a lot of fire power is the stock up enough versus the quarter . I think this is one of those stocks that is its not going to be like service now its not going to be like workday. Its not going to be like red hat. Its not going to be like sales force. It is not that kind of company it has low single digit growth, but the fact is it almost had no growth its an easier compare not only trip adviser, by the way. You want easier compare, not that i want chuck to even feel im putting them in the same im just saying what happens is you look at cisco, look at some of the companies doing well, and theyre companies we didnt think have a lot of growth, and it turned out they do have growth thats a very, very good story for the market and this stock has fully recovered from the recent selloff compared to the rest of the market definitely outperformed here in the last couple days yeah, good growth in the u. S. , good growth in europe. They are as much relevant as theyve ever been because they play a key role in on board for google cloud and for microsoft azure. Really important this is the data center, the story, internet of things, driving a lot of whats happening in tech. I got to tell you, im a believer in chuck. I think hes good. You do . Im a believer in muilenburg. It is empirical qualcomm. Do you believe in qualcomm do you believe in magic i dont know its a song. Good song the loving spoonful oh, god, great jim, thanks for sticking around, giving me that extra half hour. Its the least i can do i just my dog has to take out its alltime high, then im done for the day. For those who may not watch a the this time, your dog is nvidia we dont have the 9 00 audience. Theyre saying, what is he talking about. And you have a real dog named nvidia doesnt everyone . They should see you at curling. Lets send it over to sue herrera. Good morning, michelle. Good morning, everyone heres whats happening at this hour Broward County jail releasing a photo of 19yearold florida high schooler and the shooter Nikolas Jacob cruz, who has been charged with 17 counts of premeditated murder. President trump will address the nation at 11 00 a. M. Eastern time on the massacre and cnbc will carry that live secretary of state Rex Tillerson arriving in lebanon, the most Senior Trump Administration official to visit that country hes expected to meet with top lebanese leaders and discuss lebanons border dispute with israel Cyril Ramaphosa has been elected the new president of south africa hes the fifth president since majority ruled started after the end of apartheid in 1994 Google Chrome is rolling out a new plan to limit advertisements the company says new controls based on better standards will focus on pulling 12 types of ads. Its designed to pressure publishers into dropping annoying advertisements. That is the news update this hour well send it over to jackie for the eia inventory report good morning to you, sue. You can see this drawdown of 194 billion cubic feet in natural gas stocks turn that gas prices from negative this morning, trading around 257, into positive territory. Thats because its almost double the draw that we saw this time last year, more than the threeyear average, and also a little more than the fiveyear average as well. We had a cold snap thats why demand was a little bit more robust than expected. But if you look at the tenday forecast, traders are expecting to see a little warmer weather thats going to bring demand down remember, nat gas prices were trading around 3. 50 in late january. Now were looking at 2. 50. Weve come a long way to the downside it all depends on what Mother Nature is going to give us us a, jackie. I know the traders dont like it, but i like the warmer weather. I do too. Thanks. When we come back, an interview you wont want to miss restaurateur david chang sat down with carl in pyeongchang. Were going to get an inside look at his new netflix show and also much more and taking a look at stocks at this hour the dow is up 150 points squawk on the street back after this we took legendary, and made it liberating. We took safe, and made it daring. We took intelligent, and made it utterly irresistible. We took the most advanced eclass ever, and made the most exciting eclass ever. The 2018 eclass coupe and sedan. Lease the e300 sedan for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Lets take another look at the markets here all three indices holding on to yesterdays strong gains the dow has now recovered nearly 60 of its peak point loss as stocks look to trade higher for a fifth consecutive session. The dow higher by 132 points s p higher by nearly a third of a percent. Nasdaq higher by 47 points in terms of percentage gains, thats the biggest for a look at the state of financials and valuations, were joined by the institute of International Finance president and ceo tim adams. Good to see you, mr. Adams hey, michelle good to see you today. First, let me ask you about some of these volatility products that were sold, some have been shut down. Theyve been offered by institutions that are members of your organization. Does your Organization Take a position on all those products that some would argue caused a lot of the volatility here no, in fact, its really outside our remit. As a personal investor, i shun those things i stay with plain vanilla investments myself what do you think of the overall volatility we have seen in the markets over the last couple of weeks . And do you think theres anything nefarious out there related to whats happening with trading . I dont think nefarious look, the markets were priced at perfection for a long time we didnt have volatility. I think markets are now pricing in a different economic trajectory for the global economy. We have broadbased expansion, capital flows picking up i think markets are just now paying attention to the details and they werent necessarily two to three, four months ago. When you talk to the institutions that are members of your group, what are they saying about the future of Interest Rates . And what do you think . Tenyear yields seem to be one of the sparks that set off all that volatility and selling. Well, i think its reflecting a better assessment of Global Growth again, weve seen broadbased economic expansion, and almost every major part of the global economy, our own flows report shows we see flows flowing to the fron fetier markets its a good news story i think were at a fairly sweet spot, actually almost a goldilockslike set of conditions you dont get nervous when you say that no, well, you know, you always have to hedge just a little bit, but i think were pricing in three rate hikes this ye year there may be some oneoff components the economy is actually in good shape. So i think we should celebrate although, you are concerned a bit, i believe, about the build up in debt my god, weve printed an awful lot of money around the world these last, what, eight years, havent we oh, absolutely. David, i refer to it as a termite in a foundation. Its more of a mediumterm concern. Global debt to gdp is about 320 whether its sovereign, household, or corporates, weve seen a huge explosion of debt throughout the global economy. And i am concerned about that over the medium term are you concerned at all about the growing deficits right here at home given what weve seen, of course, with both the cost of tax reform and the new budget that we got last week i am. If you look at cbo projections by 2027, debt to gdp will be above the levels we saw at the end of world war ii. Some of those tax cuts will go to support Capital Formation and actually help on the supply side and help on growth but i do worry about the trajectory the key is to invest in the productive capacity of the country. Some of that will happen, i hope more than were currently expecting. Great expectations of deregulation from this administration from the institutions that belong to your group. How much of that have you gotten already . Has it met your expectations how much more do you expect . And do you think its already starting to play into the stock prices of these companies . Sure. Its a great question. Actually, we dont expect much deregulation at all with respect to the large institutions. I do think Small Community banks need regulatory relief i think were going to get that. Theres legislation moving on the hill i think what were seeing for larger institutions is just a rebalancing, a better understanding of cost benefit. But were not asking for it, nor do we expect major deregulation for large Financial Institutions okay. Because i think there are a lot of investors out there who are hoping that, in fact, in addition to the steepening yield curve that thats actually going to add to the bottom line and at least increase return of hurricamoney to shareholders. I think whats been good for banks is an upward sloping yield curve. I think the tax cut has been good for banks the demand side, more lending to productive parts of the global economy, locally, and the real economy is what matters. If the real economy is doing better, the Financial Sector will do better too hey, tim, time question from me given your experience in dealing across borders, certainly from your previous positions, we havent talked a lot about brexit in a long time and its impact on the Financial System certainly as it relates to the uk and london as a Financial Center and or europe do you have any thoughts there, given things are moving along . Sure. In fact, im going to spend my entire next week in london on these very topics. Look, our member firms have been actively planning for a hard or soft brexit. The conversation continues in fits and starts. I think well end up with an appropriate exit that allows for a transition period. Theres a lot of Downside Risk i do watch it very closely more from london next week all right take an umbrella. Its always rainy. See you later. Thanks, tim. Thank you, michelle thank you, david all right thank you. Lets go now to carl its not raining there, but i bet its still very cold thats my guess. In pyeongchang, south korea. A little chilly tonight thats okay. We can take it, david. David chang, for those who dont know, is a koreanamerican chef, five time James Beard Award winner, who started momofuku in 2004 hes got restaurants in toronto, australia, vegas, and l. A. And now hes launching a new docuseries on netflix. We asked him what its like helping the streaming giant start a new genre. The best way to describe netflix is they want you to define the sand box. Theyre still trying to figure out whats right or whats wrong. Its allowed us to create a show that i think is an honest representation of what we think is worthy of talking about right now. So theyve been incredibly support i have, their whole team its not like ive done this before, so i dont really i cant tell you anything else how can you not worry about sort of just getting lost in that content snchb its the same question i have and present to my team at momofuku there are more restaurants than ever before. I think you can only worry about making the best quality product possible and hope thats still going to win out through word of mouth or however. Thats the same way i think i feel about the variety of content thats on netflix. You hope someone watches it, and just like a great restaurant where youre getting a recommendation, you hope that someone that eats or watches it is like, hey, you have to watch this, you have to eat this that kind of enthusiasm is infectious so if we were eating in like another area that was beef rich, this would be like short ribs. But seeing were right off the coast, this is as good as it gets if you want to eat great seafood. You can assemble this in any which way possible what i love about korean food and why i think its so perfect for the era we live in right now, its communal dining, but you can still customize it how you want to do it. So its group and individual. Absolutely. Weve brought on a president to help run the business end. We have a board, all of these things i think for us to do it right, were going to have to become corporate. Were going to have to be as corporate as any Great Corporation has ever been, but simultaneously, we have to be like the craziest anarchist possible im not sure how that will all wind up, but i do know that i have to be a better manager, i have to delegate better, and these are new challenges you know, i live in a world of sports analogies. Its easy to hate on the patriots or the spurs. I love the fact that they have the same access of talent to everyone else, for the most part they just have a Winning Organization its something thats widely attractive to me to foresee things that other people dont, i think that paranoia is definitely a positive thats what i look at, how do you build a Winning Organization where people want to be there. Cheers. Thank you so much. Thank you, sir. That was great. Guys, coming up in the next hour, well talk more with david about the consumer and real estate and the degree to which restaurants are now actually becoming anchor tenants, something that had never been the case in his early career ill tell you, michelle, david, jim, having a meal with him here in korea, talking to him about the cuisine that helped inspire not just his restaurants but obviously was a big piece of his childhood, one of the big perks of covering these games this time i will bet. I mean, everybody in the control room is, one, jealous, two, really, really hungry after watching the segment, first of all. And it was very cool for him the way he described the way netflix is trying to do its programming. I thought his metaphors worked really well there in a new kind of insightful way. Yeah, i think the parallels are definitely there were swimming in content, and increasingly, were swimming in restaurants and concepts of food the word of mouth, as he says, have you seen this show, have you tried this restaurant, are two very similar conversations that chefs are going to rely on if theyre going to break out. The old word of mouth, as they say yeah. Thanks, carl. Always great all right, michelle see you next hour my stomach is really rumbling yeah, uhhuh. Have an apple. Thats not going to quite do it as we go to break, shares of apple moving higher this morning after it finally showed it is now Berkshire Hathaways largest holding. The firm purchased more shares during the First Quarter thats being well received amongst investors. We got a lot more sawquk on the street. Dont go anywhere. Slap on some cologne im 85 and i wanna go home just got a job as a lifeguard in savannah im 85 and i wanna go home dropping sick beats, they call me dj nana 85 and i wanna go dont get mad. Get e trade, kiddo. At holiday inn express, we cant guarantee that youll be able to contain yourself at our breakfast bar. Morning, egg white omelet. Sup lady bacon fruit, there it is but we can guarantee that youll get the best price when you book with us. Holiday inn express. Be the readiest. But some of us make somethinge make sommuch more. Dinner. Mom would be proud. With blue apron, any night is a chance to see what cooking can do. With treasury yeelz on the rise, could your portfolio get caught offside well talk about what rising rates mean for the market and your money at tradingnation. Cnbc. Com more squawk on the street coming up. Lets get to the cme group in chicago Rick Santelli with the Santelli Exchange hey, rick. Good morning, michelle. Id like to welcome my guest this morning, jim karen. Thanks for taking the time you know, jim, youre at the epicenter. I focus on theepicenter. Whats going on in the credit markets has been a key focus point for the last two or three weeks. A lot of volatility in the market how much of this, in your opinion, has been caused by rising tenyear rates . I dont know why its so shocking most analysts have been wrong the last half dozen years looking for it well, you know, rick, i think its a good point because what the market is trying to determine right now is that yields are rising because things are going better but sometimes you can have too much of a good thing, and wheres that Tipping Point between its a good thing when rates rise because it represents a stronger economy, but if they rise too much, then it becomes a Tipping Point where it can actually hurt other assets what were trying to do is figure out where that is the way were doing that at Morgan Stanley Investment Management is looking at tenyear break evens when yields rise and break evens widen and tenyear break evens right now are around 211 basis points, then that basis points, then that means the economy is frothy, we can still grow, thing are good, were building inflation pressures its also telling you real rates are, even though theyre rising, theyre staying relatively low such that theyre not choking off Economic Growth. And thats important, because lower relative real rates is still a symbol of accommodation. But we hit that Tipping Point when real rates start to rise faster than nominals and when we have good Economic Data and rates are rising but real rates are rising faster than no, maam malls and tips breakeven start to narrow, thats when i think were at the Tipping Point so rick, rates have gone up, but jim, let me stop you one minute there jim, let me stop you one minute there. Lets do like a scientific control variable experiment. Lets say, lets put inflation on hold right about where it is, quasi 2 plus area you talk about a real rate in 10s is at 80 basis points, so with the breakevens, i get it but if you freeze the level of pricing pressures and you just consider central bank Balance Sheets, which by the way, hit a new record high, about 16. 5 trillion, just that dynamic alone and the notion of it potentially disappearing, meaning all these bids are going to disappear from Central Banks and all these auctions, isnt that alone enough to potentially create a dynamic of higher rates over the next eight, nine quarters yeah, absolutely. And if the Economic Growth doesnt keep up with that, then higher rates are going to choke off some of the other asset price movements, and its going to increase risk premium for lots of different assets, and that could create problems in equities, spread products and everything else. Were not yet there. So you brought up a good point. To trade rates correctly in this very strange financial environment, you need to calibrate what normally drives it and then what is being what effects of things like Balance Sheets are having, and that isnt easy. Finish this up real quickly here, jim. Yeah, no, thats correct. Theres a manufactured portion of why rates are so low, and were moving away from that manufactured portion and getting back to the good old days of real markets, and hopefully, good news means good news, which generally brings higher yields excellent you said it, jim the biggest problem we have is that Central Banks timing, whether intentionally or not, is happening when other issues are causing rates to rise as well. Thank you very much, jim caron david faber, back to you. Okay. Thank you, Rick Santelli we he lot reava mo ahead for you on squawk on the street. Dont go away. Experience lexus Safety System plus standard. In the 2018 lexus es and es hybrid. Lease the 2018 es 350 for 339 a month for 36 months. Experience amazing at your lexus dealer. Welcome back im dominic chu. Check out whats happening with stocks up this Morning Technology standing out as one of the bestperforming sectors, up around 4 so far. Among the leaders, Cisco Systems on earnings, trading at levels not seen since 2000 of december. Youve also got salesforce, autodesk and Advanced Micro Devices all up by around 2. 5 at this point so michelle, technologys going to be a big driver in todays trade. Well see if it sticks that way into the afternoon back to you. We will watch for that. Thank you, dom. Warren buffetts longtime business partner, charlie munger, says its time for regulators to ease up on wells fargo. He says the bank will end up better off as it corrects a series of mistakes in treating customers. Speaking yesterday at the annual meeting of the Daily Journal newspaper that he chairs, munger also blasted bitcoin, calling it a noxious poison i detested it the moment it was raised, and the more popular it got, the more i hated it. [ laughter ] on the other hand, i expect the world to do insane things from time to time, because everybody wants easy money and of course, the people who are peddling things and taking moneyoff the top for promoting the investment, they like it, too. So, these crazes, they keep coming and coming and coming, but who would want their children to grow up buying things like bitcoin . Detested it from the moment he saw it. All right, checking bitcoin. 20,000 in december right now trading below 10 thousand to, 9,840 when you look at the bitcoin futures. Its been a little while since we mentioned bitcoin. I know. Yeah, there it is, coming back a bit were going to show you a live shot here. Were awaiting president trumps statement on yesterdays School Shooting in florida. We will go there as soon as that begins squawk alleys coming up next. Its absolute confidence in 30,000 precision parts. Or it isnt. Its inspected by mercedesbenz factorytrained technicians. Or it isnt. Its backed by an unlimited mileage warranty, or it isnt. For those who never settle, its either mercedesbenz certified preowned, or it isnt. The mercedesbenz certified preowned sales event. Now through february 28th. Only at your authorized mercedesbenz dealer. At holiday inn express, we cant guarantee that youll be able to contain yourself at our breakfast bar. Morning, egg white omelet. Sup lady bacon fruit, there it is but we can guarantee that youll get the best price when you book with us. Holiday inn express. Be the readiest. 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. Good morning, and welcome to squawk alley with me at post nine, and our mike santoli and Courtney Reagan joining us Carl Quintanilla is at the olympics in pyeongchang, south korea. Well go out there in a few minutes. We are awaiting the president set to address yesterdays School Shooting in florida, and we will bring you that live when we get it. Markets right now well off their session highs as stocks hope to extend their daily winning streak to five we have recovered about 60 or more of the